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The Direct and Moderating Effects of Endogenous Corporate Social Responsibility on Firm Valuation: Theoretical and Empirical Evidence from the Global Financial Crisis

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  • Sean T. Hannah
  • Naz Sayari
  • Frederick H. deB. Harris
  • Carol L. Cain

Abstract

Research has produced inconclusive results concerning the effects of corporate social responsibility (CSR) on firm financial performance, with only 59 percent of studies demonstrating positive effects. Yet, still unaddressed is how CSR impacts the key driver of financial performance – firm growth. We develop new multidisciplinary theory integrating stakeholder and risk management theories with multi‐period capital asset pricing. We test the direct and moderating effects of Social, Institutional, Strategic, and Technical CSR using a simultaneous equations model of endogenous CSR and Tobin’s q ratio. Our 2004–12 sample of S&P 3000 firms show that all CSR dimensions directly bolster firm performance, while select dimensions moderate the relationship between firms’ sales or asset growth and capitalized market value in the periods surrounding the 2008 Global Financial Crisis (GFC). These results deepen understanding of how different forms of CSR influence market value, and refine estimates of CSR’s direct and moderating impacts on the growth‐value relationship.

Suggested Citation

  • Sean T. Hannah & Naz Sayari & Frederick H. deB. Harris & Carol L. Cain, 2021. "The Direct and Moderating Effects of Endogenous Corporate Social Responsibility on Firm Valuation: Theoretical and Empirical Evidence from the Global Financial Crisis," Journal of Management Studies, Wiley Blackwell, vol. 58(2), pages 421-456, March.
    • Handle: RePEc:bla:jomstd:v:58:y:2021:i:2:p:421-456
    DOI: 10.1111/joms.12586
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    3. Saridakis, Charalampos & Angelidou, Sofia & Woodside, Arch G., 2023. "How historical and social aspirations reshape the relationship between corporate financial performance and corporate social responsibility," Journal of Business Research, Elsevier, vol. 157(C).

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