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Journal ArticleDOI

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

TL;DR: This article conducted a meta-analysis of 251 studies presented in 214 manuscripts and found that the overall effect is positive but small (mean r =.13, median r = 0.09, weighted r = 1.11), and results for the 106 studies from the past decade are even smaller.
Abstract: 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.
Citations
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Journal ArticleDOI
TL;DR: In this article, the authors review the corporate social responsibility literature based on 588 journal articles and 102 books and book chapters and offer a multilevel and multidisciplinary theoretical framework that synthesizes and integrates the literature at the institutional, organizational, and individual levels of analysis.

2,592 citations


Cites background or methods from "Does it Pay to Be Good...And Does i..."

  • ...Moreover, Margolis et al. (2009) and Orlitzky et al. (2003) used different sets of primary-level effect sizes in their meta-analyses: Margolis et al. (2009) relied on 192 effects reported in 166 studies, whereas Orlitzky et al. (2003) relied on 388 effects reported in 52 studies....

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  • ...Margolis, Elfenbein, and Walsh (2009) conducted another meta-analysis and found a mean weighted observed effect size of r = .105 (median: r = .085)....

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Journal ArticleDOI
TL;DR: In this article, the authors investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance and find that firms with better CSR performance face significantly lower capital constraints.
Abstract: We investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to (1) reduced agency costs due to enhanced stakeholder engagement and (2) reduced informational asymmetry due to increased transparency. Using a large cross-section of firms, we find that firms with better CSR performance face significantly lower capital constraints. We provide evidence that both better stakeholder engagement and transparency around CSR performance are important in reducing capital constraints. The results are further confirmed using several alternative measures of capital constraints, a paired analysis based on a ratings shock to CSR performance, an instrumental variables approach, and a simultaneous equations approach. Finally, we show that the relation is driven by both the social and environmental dimension of CSR. Copyright © 2013 John Wiley & Sons, Ltd.

2,071 citations

Journal ArticleDOI
TL;DR: In this paper, a review of the operationalization of performance highlights the limited effectiveness of commonly accepted measurement practices in tapping this multidimensional conceptualization, and a call for research that examines triangulation using multiple measures, longitudinal data and alternative methodological formulations as methods of appropriately aligning research contexts with the measurement of organizational performance.

1,830 citations

Journal ArticleDOI
TL;DR: This paper found that firms with high social capital, measured as corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital during the 2008-2009 financial crisis.
Abstract: During the 2008-2009 financial crisis, firms with high social capital, measured as corporate social responsibility (CSR) intensity, had stock returns that were four to seven percentage points higher than firms with low social capital. High-CSR firms also experienced higher profitability, growth, and sales per employee relative to low-CSR firms, and they raised more debt. This evidence suggests that the trust between the firm and both its stakeholders and investors, built through investments in social capital, pays off when the overall level of trust in corporations and markets suffers a negative shock.

1,467 citations

Posted Content
TL;DR: It is shown that corporate social responsibility (CSR) and firm value are positively related for firms with high customer awareness, as proxied by advertising expenditures, and this evidence is consistent with the view that CSR activities can add value to the firm but only under certain conditions.
Abstract: This paper shows that corporate social responsibility (CSR) and firm value are positively related for firms with high customer awareness, as proxied by advertising expenditures. For firms with low customer awareness, the relation is either negative or insignificant. In addition, we find that the effect of awareness on the value-CSR relation is reversed for firms with a poor prior reputation as corporate citizens. This evidence is consistent with the view that CSR activities can add value to the firm but only under certain conditions.

1,411 citations

References
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Journal ArticleDOI
TL;DR: In this article, the bias that results from using non-randomly selected samples to estimate behavioral relationships as an ordinary specification error or "omitted variables" bias is discussed, and the asymptotic distribution of the estimator is derived.
Abstract: Sample selection bias as a specification error This paper discusses the bias that results from using non-randomly selected samples to estimate behavioral relationships as an ordinary specification error or «omitted variables» bias. A simple consistent two stage estimator is considered that enables analysts to utilize simple regression methods to estimate behavioral functions by least squares methods. The asymptotic distribution of the estimator is derived.

23,995 citations

Journal ArticleDOI
TL;DR: In this article, the authors examine three aspects of the stakeholder theory and critique and integrate important contributions to the literature related to each, concluding that the three aspects are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental.
Abstract: ?The stakeholder theory has been advanced and justified in the management literature on the basis of its descriptive accuracy, instrumental power, and normative validity. These three aspects of the theory, although interrelated, are quite distinct; they involve different types of evidence and argument and have different implications. In this article, we examine these three aspects of the theory and critique and integrate important contributions to the literature related to each. We conclude that the three aspects of stakeholder theory are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental. If the unity of the corporate body is real, then there is reality and not simply legal fiction in the proposition that the managers of the unit are fiduciaries for it and not merely for its individual members, that they are . . . trustees for an institution [with multiple constituents] rather than attorneys for the stockholders.

10,163 citations

Book ChapterDOI
01 Jan 2007
TL;DR: When I hear businessmen speak eloquently about the social responsibilities of business in a free-enterprise system, I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life as mentioned in this paper.
Abstract: When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system”, I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are — or would be if they or anyone else took them seriously -preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.

9,875 citations

Book
01 Jan 1985
TL;DR: In this article, the authors present a model for estimating the effect size from a series of experiments using a fixed effect model and a general linear model, and combine these two models to estimate the effect magnitude.
Abstract: Preface. Introduction. Data Sets. Tests of Statistical Significance of Combined Results. Vote-Counting Methods. Estimation of a Single Effect Size: Parametric and Nonparametric Methods. Parametric Estimation of Effect Size from a Series of Experiments. Fitting Parametric Fixed Effect Models to Effect Sizes: Categorical Methods. Fitting Parametric Fixed Effect Models to Effect Sizes: General Linear Models. Random Effects Models for Effect Sizes. Multivariate Models for Effect Sizes. Combining Estimates of Correlation Coefficients. Diagnostic Procedures for Research Synthesis Models. Clustering Estimates of Effect Magnitude. Estimation of Effect Size When Not All Study Outcomes Are Observed. Meta-Analysis in the Physical and Biological Sciences. Appendix. References. Index.

9,769 citations

Journal ArticleDOI
TL;DR: In this article, the authors argue that the trade-off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress, and that instead of simply adding to cost, properly crafted environmental standards can trigger innovation offsets, allowing companies to improve their resource productivity.
Abstract: Accepting a fixed trade-off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress. Studies finding high environmental compliance costs have traditionally focused on static cost impacts, ignoring any offsetting productivity benefits from innovation. They typically overestimated compliance costs, neglected innovation offsets, and disregarded the affected industry's initial competitiveness. Rather than simply adding to cost, properly crafted environmental standards can trigger innovation offsets, allowing companies to improve their resource productivity. Shifting the debate from pollution control to pollution prevention was a step forward. It is now necessary to make the next step and focus on resource productivity.

8,154 citations