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Financial Impacts and antecedents of CSR: a PLS Path Modelling Approach

Author

Listed:
  • Jean-michel Sahut

    (IDRAC Business School (Fr) & HEG Fribourg-University of Applied Sciences Western Switzerland)

  • Medhi Mili

    (College of Business Administration, University of Bahrain)

  • Sana Ben Tekaya

    (University of Sousse)

  • Frédéric Teulon

    (IPAG Business School, IPAG – Lab, France)

Abstract

This paper explores the mutual links between corporate social responsibility (CSR), corporate governance (CG), and corporate financial performance (CFP). We aim to investigate the extent to which a firm's internal CG structures may influence its CSR practices and the resulting impact on its financial performances. To take into account the mutual interactions between these variables, we propose a global model, based on the partial least squares path modelling (PLS-PM), using a sample of 486 large U.S. and Europeans firms for the period 2002–2011. Our results highlight a positive impact of corporate governance and financial variables on CSR. The main determinant of CSR is the governance under financial constraints (firm leverage mainly and size). Firms' leverage allows them to obtain more financial resources and positively affects their CSR practices. The adoption of CSR principles is found to increase primarily the firm's accounting performance and secondarily its market performance. However, in our model, we have a double effect; we underline the direct link between CG and financial performance and identify an indirect link between these two variables mediated by CSR. This second relationship, not explored in the literature, reinforces the impact of good CG on financial performance.

Suggested Citation

  • Jean-michel Sahut & Medhi Mili & Sana Ben Tekaya & Frédéric Teulon, 2016. "Financial Impacts and antecedents of CSR: a PLS Path Modelling Approach," Economics Bulletin, AccessEcon, vol. 36(2), pages 736-751.
    • Handle: RePEc:ebl:ecbull:eb-15-00530
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    2. Fernando García & Jairo González-Bueno & Francisco Guijarro & Javier Oliver, 2020. "Forecasting the Environmental, Social, and Governance Rating of Firms by Using Corporate Financial Performance Variables: A Rough Set Approach," Sustainability, MDPI, vol. 12(8), pages 1-18, April.
    3. Dang, Rey & Houanti, L'Hocine & Sahut, Jean-Michel & Simioni, Michel, 2021. "Do women on corporate boards influence corporate social performance? A control function approach," Finance Research Letters, Elsevier, vol. 39(C).

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    More about this item

    Keywords

    Corporate social responsibility; CSR; Corporate governance; Performance; Score; Partial least squares.;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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