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Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects

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  • Lioui, Abraham
  • Sharma, Zenu

Abstract

This paper assesses the impact of environmental corporate social responsibility (ECSR) on Corporate Financial Performance (CFP) measured by ROA and Tobin's Q. We show that the relationship between firms' return on assets (ROA) and ECSR, strengths and concerns, is negative and statistically significant. We also show that firms' Tobin Q and ECSR, strengths and concerns, are negatively correlated in a statistically significant way. However, accounting for the interaction between firms' environmental efforts and R&D yields a different perspective: while the direct impact of ECSR on CFP is still negative, the interaction of ECSR and R&D has a positive and significant impact on it. ECSR strengths and concerns harm CFP since they are perceived as a potential cost. However, this CSR activity fosters R & D efforts of firms which generates additional value (indirect effect).

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 78 (2012)
Issue (Month): C ()
Pages: 100-111

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Handle: RePEc:eee:ecolec:v:78:y:2012:i:c:p:100-111

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Corporate social responsibility; Tobin's Q; R&D;

References

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Citations

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Cited by:
  1. Xiping Pan & Jinghua Sha & Hongliang Zhang & Wenlan Ke, 2014. "Relationship between Corporate Social Responsibility and Financial Performance in the Mineral Industry: Evidence from Chinese Mineral Firms," Sustainability, MDPI, Open Access Journal, vol. 6(7), pages 4077-4101, June.
  2. Nandy, Monomita & Lodh, Suman, 2012. "Do banks value the eco-friendliness of firms in their corporate lending decision? Some empirical evidence," International Review of Financial Analysis, Elsevier, Elsevier, vol. 25(C), pages 83-93.
  3. Constantin Zopounidis & Michael Doumpos, 2013. "Multicriteria decision systems for financial problems," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer, Springer, vol. 21(2), pages 241-261, July.

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