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A Data Envelopment Analysis-Based Methodology Adopting Assurance Region Approach for Measuring Corporate Social Performance

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Abstract

Many research papers calculate corporate social performance (CSP) with the net score method, i.e., by subtracting the number of concerns from the number of strengths. Although widely adopted, this method implies, perhaps mistakenly, that each indicator is of equal importance and that however serious the social misconduct a firm may have engaged in, it can be completely offset by some positive social action. The method also implies that a given firm that has done both a lot of harm and a lot of good will have CSP similar to that of another firm that has done little harm and little good. In this study, however, we question the appropriateness of the net score method in terms of its ability to truly reflect CSP and truly identify the real effects of CSP on various characteristics. We therefore propose a data envelopment analysis-based methodology that adopts the assurance region approach for evaluating CSP, through which various CSP indicators are converted into a single composite measure of CSP. Our findings show that our proposed methodology consistently performs better than the net score method in evaluating CSP.

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Notes

  1. These papers are: Graves and Waddock (1994), Waddock and Graves (1997), Hillman and Keim (2001), David et al. (2007), El Ghoul et al. (2011), Hull and Rothenberg (2008), Choi and Wang (2009), Godfrey et al. (2009), Dahlmann and Brammer (2011), Wong et al. (2011), Barnett and Salomon (2012), Kim et al. (2012), Giuli and Kostovetsky (2014), Flammer (2015), Ioannou and Serafeim (2015), Tang et al. (2015) and Petrenko et al. (2016).

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Acknowledgement

This work was supported by the Ministry of Science and Technology of Taiwan under Grants MOST-106-2410-H-305-011. This support is gratefully acknowledged.

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Authors and Affiliations

  1. Department of Business Administration, National Taipei University, 151, University Road, San Shia, Taipei, 237, Taiwan

    Tai-Hsi Wu, Mei-Chen Lin & Yi Hua Wu

  2. Department of Finance and Cooperative Management, National Taipei University, 151, University Road, San Shia, Taipei, 237, Taiwan

    Hsiang-Lin Chih

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Wu, TH., Chih, HL., Lin, MC. et al. A Data Envelopment Analysis-Based Methodology Adopting Assurance Region Approach for Measuring Corporate Social Performance. Soc Indic Res 148, 863–892 (2020). https://doi.org/10.1007/s11205-019-02228-3

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