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Doing good does not preclude doing well: corporate responsibility and financial performance

Author

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  • Jegoo Lee
  • Samuel B. Graves
  • Sandra Waddock

Abstract

Purpose - This paper aims to propose and test a modified interpretation of long-standing issues on the corporate responsibility (CR)–corporate financial performance (CFP) relationship: companies involved in CR are in general no better and no worse in their level of financial performance than companies without such engagement because of the trade-off between benefit and cost at firm level and imbalance between supply and demand at industry (market) level. Design/methodology/approach - The authors apply this frame to a data set with more than 12,000 observations over a 14-year period, using confidence intervals, as a useful and statistically valid approach for testing the null hypothesis. Findings - The present study’s findings support neutrality between CR and CFP at the firm and industry levels, implying that a firm’s CR involvement neither penalizes nor improves its CFP. Research limitations/implications - CR activities may provide windows of opportunity for companies but do not systematically improve financial performance. Practical implications - “Doing good” is not a panacea for corporate achievement with respect to market-facing activities. For firms to succeed, instead, they need to create and implement their business cases and models by converting their involvement in CR activities into drivers for better outcomes because investments in CR practices do alone not guarantee improved financial performance. Originality/value - The innovations in this study are twofold. Conceptually, this paper proposes a comprehensive approach for a neutral CR–CFP linkage. Empirically, it introduces a novel and appropriate method for testing neutrality. These will mark an important advance in the theoretical and empirical debates over CR and CFP.

Suggested Citation

  • Jegoo Lee & Samuel B. Graves & Sandra Waddock, 2018. "Doing good does not preclude doing well: corporate responsibility and financial performance," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 14(4), pages 764-781, September.
    • Handle: RePEc:eme:srjpps:srj-03-2017-0044
    DOI: 10.1108/SRJ-03-2017-0044
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    Citations

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    Cited by:

    1. Jonah Tyan & Shih‐Ching Liu & Jyun‐Ying Fu, 2024. "How environmental, social, and governance implementation and structure impact sustainable development goals," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3235-3250, July.
    2. Mochales, Gerardo & Blanch, Javier, 2022. "Unlocking the potential of CSR: An explanatory model to determine the strategic character of CSR activities," Journal of Business Research, Elsevier, vol. 140(C), pages 310-323.
    3. Muhammad Umar Boodoo, 2020. "The Influence of Unions on CSR: Is There a Trade‐Off Between Employee‐Oriented and Non–Employee‐Oriented Policies?," British Journal of Industrial Relations, London School of Economics, vol. 58(4), pages 816-843, December.
    4. Shahid Ali & Junrui Zhang & Muhammad Usman & Farman Ullah Khan & Amir Ikram & Bilal Anwar, 2019. "Sub-National Institutional Contingencies and Corporate Social Responsibility Performance: Evidence from China," Sustainability, MDPI, vol. 11(19), pages 1-21, October.
    5. Mariusz Zieliński & Izabela Jonek-Kowalska, 2021. "Does CSR Affect the Profitability and Valuation of Energy Companies? An Example from Poland," Energies, MDPI, vol. 14(12), pages 1-24, June.
    6. Carlo Bellavite Pellegrini & Raul Caruso & Rocco Cifone, 2019. "The Impact of ESG Scores on both Firm Profitability and Value in the Automotive Sector (2002-2016)," Working Papers 1004, European Centre of Peace Science, Integration and Cooperation (CESPIC), Catholic University 'Our Lady of Good Counsel'.
    7. Ibrahim Sameer, 2021. "Impact of corporate social responsibility on organization’s financial performance: evidence from Maldives public limited companies," Future Business Journal, Springer, vol. 7(1), pages 1-21, December.
    8. Mariusz Zieliński & Małgorzata Adamska, 2022. "ESG Assessment from the Perspective of the Management Board and Trade Unions on the Example of the Opole Power Plant," Energies, MDPI, vol. 15(21), pages 1-21, October.
    9. Arelys López‐Concepción & Ana I. Gil‐Lacruz & Isabel Saz‐Gil, 2022. "Stakeholder engagement, Csr development and Sdgs compliance: A systematic review from 2015 to 2021," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(1), pages 19-31, January.

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