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Book part
Publication date: 14 May 2018

Edeltraud Guenther, Timo Busch, Jan Endrikat, Thomas Guenther and Marc Orlitzky

The purpose of this literature review is to reorient empirical research on the causal links between corporate ecological sustainability (CES) and corporate financial…

Abstract

The purpose of this literature review is to reorient empirical research on the causal links between corporate ecological sustainability (CES) and corporate financial performance (CFP). Toward this end, we summarize the findings of four meta-analyses (conducted between 2012 and 2016), which indicate that there is, on average, a small positive association between CES and CFP. In addition, these empirical associations seem to be contingent on the firm’s strategic approach with regard to ecological sustainability (e.g., proactive vs reactive approach) and on the operationalization of both constructs. We conclude that future research may benefit from an even more explicit, analytic shift to the circumstances under which it pays for firms to go green. The main research limitations we point out are model misspecifications, endogeneity, and problems in the measurement of both CES and CFP.

Article
Publication date: 4 January 2021

Kim-Lim Tan, Jie Min Ho, Rita Pidani and Archana Das Goveravaram

Although corporate social responsibility–corporate financial performance (CSR-CFP) research topics have been widely investigated, previous research has yet to examine the…

Abstract

Purpose

Although corporate social responsibility–corporate financial performance (CSR-CFP) research topics have been widely investigated, previous research has yet to examine the relationship between the specific dimension of CSR and CFP among Malaysian public-listed companies. Through literature review, it has been found that the CSR-CFP studies conducted in Malaysia have omitted the role of workplace diversity dimension in contribution to CFP. Failure to consider this variable may risk misrepresenting the relationship between CSR and CFP, thereby preclude consensus on the direction of the relationship between the variables. The purpose of this study is to investigate the relationship between individual CSR dimensions and CFP.

Design Methodology Approach

By using the CSR dimension disclosure-scoring method and cross-sectional data analysis, this research has conducted a content analysis on annual reports of the sample companies to evaluate the influence of CSR practices on companies’ profitability during 2015.

Findings

The results show that companies displaying CSR behavior are associated with higher CFP. That is to say, there is a positive relationship between CSR and CFP. However, the result has further revealed that the five CSR dimensions in isolation would differently associate with the two proxies of CFP.

Originality Value

To the best of the authors’ knowledge, this is the first study in Malaysia that considers workplace diversity issues as one of the dimensions of CSR. The findings will thus bring new insights into CSR application in Malaysia and its association with the CFP.

Details

Social Responsibility Journal, vol. 18 no. 1
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 6 April 2021

Ismail Ben Douissa and Tawfik Azrak

Causality between corporate financial performance (CFP) and corporate social performance (CSP) has been extensively debated in previous research works; however, little…

Abstract

Purpose

Causality between corporate financial performance (CFP) and corporate social performance (CSP) has been extensively debated in previous research works; however, little research has been done to investigate the long-run dynamics between these two constructs. The purpose of this paper is to enrich the CFP–CSP literature by estimating the long-run equilibrium relationship between financial performance and social performance in the banking sector in the Gulf Cooperation Council countries over the period 2009–2019.

Design/methodology/approach

The paper adopts an approach that is primarily used in financial economics: first, the authors perform panel long-run Granger causality following Canning and Pedroni’s procedure to indicate the direction of the causal relationship. Second, the authors estimate an error correction model using Chudik and Pesaran’s (2015) dynamic common correlated effects mean group estimator to determine the sign of the relationship.

Findings

The present research findings prove the existence of a long-run equilibrium relationship between CFP and CSP, while indicating at the same time that panel Granger causality runs positively from CSP to CFP, which means that changes in CSP produce lasting changes in CFP.

Practical implications

The findings of the paper would guide strategists to build fit for purpose corporate social responsibility (CSR) strategies in their firms and establish a continuous investment in CSR activities in the long run rather than harshly investing in CSR activities in the short run.

Originality/value

To the best of the authors’ knowledge, this paper is the first one to address heterogeneity in long-run Granger causality tests to estimate the relationship between CSP and CFP.

Details

Social Responsibility Journal, vol. 18 no. 3
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 22 August 2020

S. Sudha

The purpose of this study is to attempt to empirically examine the impact of disaggregate, eco-efficiency-based measures of corporate environmental performance (CEP) on…

Abstract

Purpose

The purpose of this study is to attempt to empirically examine the impact of disaggregate, eco-efficiency-based measures of corporate environmental performance (CEP) on corporate financial performance (CFP) of Indian companies. Further, recent theories contending a bidirectional causality between them is also explored.

Design/methodology/approach

Secondary data of 224 Indian S&P 500 companies from 2002 to 2011 are used to run panel data regression models for examining the impact of CEP measures on accounting-based CFP measures.

Findings

The empirical results are statistically significant and provide evidence for a positive association of eco-efficiency-based CEP metrics on CFP metrics, thereby supporting Porter's win–win hypothesis. Further, the results evidence a positive bi-directional causality between CEP and CFP for one period time lag signalling possibility of mutual reinforcement in CEP–CFP relationship.

