The evolution of firms’ social responsibility and stock performance

Purpose - The authors ask the question if firms would continue the efforts to improve their social responsibility and how that continued efforts would impact their financial performance over time. This study’s approach helps better understand the effects of changing social responsibility on firms’ stock performance over time. Design/methodology/approach - The authors investigate the relationship between firms’ evolving social responsibility and their stock performance changes. Findings - This study’s findings suggest that more socially responsible firms tend to perform better. In addition, improvements in companies’ social responsibility measures are associated with better stock performances. Originality/value - Existing literature uses firms’ social capital scores at a single point in time and does not account for the changes in firms’ social effort over time. By using Media Corporate Responsibility Magazine’s 100 best corporate citizens ranking for a 10-year period from 2009 to 2018, we construct a unique data set that includes the firm’s social responsibility levels for 10 years.