IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v9y2017i9p1622-d111775.html
   My bibliography  Save this article

Financial Performance of Socially Responsible Firms: The Short- and Long-Term Impact

Author

Listed:
  • Maria J. Charlo

    (Department of Accounting and Finance, University of Seville, 41018 Seville, Spain)

  • Ismael Moya

    (Department of Economics and Social Sciences, Universitat Politècnica de València, 46022 Valencia, Spain)

  • Ana M. Muñoz

    (Department of Accounting and Finance, University of Seville, 41018 Seville, Spain)

Abstract

The pressure of society for firms to adopt socially responsible behavior is evident. Yet, Corporate Social Responsibility (CSR) needs an economic justification. In response to this, there exists a comprehensive literature that analyzes the possible relation between social and business financial performance. During the last decade, the literature has been heading toward the carrying out of dynamic studies as researches find that the relationship between social and financial performance is not static. The purpose of this work is to analyze the relevance for the financial performance of Spanish listed firms of maintaining their responsible behavior. To do so, we carry out a comparison between two analyses—one cross-sectional, and the other longitudinal—to be able to conclude whether or not adopting responsible criteria makes a difference in business financial performance in the short and long-term. Some of the results obtained in the cross-sectional study are consolidated in the long-term study. In this sense, responsible firms exhibit a higher systematic risk and have greater size. As a conclusion, be responsible does not mean less stock profitability or a lower business result. It certainly contributes to firms continuing to voluntarily incorporate good corporate social responsibility practices into their business models. What is more, these results support the governmental policies and initiatives that bolster corporate social responsibility.

