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Does Corporate Social Responsibility Affect the Performance of Firms?

Author

Listed:
  • Sergio Vergalli

    (University of Brescia)

  • Laura Poddi

    (University of Ferrara)

Abstract

Over the last two decades in OECD countries increasingly more firms are certifying as Socially Responsible (CSR is the acronym for Corporate Social Responsibility). This kind of certification is assigned by private companies that guarantee that a certain firm’s behaviour is environmentally and sociologically correct. Some papers (including Preston and O’Bannon, 1997; Waddock and Graves, 1997; McWilliams and Sieger, 2001; Ullman, 1985) tried to establish if there exists a link between Social Responsibility certification and the performance of firms. Their results were ambiguous and did not show any common connection. This ambiguity depends mainly on the static nature of their analyses and on the problem of whether performance is affected more by certification costs or by increasing sales due to an effect on reputation. Our work would like to discover whether certain performance indicators are affected by a firm’s social responsible behaviour and their certifications by looking at panel data. The novelty of our analysis is due to its dynamic aspect and from a CSR index that intersects two of the three main international indices (Domini 400 Social Index, Dow Jones Sustainability World Index, FTSE4Good Index), to be objective and obtain a representative sample. The main results seem to support the idea that CSR firms which are more virtuous, have better long run performance. They have some initial costs but obtain higher sales and profits due to several causes reputation effect, a reduction of long run costs and increased social responsible demand.

Suggested Citation

  • Sergio Vergalli & Laura Poddi, 2009. "Does Corporate Social Responsibility Affect the Performance of Firms?," Working Papers 2009.52, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.52
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    References listed on IDEAS

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    1. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
    2. Dierkes, Meinolf & Preston, Lee E., 1977. "Corporate social accounting reporting for the physical environment: A critical review and implementation proposal," Accounting, Organizations and Society, Elsevier, vol. 2(1), pages 3-22, January.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Trotman, Ken T. & Bradley, Graham W., 1981. "Associations between social responsibility disclosure and characteristics of companies," Accounting, Organizations and Society, Elsevier, vol. 6(4), pages 355-362, October.
    5. Teoh, Siew Hong & Welch, Ivo & Wazzan, C Paul, 1999. "The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African Boycott," The Journal of Business, University of Chicago Press, vol. 72(1), pages 35-89, January.
    6. repec:bla:joares:v:18:y:1980:i:2:p:614-622 is not listed on IDEAS
    7. Patten, Dennis M., 1990. "The market reaction to social responsibility disclosures: The case of the Sullivan principles signings," Accounting, Organizations and Society, Elsevier, vol. 15(6), pages 575-587.
    8. Freedman, Martin & Jaggi, Bikki, 1982. "Pollution disclosures, pollution performance and economic performance," Omega, Elsevier, vol. 10(2), pages 167-176.
    9. Patten, Dennis M., 1991. "Exposure, legitimacy, and social disclosure," Journal of Accounting and Public Policy, Elsevier, vol. 10(4), pages 297-308.
    10. Herremans, Irene M. & Akathaporn, Parporn & McInnes, Morris, 1993. "An investigation of corporate social responsibility reputation and economic performance," Accounting, Organizations and Society, Elsevier, vol. 18(7-8), pages 587-604.
    11. Roberts, Robin W., 1992. "Determinants of corporate social responsibility disclosure: An application of stakeholder theory," Accounting, Organizations and Society, Elsevier, vol. 17(6), pages 595-612, August.
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    Citations

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    Cited by:

    1. Paolo Cominetti & Laura Poddi & Sergio Vergalli, 2012. "The Push Factors for Corporate Social Responsibility: A Probit Analysis," Working Papers 2012.58, Fondazione Eni Enrico Mattei.
    2. Diana Tuomasjukka & Staffan Berg & Marcus Lindner, 2013. "Managing Sustainability of Fennoscandian Forests and Their Use by Law and/or Agreement: For Whom and Which Purpose?," Sustainability, MDPI, Open Access Journal, vol. 6(1), pages 1-32, December.
    3. Nicola Comincioli & Laura Poddi & Sergio Vergalli, 2012. "Does Corporate Social Responsibility Affect the Performance of Firms?," Working Papers 2012.53, Fondazione Eni Enrico Mattei.
    4. Paolo Cominetti & Laura Poddi & Sergio Vergalli, 2013. "The Push Factors for Corporate Social Responsibility: A Probit Analysis," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(2), pages 1-2, April.
    5. Reif, Christiane & Rexhäuser, Sascha, 2015. "Good enough! Are socially responsible companies the more successful environmental innovators?," ZEW Discussion Papers 15-018, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. repec:eco:journ1:2017-02-41 is not listed on IDEAS

    More about this item

    Keywords

    Corporate Social Responsibility; Growth;

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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