Corporate Social Responsibility and Firm Financial Performance: The Mediating Role of Productivity
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This study treats firm productivity as an accumulation of productive intangibles and posits that stakeholder engagement associated with better corporate social performance helps develop such intangibles. We hypothesize that because shareholders factor improved productive efficiency into stock price, productivity mediates the relationship between corporate social and financial performance. Furthermore, we argue that key stakeholders’ social considerations are more valuable for firms with higher levels of discretionary cash and income stream uncertainty. Therefore, we hypothesize that those two contingencies moderate the mediated process of corporate social performance with financial performance. Our analysis, based on a comprehensive longitudinal dataset of the U.S. manufacturing firms from 1992 to 2009, lends strong support for these hypotheses. In short, this paper uncovers a productivity-based, context-dependent mechanism underlying the relationship between corporate social performance and financial performance.
KeywordsCorporate social responsibility Corporate financial performance Total factor productivity Stakeholder management Discretionary cash Organizational risk
This research project is generously supported by a Summer Research Grant awarded by the Stuart School of Business, Illinois Institute of Technology. This project is also supported by the Research Bureau at People's Bank of China, and the Major Program of the National Natural Science Foundation of China (Grant 13&ZD016), and the Key Program of the National Natural Science Foundation of China (Grant 12AZD095).
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