Suggested Citation

  • Maria J. Charlo & Ismael Moya & Ana M. Muñoz, 2017. "Financial Performance of Socially Responsible Firms: The Short- and Long-Term Impact," Sustainability, MDPI, vol. 9(9), pages 1-15, September.
    • Handle: RePEc:gam:jsusta:v:9:y:2017:i:9:p:1622-:d:111775
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/9/9/1622/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/9/9/1622/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lois Mahoney & Robin W. Roberts, 2007. "Corporate social performance, financial performance and institutional ownership in Canadian firms," Accounting Forum, Taylor & Francis Journals, vol. 31(3), pages 233-253, September.
    2. Stephen Brammer & Chris Brooks & Stephen Pavelin, 2006. "Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures," Financial Management, Financial Management Association International, vol. 35(3), pages 97-116, September.
    3. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
    4. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," The Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
    5. Diego Prior & Jordi Surroca & Josep A. Tribó, 2008. "Are Socially Responsible Managers Really Ethical? Exploring the Relationship Between Earnings Management and Corporate Social Responsibility," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(3), pages 160-177, May.
    6. Heinkel, Robert & Kraus, Alan & Zechner, Josef, 2001. "The Effect of Green Investment on Corporate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(4), pages 431-449, December.
    7. Clement, Ronald W., 2005. "The lessons from stakeholder theory for U.S. business leaders," Business Horizons, Elsevier, vol. 48(3), pages 255-264.
    8. Zhi Tang & Clyde Eiríkur Hull & Sandra Rothenberg, 2012. "How Corporate Social Responsibility Engagement Strategy Moderates the CSR–Financial Performance Relationship," Journal of Management Studies, Wiley Blackwell, vol. 49(7), pages 1274-1303, November.
    9. Jaepil Choi & Heli Wang, 2009. "Stakeholder relations and the persistence of corporate financial performance," Strategic Management Journal, Wiley Blackwell, vol. 30(8), pages 895-907, August.
    10. Giacomo Boesso & Kamalesh Kumar & Giovanna Michelon, 2013. "Descriptive, instrumental and strategic approaches to corporate social responsibility," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 26(3), pages 399-422, March.
    11. Carmelo Reverte, 2009. "Determinants of Corporate Social Responsibility Disclosure Ratings by Spanish Listed Firms," Journal of Business Ethics, Springer, vol. 88(2), pages 351-366, August.
    12. Yuriko Nakao & Akihiro Amano & Kanichiro Matsumura & Kiminori Genba & Makiko Nakano, 2007. "Relationship between environmental performance and financial performance: an empirical analysis of japanese corporations," Business Strategy and the Environment, Wiley Blackwell, vol. 16(2), pages 106-118, February.
    13. Lin, Tyrone T. & Huang, Shio-Ling, 2011. "Application of the modified Tobin's q to an uncertain energy-saving project with the real options concept," Energy Policy, Elsevier, vol. 39(1), pages 408-420, January.
    14. Andrew King & Michael Lenox, 2002. "Exploring the Locus of Profitable Pollution Reduction," Management Science, INFORMS, vol. 48(2), pages 289-299, February.
    15. Edward Nelling & Elizabeth Webb, 2009. "Corporate social responsibility and financial performance: the “virtuous circle” revisited," Review of Quantitative Finance and Accounting, Springer, vol. 32(2), pages 197-209, February.
    16. Vicente Lima Crisóstomo & Fátima de Souza Freire & Felipe Cortes de Vasconcellos, 2011. "Corporate social responsibility, firm value and financial performance in Brazil," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 7(2), pages 295-309, June.
    17. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-139, May.
    18. Herremans, Irene M. & Akathaporn, Parporn & McInnes, Morris, 1993. "An investigation of corporate social responsibility reputation and economic performance," Accounting, Organizations and Society, Elsevier, vol. 18(7-8), pages 587-604.
    19. Glen Dowell & Stuart Hart & Bernard Yeung, 2000. "Do Corporate Global Environmental Standards Create or Destroy Market Value?," Management Science, INFORMS, vol. 46(8), pages 1059-1074, August.
    20. Falck, Oliver & Heblich, Stephan, 2007. "Corporate social responsibility: Doing well by doing good," Business Horizons, Elsevier, vol. 50(3), pages 247-254.
    21. Inoue, Yuhei & Lee, Seoki, 2011. "Effects of different dimensions of corporate social responsibility on corporate financial performance in tourism-related industries," Tourism Management, Elsevier, vol. 32(4), pages 790-804.
    22. Stephen Brammer & Andrew Millington, 2008. "Does it pay to be different? An analysis of the relationship between corporate social and financial performance," Strategic Management Journal, Wiley Blackwell, vol. 29(12), pages 1325-1343, December.
    23. Taiyuan Wang & Pratima Bansal, 2012. "Social responsibility in new ventures: profiting from a long‐term orientation," Strategic Management Journal, Wiley Blackwell, vol. 33(10), pages 1135-1153, October.
    24. Roberts, Robin W., 1992. "Determinants of corporate social responsibility disclosure: An application of stakeholder theory," Accounting, Organizations and Society, Elsevier, vol. 17(6), pages 595-612, August.
    25. Krishna Udayasankar, 2008. "Corporate Social Responsibility and Firm Size," Journal of Business Ethics, Springer, vol. 83(2), pages 167-175, December.
    26. Giovanna Michelon & Giacomo Boesso & Kamalesh Kumar, 2013. "Examining the Link between Strategic Corporate Social Responsibility and Company Performance: An Analysis of the Best Corporate Citizens," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 20(2), pages 81-94, March.
    27. Eduardo Ortas & Igor Álvarez & Ainhoa Garayar, 2015. "The Environmental, Social, Governance, and Financial Performance Effects on Companies that Adopt the United Nations Global Compact," Sustainability, MDPI, vol. 7(2), pages 1-25, February.
    28. Amy J. Hillman & Gerald D. Keim, 2001. "Shareholder value, stakeholder management, and social issues: what's the bottom line?," Strategic Management Journal, Wiley Blackwell, vol. 22(2), pages 125-139, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristian Carini & Nicola Comincioli & Laura Poddi & Sergio Vergalli, 2017. "Measure the Performance with the Market Value Added: Evidence from CSR Companies," Sustainability, MDPI, vol. 9(12), pages 1-19, November.
    2. María Mar Miralles-Quirós & José Luis Miralles-Quirós & Luis Miguel Valente Gonçalves, 2018. "The Value Relevance of Environmental, Social, and Governance Performance: The Brazilian Case," Sustainability, MDPI, vol. 10(3), pages 1-15, February.
