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The impact of corporate social responsibility on employee performance and cost

Li Sun (School of Accounting, University of Tulsa, Tulsa, Oklahoma, USA)
T. Robert Yu (Department of Accounting, University of Wisconsin - Whitewater, Whitewater, Wisconsin, USA)

Review of Accounting and Finance

ISSN: 1475-7702

Article publication date: 10 August 2015

Abstract

Purpose

The purpose of our paper is to empirically examine the conjectures, which prior literature suggests, that employees work more productively in socially responsible companies and employees are willing to work for less when they work for these companies.

Design/methodology/approach

This study uses ordinary least squares regression to examine the relationship between corporate social responsibility (CSR) and employee performance and between CSR and employee cost. Further, 2SLS is used to address the endogeneity issue.

Findings

The results indicate a positive relation between CSR and employee performance, suggesting that employees in socially responsible companies generate better operating performance than their peers in less socially responsible companies. Findings also reveal that socially responsible companies incur higher labor cost.

Research limitations/implications

First, the CSR ratings constructed by KLD Inc. are an approximate measure of CSR performance. Better CSR measures may yield stronger results. Additionally, the sample firms in our study are relatively large firms. Caution needs be exercised when readers generalize these conclusions. Finally, this sample only consists of public firms. Whether these conclusions hold in private firms remains unknown. The above issues can be investigated in future studies.

Practical implications

The findings of our study should interest managers who contemplate engaging in socially responsible activities, investors and financial analysts who assess firm performance and policymakers who design and implement guidelines on CSR programs.

Originality/value

This is the first paper that directly tests the association between CSR and employee performance and cost. Thus, this study contributes to the CSR literature by offering evidence to show a positive effect of CSR on employee performance. It also contributes to the management accounting literature.

Keywords

Acknowledgements

The authors thank Janie Chang (editor) and an anonymous referee for their constructive comments and suggestions.

Citation

Sun, L. and Yu, T.R. (2015), "The impact of corporate social responsibility on employee performance and cost", Review of Accounting and Finance, Vol. 14 No. 3, pp. 262-284. https://doi.org/10.1108/RAF-03-2014-0025

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited