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The Economics and Politics of Corporate Social Performance

  • Baron, David P.

    (Stanford University)

  • Harjoto, Maretno A.

    (Pepperdine University)

  • Jo, Hoje

    (Santa Clara University)

Registered author(s):

    This paper estimates a three-equation structural model based on a theory that relates corporate financial performance (CFP), corporate social performance (CSP), and social pressure. CFP is found to be independent of CSP and decreasing in social pressure, and CSP is independent of CFP and increasing in social pressure. Social pressure is increasing in CSP and decreasing in CFP, which is consistent with social pressure being directed to soft targets. These relations were stronger during the first four years of the Bush administration than the last four year of the Clinton administration. Disaggregating the measure of social pressure indicate that the relations among CFP, CSP, and social pressure are due to private politics and not public politics. For consumer industries greater CSP is associated with better CFP, and the opposite is true for industrial industries.

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    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1993r.

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    Date of creation: Apr 2009
    Date of revision:
    Handle: RePEc:ecl:stabus:1993r
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    1. Aaron K. Chatterji & David I. Levine & Michael W. Toffel, 2009. "How Well Do Social Ratings Actually Measure Corporate Social Responsibility?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 125-169, 03.
    2. Maxwell, John W & Lyon, Thomas P & Hackett, Steven C, 2000. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 583-617, October.
    3. Donald S. Siegel & Donald F. Vitaliano, 2006. "An Empirical Analysis of the Strategic Use of Corporate Social Responsibility," Rensselaer Working Papers in Economics 0602, Rensselaer Polytechnic Institute, Department of Economics.
    4. Matthew J. Kotchen & Jon Jungbien Moon, 2011. "Corporate Social Responsibility for Irresponsibility," NBER Working Papers 17254, National Bureau of Economic Research, Inc.
    5. Seth Binder & Eric Neumayer, 2003. "Environmental Pressure Group Strength and Air Pollution: An Empirical Analysis," Others 0312003, EconWPA, revised 25 Oct 2004.
    6. Becchetti , Leonardo & Ciciretti , Rocco & Hasan, Iftekhar, 2009. "Corporate social responsibility and shareholder's value: an empirical analysis," Research Discussion Papers 1/2009, Bank of Finland.
    7. Giovanni Cespa & Giacinta Cestone, 2007. "Corporate Social Responsibility and Managerial Entrenchment," CSEF Working Papers 173, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Milyo Jeffrey & Primo David & Groseclose Timothy, 2000. "Corporate PAC Campaign Contributions in Perspective," Business and Politics, De Gruyter, vol. 2(1), pages 1-15, April.
    9. Navarro, Peter, 1988. "Why Do Corporations Give to Charity?," The Journal of Business, University of Chicago Press, vol. 61(1), pages 65-93, January.
    10. Hong, Harrison & Kacperczyk, Marcin, 2009. "The price of sin: The effects of social norms on markets," Journal of Financial Economics, Elsevier, vol. 93(1), pages 15-36, July.
    11. 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(04), pages 431-449, December.
    12. Graff Zivin Joshua & Small Arthur, 2005. "A Modigliani-Miller Theory of Altruistic Corporate Social Responsibility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-21, May.
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