    3. Borja Diez-Cañamero & Tania Bishara & Jose Ramon Otegi-Olaso & Rikardo Minguez & José María Fernández, 2020. "Measurement of Corporate Social Responsibility: A Review of Corporate Sustainability Indexes, Rankings and Ratings," Sustainability, MDPI, vol. 12(5), pages 1-36, March.
    4. Marek Potkány & Miloš Gejdoš & Marek Debnár, 2018. "Sustainable Innovation Approach for Wood Quality Evaluation in Green Business," Sustainability, MDPI, vol. 10(9), pages 1-14, August.
    5. Nor'Aini Yusof & Amin Akhavan Tabassi & Ernawati Mustafa Kamal, 2020. "Do environmental, economic and reputational advantages strengthen green practices' impact on environmental performance?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(5), pages 2081-2093, September.
    6. Fernando García & Jairo González-Bueno & Javier Oliver & Nicola Riley, 2019. "Selecting Socially Responsible Portfolios: A Fuzzy Multicriteria Approach," Sustainability, MDPI, vol. 11(9), pages 1-14, April.
    7. Mohinesh Chandra & Alireza Tourani-Rad, 2021. "Do Investors Value Environmental Corporate Policies? Evidence from the Australian Market," JRFM, MDPI, vol. 14(3), pages 1-12, March.
    8. Khan, Majid & Lockhart, James & Bathurst, Ralph, 2021. "The institutional analysis of CSR: Learnings from an emerging country," Emerging Markets Review, Elsevier, vol. 46(C).
    9. Lucia Maciková & Marián Smorada & Peter Dorčák & Benjamin Beug & Peter Markovič, 2018. "Financial Aspects of Sustainability: An Evidence from Slovak Companies," Sustainability, MDPI, vol. 10(7), pages 1-15, July.
    10. José M. Brotons & Manuel E. Sansalvador, 2020. "The relation between corporate social responsibility certification and financial performance: An empirical study in Spain," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(3), pages 1465-1477, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maria J. Charlo & Ismael Moya & Ana M. Muñoz, 2017. "Sustainable Development in Spanish Listed Companies: A Strategic Approach," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(3), pages 222-234, May.
    2. José M. Brotons & Manuel E. Sansalvador, 2020. "The relation between corporate social responsibility certification and financial performance: An empirical study in Spain," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(3), pages 1465-1477, May.
    3. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    4. Sana Noor & Abubakr Saeed & Muhammad Saad Baloch & Muhammad Awais, 2020. "CSR permanency, family ownership, and firm value: Evidence from emerging economies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(5), pages 2135-2149, September.
    5. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber, 2019. "It is merely a matter of time: A meta‐analysis of the causality between environmental performance and financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 28(2), pages 257-273, February.
    6. Alexandra ZBUCHEA & Florina PÎNZARU, 2017. "Tailoring CSR Strategy to Company Size?," Management Dynamics in the Knowledge Economy, College of Management, National University of Political Studies and Public Administration, vol. 5(3), pages 415-437, September.
    7. María del Mar Miras‐Rodríguez & Amalia Carrasco‐Gallego & Bernabé Escobar‐Pérez, 2015. "Are Socially Responsible Behaviors Paid Off Equally? A Cross‐cultural Analysis," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 22(4), pages 237-256, July.
    8. Ben Lahouel, Béchir & Ben Zaied, Younes & Managi, Shunsuke & Taleb, Lotfi, 2022. "Re-thinking about U: The relevance of regime-switching model in the relationship between environmental corporate social responsibility and financial performance," Journal of Business Research, Elsevier, vol. 140(C), pages 498-519.
    9. Nour Chams & Josep García-Blandón & Khaled Hassan, 2021. "Role Reversal! Financial Performance as an Antecedent of ESG: The Moderating Effect of Total Quality Management," Sustainability, MDPI, vol. 13(13), pages 1-18, June.
    10. Sanja Pekovic & Sebastian Vogt, 2021. "The fit between corporate social responsibility and corporate governance: the impact on a firm’s financial performance," Review of Managerial Science, Springer, vol. 15(4), pages 1095-1125, May.
    11. Theofanis Karagiorgos, 2010. "Corporate Social Responsibility and Financial Performance: An Empirical Analysis on Greek Companies," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 85-108.
    12. Franck Brulhart & Sandrine Gherra & Bertrand V. Quelin, 2019. "Do Stakeholder Orientation and Environmental Proactivity Impact Firm Profitability?," Journal of Business Ethics, Springer, vol. 158(1), pages 25-46, August.
    13. Hajer Tebini & Bouchra M’Zali & Pascal Lang & Paz Méndez-Rodrı́guez, 2015. "Social Performance and Financial Performance: A Controversial Relationship," International Series in Operations Research & Management Science, in: Enrique Ballestero & Blanca Pérez-Gladish & Ana Garcia-Bernabeu (ed.), Socially Responsible Investment, edition 127, chapter 0, pages 53-73, Springer.
    14. Luis Otero-González & Pablo Durán-Santomil & Luis-Ignacio Rodríguez-Gil & Rubén Lado-Sestayo, 2021. "Does a Company’s Profitability Influence the Level of CSR Development?," Sustainability, MDPI, vol. 13(6), pages 1-15, March.
    15. Kimitaka Nishitani & M.B. Haider & Katsuhiko Kokubu, 2014. "Corporate Environmental Initiatives and Shareholder Value: Focusing on the Role of Environmental Information and Its Credibility," Discussion Paper Series DP2014-13, Research Institute for Economics & Business Administration, Kobe University.
    16. Claudio Nuber & Patrick Velte & Jacob Hörisch, 2020. "The curvilinear and time‐lagging impact of sustainability performance on financial performance: Evidence from Germany," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(1), pages 232-243, January.
    17. Jieun Chung & Charles H. Cho, 2018. "Current Trends within Social and Environmental Accounting Research: A Literature Review," Accounting Perspectives, John Wiley & Sons, vol. 17(2), pages 207-239, June.
    18. Lee, Ki-Hoon & Min, Byung & Yook, Keun-Hyo, 2015. "The impacts of carbon (CO2) emissions and environmental research and development (R&D) investment on firm performance," International Journal of Production Economics, Elsevier, vol. 167(C), pages 1-11.
    19. Francisco J. López-Arceiz & Ana J. Bellostas & Pilar Rivera, 2018. "Twenty Years of Research on the Relationship Between Economic and Social Performance: A Meta-analysis Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 140(2), pages 453-484, November.
    20. Yann Truong & Brian G. Nagy, 2021. "Nascent ventures’ green initiatives and angel investor judgments of legitimacy and funding," Small Business Economics, Springer, vol. 57(4), pages 1801-1818, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:9:y:2017:i:9:p:1622-:d:111775. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.