In an era of rising concern about financial performance and social ills, companies’ economic achievements and negative externalities prompt a common question: Does it pay to be good? For thirty-five years, researchers have been investigating the empirical link between corporate social performance (CSP) and corporate financial performance (CFP). In the most comprehensive review of this research to date, we conduct a meta-analysis of 251 studies presented in 214 manuscripts. The overall effect is positive but small (mean r = .13, median r = .09, weighted r = .11), and results for the 106 studies from the past decade are even smaller. We also conduct sensitivity analyses to determine whether or not the relationship is stronger under certain conditions. Except for the effect of revealed misdeeds on financial performance, none of the many contingencies examined in the literature markedly affects the results. Therefore, we conclude by considering whether, aside from striving to do no harm, companies have grounds for doing good - and whether researchers have grounds for continuing to look for an empirical link between CSP and CFP.

Does it Pay to Be Good...And Does it Matter? A Meta-Analysis of the Relationship between Corporate Social and Financial Performance

This paper reviews the literature on corporate social performance (CSP) measurement and sets that literature into a theoretical context. Following a review of CSP theory development and the literature on relationships between CSP and corporate financial performance, Wood’s CSP model (Wood, D.J. (1991). Corporate social performance revisited. Academy of Management Review, 16, pp. 691‐718) is used as an organizing device to present and discuss studies that use particular measures of CSP. Conclusions emphasize the need for CSP scholars to refocus on stakeholders and society, and to incorporate relevant literatures from other scholarly domains. Corporate social performance (CSP) and its sister concepts – corporate social responsibility, corporate social responsiveness, corporate citizenship – have been present in management scholarship for about 45 years. Notwithstanding this longevity, the CSP domain has remained controversial, fluid, ambiguous and difficult to research. To a large extent, CSP has been equated with ‘doing good’, and the search has been on for a statistical relationship between CSP and financial performance (FP) so as to justify or delegitimize the normative calls for managers to pay attention to CSP. These two phenomena may be largely to blame for the lack of progress in CSP theory and measurement. It is possible, and I believe desirable, to take a different stance on CSP. Corporate social performance, as conceived in the Wood (1991) framework, is a set of descriptive categorizations of business activity, focusing on the impacts and outcomes for society, stakeholders and the firm itself. Types of relevant outcomes are determined by the firm’s linkages, both general and specific, as defined by the structural principles of corporate social responsibility (CSR). The production, monitoring, evaluation, compensation and rectification (or not) of these outcomes are defined by the processes of corporate social responsiveness – the boundary-spanning (or bridging) processes by which the firm connects itself to information, stakeholders and issues. All these elements can be measured and evaluated: impacts and outcomes; processes; and the specific guidance offered by structural principles. The aim of this paper is, first, to describe briefly the conceptual history of CSP and then to explain CSP as a set of structural categories that can be identified, described and measured (following Wood 1991 and modifications by Kang 1995; Swanson 1995, 1999; and Mitnick 1993, 1995, 2000). A ‘detour’ into CSP–FP research emphasizes how much attention has been paid to this aspect of the CSP domain and suggests that other research questions might now be more interesting. The paper then reviews the empirical literature in which some aspect of CSP is measured, showing how the measures themselves fit into an expanded structural CSP model. An additional result of this analysis will be to spotlight the aspects of CSP that have gone relatively (or completely) unexamined, or that have not yet been considered generally as indicators of CSP. Finally, the analysis will suggest some overarching conclusions about existing CSP research which suggest fruitful paths for future work.

Measuring Corporate Social Performance: A Review

This study reveals the multifaceted contribution of alliance portfolios to firms' market performance. Extending prior research that has stressed the value-creation effect of network resources, it uncovers how prominent partners may undermine a firm's capacity to appropriate value from its alliance portfolio. Analysis of a comprehensive panel dataset of 367 software firms and their 20,779 alliances suggests that the contribution of network resources to value creation varies with the complementarity of those resources. Furthermore, the relative bargaining power of partners in the alliance portfolio constrains the firm's appropriation capacity, especially when many of these partners compete in the focal firm's industry. In turn, the firm's market performance improves with the intensity of competition among partners in its alliance portfolio. These findings advance network research by highlighting the tradeoffs that alliance portfolios impose on firms that seek to manage and leverage their alliances.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1304776_code496915.pdf?abstractid=985878

Alliance Portfolios and Firm Performance: A Study of Value Creation and Appropriation in the U.S. Software Industry

Our study of 267 U.S. firms shows that improved environmental risk management is associated with a lower cost of capital. Our findings provide an alternative perspective on the environmental-economic performance relationship, which has been dominated by the view that improvements in economic performance stem from better resource utilization. Firms also benefit from improved environmental risk management through a reduction in their cost of equity capital, a shift from equity to debt financing, and higher tax benefits associated with the ability to add debt. These findings help build better theory regarding the outcomes of strategic improvements in environmental risk management. Copyright © 2008 John Wiley & Sons, Ltd.

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Environmental risk management and the cost of capital

This study reveals the multifaceted contribution of alliance portfolios to firms' market performance. Extending prior research that has stressed the value-creation effect of network resources, it uncovers how prominent partners may undermine a firm's capacity to appropriate value from its alliance portfolio. Analysis of a comprehensive panel dataset of 367 software firms and their 20,779 alliances suggests that the contribution of network resources to value creation varies with the complementarity of those resources. Furthermore, the relative bargaining power of partners in the alliance portfolio constrains the firm's appropriation capacity, especially when many of these partners compete in the focal firm's industry. In turn, the firm's market performance improves with the intensity of competition among partners in its alliance portfolio. These findings advance network research by highlighting the trade-offs that alliance portfolios impose on firms that seek to manage and leverage their alliances. Copyright © 2007 John Wiley & Sons, Ltd.

Alliance portfolios and firm performance: A study of value creation and appropriation in the U.S. software industry

The purposes of this study are to measure the wealth effects of international joint ventures on the U.S. firms' shareholders and to determine whether these effects are related to the economics status of the partner's home country. The results indicate that overall investor reactions to joint ventures with foreign firms are negative and that only joint ventures with firms from lesser developed countries have nonnegative effects on shareholders' wealth. These findings are in contrast with previous reports of positive stock price reactions to both dimestic and international joint ventures.

Insup Lee

Papers

The Effects of International Joint Ventures on Shareholder Wealth

Stock market views of corporate multinationalism: some evidence from announcements of international joint ventures

The impact of overseas listings on shareholder wealth: the case of the london and toronto stock exchanges

Daily return relationships among asian stock markets

Nonlinearities in emerging foreign capital markets