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The interactive financial effects between corporate social responsibility and irresponsibility

Author

Listed:
  • Ioannis Oikonomou

    (ICMA Centre, Henley Business School, University of Reading)

  • Chris Brooks

    (ICMA Centre, Henley Business School, University of Reading)

  • Stephen Pavelin

    (School of Management, University of Bath)

Abstract

Firms typically present a mixed picture of corporate social performance (CSP), with positive and negative indicators exhibited by the same firm. Thus, stakeholders' judgements of corporate social responsibility (CSR) typically evaluate positives in the context of negatives, and vice versa. We present two alternative accounts of how stakeholders respond to such complexity, which provide differing implications for the financial effects of CSP: reciprocal dampening and rewarding uniformity. Our US panel study finds a U-shaped relationship - firms that exhibit solely positive or solely negative indicators outperform firms that exhibit both - which supports the notion that stakeholders' judgements of CSR reward uniformity.

Suggested Citation

  • Ioannis Oikonomou & Chris Brooks & Stephen Pavelin, 2012. "The interactive financial effects between corporate social responsibility and irresponsibility," ICMA Centre Discussion Papers in Finance icma-dp2012-02, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2012-02
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    File URL: http://www.icmacentre.ac.uk/files/discussion-papers/2012-02.pdf
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    References listed on IDEAS

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    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
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    4. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    5. Abagail McWilliams & Donald Siegel, 2000. "Corporate social responsibility and financial performance: correlation or misspecification?," Strategic Management Journal, Wiley Blackwell, vol. 21(5), pages 603-609, May.
    6. Galema, Rients & Plantinga, Auke & Scholtens, Bert, 2008. "The stocks at stake: Return and risk in socially responsible investment," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2646-2654, December.
    7. Alan Pomering & Sara Dolnicar, 2009. "Assessing the Prerequisite of Successful CSR Implementation: Are Consumers Aware of CSR Initiatives?," Journal of Business Ethics, Springer, vol. 85(2), pages 285-301, April.
    8. Stephen Brammer & Chris Brooks & Stephen Pavelin, 2006. "Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures," Financial Management, Financial Management Association International, vol. 35(3), pages 97-116, September.
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    10. Joëlle Vanhamme & Bas Grobben, 2009. "“Too Good to be True!”. The Effectiveness of CSR History in Countering Negative Publicity," Journal of Business Ethics, Springer, vol. 85(2), pages 273-283, April.
    11. Amy J. Hillman & Gerald D. Keim, 2001. "Shareholder value, stakeholder management, and social issues: what's the bottom line?," Strategic Management Journal, Wiley Blackwell, vol. 22(2), pages 125-139, February.
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    Cited by:

    1. Windsor, Duane, 2013. "Corporate social responsibility and irresponsibility: A positive theory approach," Journal of Business Research, Elsevier, vol. 66(10), pages 1937-1944.
    2. Brooks, Chris & Godfrey, Chris & Hillenbrand, Carola & Money, Kevin, 2016. "Do investors care about corporate taxes?," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 218-248.
    3. Marion Dupire & Bouchra M’Zali, 2018. "CSR Strategies in Response to Competitive Pressures," Journal of Business Ethics, Springer, vol. 148(3), pages 603-623, March.

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    More about this item

    Keywords

    Corporate social responsibility; Corporate social performance; Socially responsible investing;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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