A Bi-Directional Examination of the Relationship Between Corporate Social Responsibility Ratings and Company Financial Performance in the European Context

Bertrand Quéré, C. Richard Baker and Genevieve Nouyrigat ()
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Bertrand Quéré: CERAG - Centre d'études et de recherches appliquées à la gestion - UPMF - Université Pierre Mendès France - Grenoble 2 - CNRS - Centre National de la Recherche Scientifique
Genevieve Nouyrigat: CERAG - Centre d'études et de recherches appliquées à la gestion - UPMF - Université Pierre Mendès France - Grenoble 2 - CNRS - Centre National de la Recherche Scientifique

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Abstract: Research focusing on the relationship between measures of Corporate Social Responsibility (CSR) and company financial performance has led to mixed results in the North American context. In addition, the ethical attitudes and approaches toward CSR investments of both companies and rating agencies are not necessarily the same in Europe and the United States. In this study, we use CSR ratings issued by a major European CSR ratings agency (Vigeo) to examine in a bi-directional manner the relationships between CSR ratings and financial performance in the European context. By bi-directional, we mean an examination of the relationship between prior CSR ratings and subsequent accounting and financial performance and reciprocally, the impact of accounting and financial performance of year N - 1 on CSR ratings of year N. Our principal findings are: (1) the greater the market capitalization of a company, the higher the Vigeo rating, (2) the higher the risk of the company, the lower the Vigeo rating, and (3) the greater the stock market return of a company, the lower the Vigeo rating. Based on these findings, we propose (1) a concept of ‘‘political visibility'' pursuant to which enterprises of a greater size are exposed to greater pressure to conform to norms of socially acceptable behavior, (2) a concept of ‘‘priorities'' in which enterprises that have resolved their most urgent financial needs have a greater ability to invest in CSR, (3) a concept of ‘‘rating downgrading'' which reveals the sanctioning role of the rating agency from an ethical standpoint.

Keywords: Corporate; social; responsibility; Prior; and; subsequent; financial; performance; Concept; of; ‘‘political; visibility’’; Concept; of; ‘‘rating; downgrading’’; Concept; of; ‘‘priorities’’ (search for similar items in EconPapers)
Date: 2015-12-30
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Published in Journal of Business Ethics, 2015, 148 (3), pp.527-544. ⟨10.1007/s10551-015-2998-1⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04533439

DOI: 10.1007/s10551-015-2998-1

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