Research limitations/implications

The study has used data for the period 2002–2011 and eco-efficiency metrics – energy, water and material efficiencies due to availability.

Practical implications

The results have implications to both corporate managers as well as policymakers across all industries for emphasizing on eco-efficiency-based (proactive) environmental sustainability initiatives to enhance both financial and environmental bottom lines.

Originality/value

The study contributes to scarce empirical literature analysing the impact of CEP on financial performance. To the best of authors's knowledge, event studies, portfolio studies and perceptual data-based empirical studies exist in India. This study is unique in that it examines long run effect of eco-efficiency-based CEP metrics which is pertinent in a rapidly growing emerging market – India, where, eco-efficiency is considered quintessential for sustainable development.

Details

Management of Environmental Quality: An International Journal, vol. 31 no. 6
Type: Research Article
ISSN: 1477-7835

Keywords

Article
Publication date: 11 July 2019

Woon Leong Lin, Jo Ann Ho, Siew Imm Ng and Chin Lee

The purpose of this study is to investigate the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP), as the findings on…

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Abstract

Purpose

The purpose of this study is to investigate the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP), as the findings on the relationship have been inconsistent and have led to calls to further examine this relationship. However, instead of investigating the connection between CSR and CFP, academics have stated that a contingency viewpoint must be used for uncovering the context and conditions which catalyse the relationship between both constructs.

Design/methodology/approach

This study acquired the CSR data from 100 companies listed in Fortune’s most admired US companies between 2007 and 2016. These data were used to investigate the CSR–CFP link with the help of the dynamic panel data system, which is the generalised method of moments (GMM) estimator.

Findings

The results indicate that CSR and CFP have a neutral relationship which characterises the effect between CFP and CSR. However, this study found that financial slack positively affected the CSR–CFP relationship, implying that companies will only benefit from CSR activities if they have excess financial resources.

Originality/value

This study offers a very distinctive perspective regarding the CSR–CFP link according to the financial slack perspective.

Details

Social Responsibility Journal, vol. 16 no. 7
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 8 April 2019

Sean Yim, Young Han Bae, Hyunwoo Lim and JaeHwan Kwon

The authors use signaling theory in proposing a conceptual framework that simultaneously incorporates both the mediating effects of corporate reputation (CR) and the…

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Abstract

Purpose

The authors use signaling theory in proposing a conceptual framework that simultaneously incorporates both the mediating effects of corporate reputation (CR) and the moderating effects of marketing capability (MC) into the corporate social responsibility (CSR)–corporate financial performance (CFP) link and theorize a single moderated mediation model. The empirical results of the research confirm the theorized moderated mediation model among the four variables, where a firm’s CR plays a mediating role in the relationship between CSR and CFP, and a firm’s MC moderates the effect of CSR on CR exclusively in the first link. Both theoretical and practical implications of the moderated mediation model are discussed.

Design/methodology/approach

This study uses structural equation model estimations with the relevant secondary datasets collected from publicly available databases.

Findings

The empirical results confirm the theorized moderated mediation model in the conceptual framework that uses signaling theory. Specifically, the results identify the moderating role of MC in only the CSR- CR link (but not in the CR and CFP link), such that CR plays a moderated mediation role in the CSR–CFP link.

Research limitations/implications

The current research is not without limitations. These limitations mainly stem from data sets used in the empirical analyses. More details are discussed in the limitations and future research directions section.

Practical implications

The empirical findings suggest that a firm needs to develop a consolidated CSR-marketing program, simultaneously satisfying stakeholders’ needs for both the firm’s socially desirable business practices and value-creating marketing programs to increase its CR, which will, in turn, lead to better profitability for the firm.

Originality/value

To the best of the authors’ knowledge, the current research is the first to use signaling theory in building a conceptual framework that theorizes a moderated mediation model regarding the simultaneous effects of CR and MC on the relationship between CSR and CFP and to empirically test this conceptual framework of the single moderated mediation model. By doing so, the current research clarifies an unanswered question in the literature of whether the underlying mechanism in the CSR–CFP link is based on a mediated moderation or moderated mediation of CR and MC.

Article
Publication date: 3 October 2016

Anni Tuppura, Heli Arminen, Satu Pätäri and Ari Jantunen

The purpose of the paper is to examine empirically Granger causality relationships between corporate social performance (CSP) and corporate financial performance (CFP) in…

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Abstract

Purpose

The purpose of the paper is to examine empirically Granger causality relationships between corporate social performance (CSP) and corporate financial performance (CFP) in four different industries.

Design/methodology/approach

The paper uses the Granger causality test to analyse the causality relationships between CSP and CFP in clothing, energy, food and forest industries in the USA. The panel data used combined CSP and CFP measures over the years 1991-2009. CSP strengths and concerns are handled as distinct constructs.

