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In addition to their profit maximization objective, firms are often challenged to meet environmental and social demands. The purpose of this paper is to test whether a firm’s macroeconomic environment moderates the efficiency of its social and environmental disclosures.

The study uses the Bloomberg database to collect data on the FTSE 350 listed firms for the years 2007-2012. The sample is split into crisis and post-crisis periods, to study the investor reaction to social disclosures under different economic conditions.

The results suggest that the effect of corporate social responsibility (CSR) disclosure on future firm performance depends on the surrounding macroeconomic environment. During tight economic situations, market participants become more self-centered and penalize firms diverting scarce resources toward non-profitable societal engagements. Moreover, the findings indicate that firms with a high participation of outside directors and low accounting profit experience negative future performance when engaging in social disclosures during times of crisis.

Corporate governance is a system of interconnected practices that is affected by various firm and environmental characteristics. The results are in line with the premise that, depending on macroeconomic changes and specific firm attributes, CSR reporting may have dissimilar implications across different situations and conditions. Social disclosures and engagements are not always favorable, and should only be utilized in non-recessionary periods by firms possessing certain characteristics in terms of board composition and accounting profitability.

This study identifies key moderating variables which present additional obstacles for firms engaging in CSR during adverse economic conditions. Outsiders’ inferior firm-specific expertise, along with the firm’s poor accounting performance, present additional financial constraints for firms engaging in CSR activities during economic downturns.

Throughout years of corporate social responsibility (CSR) debates, most studies have focused on whether or not a firm should engage in CSR activities, while giving little attention to the firm’s engagement strategy. The purpose of this paper is to demonstrate the optimal way of engaging in CSR activities to maximize firm value while acting in a socially responsible manner.

The sample includes US-listed firms and was initially split into three categories (slow-paced, steady-paced and fast-paced firms) based on how fast the firm increased/decreased the pace of its CSR involvement. The sample was later split into firms that have interlocked directors and those that do not, to highlight the important role played by interlocked directors in moderating the relationship between CSR pace and firm performance.

Results suggest that firms engaging in CSR activities at a slow or steady pace experience superior financial returns than firms engaging in CSR activities at a fast pace. Further analysis indicates that rapid CSR involvement is counterproductive for firms with no interlocked directors. On the other hand, firms with interlocked directors benefit from their directors’ social network, and experience positive returns when engaging in CSR activities at a fast pace.

This study is of particular importance for firms establishing their CSR engagement strategies. The results highlight the optimal way a firm can engage in CSR activities while still maximizing shareholder wealth.

This paper is the first to study the pace determinants of a firm’s CSR engagement strategy. The absence/presence of interlocked directors is identified as a key moderating variable for the CSR–firm performance relationship. The study pinpoints the absence of interlocked directors as a constraint for firms that rapidly engage in CSR activities.