Effects of Corporate Social Responsibility on Firm Performance: Does Customer Satisfaction Matter?

An-Pin Wei, Chi-Lu Peng, Hao-Chen Huang and Shang-Pao Yeh
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An-Pin Wei: International School of Business and Finance, Sun Yat-sen University, Zhuhai 519082, China
Chi-Lu Peng: Business Intelligence School, National Kaohsiung University of Science and Technology, Kaohsiung 82445, Taiwan
Hao-Chen Huang: Department of Public Finance and Taxation, National Kaohsiung University of Science and Technology, Kaohsiung 82445, Taiwan
Shang-Pao Yeh: Department of Hospitality and M.I.C.E. Marketing Management, National Kaohsiung University of Hospitality and Tourism, Kaohsiung 812301, Taiwan

Sustainability, 2020, vol. 12, issue 18, 1-18

Abstract: Academic research has shed light on the empirical relationships among a firm’s corporate social responsibility (CSR), corporate social irresponsibility (CSiR) and firm performance and on the firm’s customer satisfaction–firm performance relationship in different markets. However, little notice has been taken of whether the coexistence of corporate social responsibility, corporate social irresponsibility and customer satisfaction has an interactive effect on firm performance. This study aims to examine the effects of their interaction on firm performance from an investment perspective. Using unbalanced panel regression to test a sample of publicly traded firms from the United States, this study finds that, in general, firms with higher customer satisfaction earn positive changes in abnormal stock returns. For firms that engage in CSR, CSR positively affects corporate performance, whereas firms’ social irresponsibility activities reduce firms’ financial performance. All else equal, a positive interactive effect of CSiR and customer satisfaction on stock return was observed. The results reveal that high customer satisfaction can alleviate the negative effect of corporate social irresponsibility on firms’ financial performance. Our findings will help management executives and investors to understand that the negative effect of a firm’s unforeseen events on firm performance can be weakened by increasing customer satisfaction.

Keywords: corporate social responsibility; corporate social irresponsibility; American Customer Satisfaction Index; stock returns (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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