Some Evidence of the Cumulative Effects of Corporate Social Responsibility on Financial Performance

Most observers agree that corporate social responsibility (CSR) is an important consideration for firms and their stakeholders. There is, however, disagreement in the literature about the motivation for firms to engage in socially responsible behavior. The CSR-Firm financial performance relationship...

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Bibliographic Details
Published in:Journal of global business issues 2009-04, Vol.3 (1), p.1
Main Authors: Peters, Richard, Mullen, Michael R
Format: Article
Language:English
Subjects:
Consumers
Financial performance
Impact analysis
Social responsibility
Stakeholders
Strategic management
Studies
Sustainability
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Summary:Most observers agree that corporate social responsibility (CSR) is an important consideration for firms and their stakeholders. There is, however, disagreement in the literature about the motivation for firms to engage in socially responsible behavior. The CSR-Firm financial performance relationship has been investigated previously without substantial agreement about its nature or even its very existence. While CSR has traditionally been defined as a strategic 'process', empirical studies to date have been almost exclusively cross-sectional in nature, studying the immediate or short-term effects of CSR on firm performance. Nonetheless, many authors argue that the CSR-financial performance link should be studied over time. In this study, we use time series data to empirically analyze the cumulative effects of CSR on future firm financial performance. While cross-sectional analyses of CSR have produced ambiguous results, our analysis provide evidence that time-based, cumulative effects of CSR on firm financial performance are positive and strengthen over time. The results provide support for the ideal that long term corporate social responsibility is positive for a firm's stockholders as well as other stakeholders. [PUBLICATION ABSTRACT]
ISSN:1931-311X