Corporate Social Responsability
and Firm Financial Performance
MCGUIRE, Jean B. SUNDGREN, Alison. SCHNEEWEIS, Thomas. Corporate social
responsibility and firm financial performance. Academy of management journal.
1988, Vol. 31, No. 4, p. 854-872.
Presented by: Melanie Hurlimann
Course: Research Methods
Date: 09.12.2010
Abstract:
Using Fortune magazine's ratings of corporate reputations, we analyzed the relationships
between perceptions of firms' corporate social responsibility and measures of their financial
performance. Results show that a firm's prior performance, assessed by both stock-market
returns and accounting-based measures, is more closely related to corporate social
responsibility than is subsequent performance. Results also show that measures of risk are
more closely associated with social responsibility than previous studies have suggested.
Context
Research Question
Literature Review
Methodology
Findings
CONTEXT
• Research was conducted in various industries
• “Various arguments have been made regarding the
relationship between firms’ social responsibility and
their financial performance”
o
o
o
o
Firms face trade-offs
Firms benefit in terms of employee morale and productivity
Firms reduce costs
Firms invest in their reputation
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Context
Research Question
Literature Review
Methodology
Findings
RESEARCH OBJECTIVE & QUESTION
• Research Objective
Measure the relationship between a firm’s financial
performance and its corporate social responsibility as well as
extending previous research.
• Research Question
The correlation between a firm’s CSR and its financial
performance is negative, positive or not significant in terms
costs, reputation and risk.
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Context
Research Question
Literature Review
Methodology
Findings
LITERATURE REVIEW
• “Moskowitz (1972) ranked 67 selected firms in terms of his
evaluation of their level of social responsibility and reported higher
than average stock returns for highly ranked firms”
Reference: MOSKOWITZ, M. Choosing socially responsible stocks.
Business and society. Vol. 1, p.71-75
• “Bowman and Haire (1975) have suggested that stakeholder and
stock- and bondholders may see corporate social responsibility as
indicating management skill”
Reference: BOWMEN, E. HAIRE, M. A strategic posture towards CSR.
California Management Review. 1978, Vol. 18, No. 2, p. 49-58
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Context
Research Question
Literature Review
Methodology
Findings
METHODOLOGY
• Source of data
o
o
Fortune magazine’s annual survey
COMPUSTAT data base for data on accounting- and
stock-market-based measures
• Descriptive Statistics
Regression and correlation analysis
• Hypothesis testing
Corporate social responsibility and ROA are not correlated
Corporate social responsibility and ROA are correlated
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Context
Research Question
Literature Review
Methodology
Findings
FINDINGS
•
“Rather than looking for increased profitability from socially responsible actions,
managers and those interested in the financial impact of social responsibility
might look toward reduced risk.”
•
“Our data [...] suggests that firms low in social responsibility also experience
lower ROA and stock-market returns than do firms high in social responsibility.”
•
“[...] most interesting is that prior performance is generally a better predictor of
corporate social responsibility than subsequent performance. Thus, associations
found between concurrent social responsibility and performance may partially
be artefacts of previous high financial performance.”
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