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When doing good for society is good for shareholders: importance of alignment between strategy and CSR performance

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Listed:
  • Rajiv D. Banker

    (Temple University)

  • Xinjie Ma

    (National University of Singapore)

  • Carol Pomare

    (Mount Allison University)

  • Yue Zhang

    (Lingnan University)

Abstract

We investigate the association between firms’ strategy and their corporate social responsibility (CSR) performance and whether the alignment between strategy and CSR activities affects firms’ financial performance. We describe firms’ strategies as innovation differentiation, marketing differentiation, and cost leadership Miller, (1986). We expect a higher benefit from CSR for firms that rely more on innovation differentiation and a lower benefit for firms that rely more on marketing differentiation and cost leadership. We measure firms’ strategy through a textual analysis of 10-K filings and collect CSR data from KLD Ratings. We find that innovation differentiation strategy is positively associated with CSR performance, while cost leadership (marketing differentiation) is negatively (insignificantly) associated with CSR performance. Moreover, we find that innovating differentiators with higher CSR performance achieve higher financial performance. Finally, we provide additional evidence that information asymmetry and financial constraints moderate the alignment between firms’ strategy and CSR performance.

Suggested Citation

  • Rajiv D. Banker & Xinjie Ma & Carol Pomare & Yue Zhang, 2023. "When doing good for society is good for shareholders: importance of alignment between strategy and CSR performance," Review of Accounting Studies, Springer, vol. 28(2), pages 1074-1106, June.
    • Handle: RePEc:spr:reaccs:v:28:y:2023:i:2:d:10.1007_s11142-021-09664-y
    DOI: 10.1007/s11142-021-09664-y
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