Findings

There is some evidence of bidirectional causality between CSP and CFP in the clothing, energy and forest industries; but in the food industry, CSP appears not to Granger-cause CFP. The results encourage accounting for the industry in empirical analyses, as well as the use of more than one measure for CFP in the analyses.

Originality/value

The direction of causality between CSP and CFP has been specifically addressed in only a few studies. Because the causality relationship may, in addition, be concealed when multi-industry data are used, this paper contributes to the literature by examining the Granger causality between CSP and CFP in four different industry contexts using two different measures of CFP.

Details

Social Responsibility Journal, vol. 12 no. 4
Type: Research Article
ISSN: 1747-1117

Keywords

Book part
Publication date: 21 August 2019

Amy Yueh-Fang Ho, Hsin-Yu Liang and Tumenjargal Tumurbaatar

This is the first study to investigate the impact of corporate social responsibility (CSR) on corporate financial performance (CFP) in Mongolian banks. We hand-collect…

Abstract

This is the first study to investigate the impact of corporate social responsibility (CSR) on corporate financial performance (CFP) in Mongolian banks. We hand-collect data to construct CSR disclosure index from 65 annual reports of 12 banks in Mongolia from 2003 to 2012. The results indicate that banks with larger size or Chief Executive Officer duality exhibit higher CSR performance. Moreover, banks with higher CSR performance tend to have higher net interest margin and lower non-performing loan. Furthermore, the CSR–CFP relationship varies before and after the financial crisis. The findings provide meaningful insight to the foreign investors regarding the effect of CSR on the profitability and credit risk in Mongolian banking sector.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-78973-285-6

Keywords

Book part
Publication date: 16 October 2014

Robert W. Rutledge, Khondkar E. Karim, Mark Aleksanyan and Chenlong Wu

Research in the field of corporate social responsibility (CSR) has grown exponentially in the last few decades. Nevertheless, significant debate remains about the…

Abstract

Research in the field of corporate social responsibility (CSR) has grown exponentially in the last few decades. Nevertheless, significant debate remains about the relationship between CSR performance and corporate financial performance (CFP). This is particularly true for the case of Chinese state-owned enterprises (SOEs). The purpose of the current study is to empirically test the relationship between CSR and CFP. We use data for 66 Chinese SOEs listed on the Shanghai and Shenzhen stock exchanges. The results are interesting in that they are not consistent with similar studies using US and other Western market data. We find a significant negative relationship between CSR performance and CFP. The results are discussed in light of the preferential government treatment afforded to Chinese SOEs, and social welfare requirements imposed on such entities. Implications for Chinese policy-makers are discussed.

Details

Accounting for the Environment: More Talk and Little Progress
Type: Book
ISBN: 978-1-78190-303-2

Keywords

Article
Publication date: 31 January 2022

Anis EL Ammari

This paper aims to examine the effects of political connections (PCs) on corporate financial performance (CFP) in an emerging economy. It also investigates the moderating…

Abstract

Purpose

This paper aims to examine the effects of political connections (PCs) on corporate financial performance (CFP) in an emerging economy. It also investigates the moderating influence of the directors’ financial expertise (DFE) on the relationship between politically connected firms and their financial performance.

Design/methodology/approach

The study sample includes 304 firm-year observations from non-financial Tunisian listed firms covered over 2012–2019. Financial data are from various sources: financial statements, annual reports, official bulletins of the Tunisian Stock Exchange (TSE) and the Financial Market Council. PCs and DFE data are manually collected from the TSE and companies’ websites. Multivariate regression analyses are used to test the research hypotheses.

Findings

The results show that PCs negatively affect CFP and the DFE is a moderator variable that exacerbates this negative relationship. These results could be explained on the one hand by the fact that politicians often lack management, professionalism and know-how. On the other hand, political members on boards focus mainly on their political agendas and prioritize their interests rather than firm performance. Furthermore, board directors are more inclined towards the grabbing-hand approach to create personal linkages with these politicians and take personal benefits rather than protect the interests of minority shareholders and effectively use firm resources.

Research limitations/implications

The most important limitation of the study is the small number of non-financial TSE-listed firms. Indeed, the small sample size prevents us from considering industry specificities and working in a homogeneous environment.

Practical implications

This study recommends that external investors pay particular attention to politically connected firms as PCs tend to weaken corporate governance. Also, it helps policymakers better assess the need to harmonize and develop corporate governance standards and practices that account for the specific conditions in Tunisia to mitigate the lobbying of political parties and supervise their abuse of power. Furthermore, the negative relationship between PCs and CFP in a poorly regulated and governed country could be used by financial institutions in their credit scoring.

Social implications

The findings suggest that the nexus between politics and business draws attention to corruption post-revolution.

Originality/value

The originality and the relevance of this study consist in studying the moderating effect of the DFE on the association between PCs and CFP. To the best of the author’s knowledge, this study pioneers assessing the role of the DFE as a moderating variable. It also supplements prior literature by examining the combined factors, such as PCs and DFE, on CFP in an emerging market.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

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