Reviewing the Business Case for Corporate Social Responsibility: New Evidence and Analysis

Abstract

This study complements previous empirical research on the business case for corporate social responsibility (CSR) by employing hitherto unused data on corporate social performance (CSP) and proposing statistical analyses to account for bi-directional causality between social and financial performance. By allowing for differences in the importance of single components of CSP between industries, the data in this study overcome certain limitations of the databases used in earlier studies. The econometrics employed offer a rigorous way of addressing the problem of endogeneity due to simultaneous causality. Although the study’s results provide no evidence that there is a generic or universal business case for CSR, they indicate that there is a strong link between single stakeholder-related issues of CSR and financial performance. However, the analysis does not establish causality within these relationships.

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Abbreviations

CFP:

Corporate financial performance

CSP:

Corporate social performance

CSR:

Corporate social responsibility

IV:

Instrumental variable

KLD:

Kinder, Lydenberg, Domini & Co

OLS:

Ordinary least squares

ROE:

Return on equity

VIF:

Variance inflation factor

2SLS:

Two-stage least squares

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Schreck, P. Reviewing the Business Case for Corporate Social Responsibility: New Evidence and Analysis. J Bus Ethics 103, 167 (2011). https://doi.org/10.1007/s10551-011-0867-0

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Keywords

  • business case
  • corporate social responsibility
  • corporate social performance
  • CSP/CFP link
  • empirical
  • causality