Advertisement

Journal of Business Ethics

, Volume 35, Issue 2, pp 97–109 | Cite as

The Link Between Corporate Social and Financial Performance: Evidence from the Banking Industry

  • W. Gary Simpson
  • Theodor Kohers
Article

Abstract

The purpose of this investigation is to extend earlier research on the relationship between corporate social and financial performance. The unique contribution of the study is the empirical analysis of a sample of companies from the banking industry and the use of Community Reinvestment Act ratings as a social performance measure. The empirical analysis solidly supports the hypothesis that the link between social and financial performance is positive.

Community Reinvestment Act Rating financial performance social performance 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alexander, G. J. and R. A. Buchholz: 1978, 'Corporate Responsibility and Stock Market Performance', Academy of Management Journal 21, 479–486.Google Scholar
  2. Belkaoui, A.: 1976, 'The Impact of the Disclosure of the Environmental Effects of Organizational Behavior on the Market', Financial Management 5, 26–31.Google Scholar
  3. Bragdon, J. H. and J. T. Marlin: 1972, 'Is Pollution Profitable?', Risk Management 19, 9–18.Google Scholar
  4. Brown, B. and S. Perry: 1995, 'Halo-Removed Residuals of Fortune's "Responsibility to the Community and Environment"-A Decade of Data', Business and Society 34, 199–215.Google Scholar
  5. Carroll, A. B.: 1979, 'A Three-Dimensional Model of Corporate Social Performance', Academy of Management Review 4, 497–505.Google Scholar
  6. Carroll, A. B.: 2000, 'A Commentary and an Overview of Key Questions on Corporate Social Performance Measurement', Business and Society 39, 466–478.Google Scholar
  7. Catalano, J.: 1993, 'A Clearer Focus on Your CRA Examination', ABA Bank Compliance (Spring), 5–12.Google Scholar
  8. Evanoff, D. D. and L. M. Segal: 1996, 'CRA and Fair Lending Regulations: Resulting Trends in Mortgage Lending', Economic Perspectives: Federal Reserve Bank of Chicago (Nov.-Dec.), 19–43.Google Scholar
  9. Friedman, M.: 1962, Capitalism and Freedom (University of Chicago Press, Chicago).Google Scholar
  10. Frooman, J.: 1997, 'Socially Irresponsible and Illegal Behavior and Shareholder Wealth', Business and Society 36, 221–249.Google Scholar
  11. Greene, W. H.: 1997, Econometric Analysis (Prentice Hall, Upper Saddle River, New Jersey).Google Scholar
  12. Griffin, J. J.: 2000, 'Corporate Social Performance: Research Directions for the 21st Century', Business and Society 39, 479–491.Google Scholar
  13. Griffin, J. J. and J. F. Mahon: 1997, 'The Corporate Social Performance and Corporate Financial Performance Debate: Twenty-Five Years of Incomparable Research', Business and Society 36, 5–31.Google Scholar
  14. McWilliams, A. and D. Siegel: 2001, 'Corporate Social Responsibility: A Theory of the Firm Perspective', Academy of Management Review 26, 117–127.Google Scholar
  15. McWilliams, A. and D. Siegel: 2000, 'Corporate Social Responsibility and Financial Performance: Correlation or Misspecification?', Strategic Management Journal 21, 603–609.Google Scholar
  16. Preston, L. E. and D. P. O'Bannon: 1997, 'The Corporate Social-Financial Performance Relationship: A Typology and Analysis', Business and Society 36, 419–429.Google Scholar
  17. Pindyck, R. S. and D. L. Rubinfeld: 1998, Econometric Models and Economic Forecasts (Irwin McGraw-Hill, Boston).Google Scholar
  18. Roman, R. M., S. Hayibor and B. R. Agle: 1999, 'The Relationship Between Social And Financial Performance: Repainting a Portrait', Business and Society 38, 109–125.Google Scholar
  19. Rowley, T. and S. Berman: 2000, 'A Brand New Brand of Corporate Social Performance', Business and Society 39, 397–418.Google Scholar
  20. Spong, K.: 1994, Banking Regulation: Its Purposes, Implementation, and Effects, Kansas City, Federal Reserve Bank of Kansas City.Google Scholar
  21. Stanwick, P. A. and S. D. Stanwick: 1998, 'The Relationship Between Corporate Social Performance and Organizational Size, Financial Performance, and Environmental Performance: An Empirical Examination', Journal of Business Ethics 17, 195–204.Google Scholar
  22. Swanson, D. L.: 1999, 'Toward an Integrative Theory of Business and Society: A Research Strategy for Corporate Social Performance', Academy of Management Review 24, 506–521.Google Scholar
  23. Vance, S. C.: 1975, 'Are Socially Responsible Corporations Good Investment Risks?', Academy of Management Review(August), 18–24.Google Scholar
  24. Waddock, S. A. and S. B. Graves: 1997, 'The Corporate Social Performance-Financial Performance Link', Strategic Management Journal 18, 303–319.Google Scholar
  25. Wartrick, S. L. and P. L. Cochran: 1985, 'The Evolution of the Corporate Social Performance Model', Academy of Management Review 10, 758–769.Google Scholar
  26. Wood, D. J.: 1991, 'Corporate Social Performance Revisited', Academy of Management Review 16, 691–718.Google Scholar

Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • W. Gary Simpson
    • 1
  • Theodor Kohers
    • 2
  1. 1.Department of Finance, College of Business AdministrationOklahoma State UniversityStillwaterU.S.A.
  2. 2.Department of Finance and Economics, College of Business and IndustryMississippi State UniversityMississippi StateU.S.A.

Personalised recommendations