5 CONCLUSIONS AND FUTURE RESEARCH
5.2 Limitations and future research
One limitation of this study is the use of only accounting-based measures of CFP and not including market-based measures. Accounting-based measures such as
58
ROA and ROE have been criticized by Hillmand and Keim (2001) as being inadequate measures for this study context ultimately because it does not capture shareholder value creation, which includes among others the value of customer service and reputation. This transforms the premise for this study – focus on only financial performance – as limited, and maybe the focus should be on the overall value creation for stakeholders. In future research market-based measures such as MVA or Tobin’s Q could be used to account for CFP or for shareholder value creation of the companies as done in studies by Hillman and Keim (2001), Makni et al. (2009), and Schreck (2011).
This study studied only the companies in Europe. In future research controlling for countries could be warranted as there is a possibility of company-specific differences in CSR and CFP, as it is now accepted in literature in different industries. Likewise, this study also did not consider the industry-related differences, for example, use it as a control variable. For future research, including the industry aspect could be considered. Also, company risk was not taken into this study’s consideration, even though it is included as a control variable in various studies due to it being a known determinant of CFP (Fama and French, 1992, 1993; Makni et al., 2009). For future research, its effect could also be included.
This study studied a time frame of 2009 to 2015, which for all variables meant only 7 marks. This was due to financial data being mostly available on an annual basis in the database. However, quarterly data is available for most public companies, so it would be theoretically possible to gain quarterly financial data for future research. This would enhance the validity and robustness of the research. One interesting idea for future research would be to divide a time series data into two parts, the first part being before the financial crisis and the second part being after the financial crisis, like in this study. CSR can be seen as altruism, so it would be interesting to study whether the financial crisis has affected the relationship.
59
It would be interesting to see a study done by examining the CSR/CFP relationship with the subcategories available also from CSRHub. This could have provided valuable information on the individual affecting factors of the relationship and could better motivate companies to invest in socially responsible actions. For the motives of this study, the data collecting would have been too time-consuming, so only the broad categories were used.
As stated before, more studies are needed of the CSR/CFP relationship due to there being mixed results still, after decades of studies, and especially when considering the incomparability of the studies and the rising trend in allowing for the measure of CSR to be divided into categories. Also, the presence of new more complex CSR data (for example CSRHub used in this study) allows for more complex results to appear if continuing to study the CSR/CFP relationship. This is enhanced by CSR reporting becoming more prominent so CSR data should become more readily available from different sources and for different objectives.
60
REFERENCES
Albinger, H. S. and Freeman, S. J. (2000). Corporate Social Performance and Attractiveness as an Employer to Different Job Seeking Populations. Journal of Business Ethics, 28(3), pp. 243–253.
Ali, R., Muhammad, I. I., Rafeh, R. and Rabia, Q. (2012). Relationship between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP): literature review approach. Elixir International Journal, 26, pp. 8404–8409.
Allouche, J. and Laroche, P. (2005). A Meta-Analytical Investigation of the Relationship Between Corporate Social and Financial Performance. Revue de Gestion des Ressources Humaines, 57, pp. 18–40.
Arya, B. and Zhang, G. (2009. Institutional reforms and investor reactions to corporate social responsibility announcements: evidence from an emerging economy. Journal of Management Studies, 46(7), pp. 1089–1112.
Baltagi, B. H. (2001). Econometric analysis of panel data (second edition).
Chichester: Wiley.
Bang, W. and Chun, K. (2016). Effect of CSR on Customer Loyalty: Moderating Effect of Authenticity. International Journal of u- and e- Service, Science and Technology, 9(5), pp. 135–142.
Bansal, P. and Clelland, I. (2004). Talking Trash: Legitimacy, Impression Management, and Unsystematic Risk in the Context of the Natural Environment.
Academy of Management Journal, 47(1), pp. 93–103.
Barnard, C. I. (1938). The functions of the executive. Cambridge, MA: Harvard University Press.
61
Barnea, A. and Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97(1), pp. 71–86.
Barnett, M. L. and Salomon, R. M. (2006). Beyond dichotomy: The curvilinear relationship between social responsibility and financial performance. Strategic Management Journal, 27(11), pp. 1101–1122.
Bauer, R., Guenster, N. and Otten, R. (2004). Empirical Evidence on Corporate Governance in Europe: The Effect on Stock Returns, Firm Value and Performance. Journal of Asset Management, 5(2), pp. 91–104.
Berman, S. L., Jones, T. M., Kotha, S. and Wicks, A. C. (1999). Does Stakeholder Orientation Matter? The Relationship Between Stakeholder Management Models and Firm Financial Performance. Academy of Management Journal , 42(5), pp.
488–506.
Black, B., Hasung, J. and Woochan, K. (2006). Does Corporate Governance Predict Firms’ Market Values? Evidence from Korea. Journal of Law, Economics, and Organization, 22(2), pp. 366–413.
Bowen, H. (1953). Social responsibilities of the businessman. New York: Harper.
Bowman, E. H. and Haire, M. (1975). A Strategic Posture toward Corporate Social Responsibility. California Management Review, 18(2), pp. 49–58.
Branco, M. C. and Rodriguez, L. L. (2006). Corporate Social Responsibility and Resource-based Perspectives. Journal of Business Ethics, 69(2), pp. 111–132.
Brammer, S. and Millington, A. (2004). The development of corporate charitable contributions in the UK: a stakeholder analysis. Journal of Management Studies ,
62
42(8), pp. 1411–1436.
Bureau van Dijk (2017). Amadeus. Available from:
https://www.bvdinfo.com/en-us/our-products/company-information/international-pr oducts/amadeus [30 March 2017].
Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An Institutional theory of corporate social responsibility. Academy of Management Review, 32(3), pp. 946–967.
Cardebat, J. and Sirven, N. (2010). What corporate social responsibility reporting adds to financial return? Journal of Economics and International Finance , 2(2), pp.
20–27.
Cao, F., Ye, K. and Wang, X. (2016). Mandatory Corporate Social Responsibility (CSR) Reporting and Financial Reporting Quality: Evidence from a Quasi-Natural Experiment. Journal of Business Ethics, (Aug 2016), pp.1–22.
Chatterji, A. K., Levine, D. L. and Toffel, M. W. (2009). How well do social ratings actually measure corporate social responsibility? Journal of Economics &
Management Strategy, 18(1), pp. 125–169.
Claessens, S., Djankov, S., Fan, J. P. H. and Lang, L. H. P. (2002). Disentangling the Incentive and Entrenchment Effects of Large Shareholdings. The Journal of Finance, 57(6), pp. 2741–2771.
Clark, J. M. (1939). Social control of business. New York: McGraw-Hill.
Commission of the European Communities (2001). Promoting a European Framework for Corporate Social Responsibilities. COM, Vol. 366.
63
Corporate Register Ltd. (2017). About. Available from:
http://www.corporateregister.com/about/ [16 March 2017].
CSRHub (2017). The CSRHub Data Schema. Available from:
http://www.csrhub.com/content/csrhub-data-schema/ [16 February 2017].
Dahlsrud, A. (2008). How corporate social responsibility is defined: an analysis of 37 definitions. Corporate Social Responsibility and Environmental Management, 15(1), pp. 1-13.
Davis, R. and Kollewe, J. (2016 April 22). Volkswagen takes €16bn hit for diesel scandal as it makes €4bn loss. The Guardian. Available from:
https://www.theguardian.com/business/2016/apr/22/volkswagen-takes-16bn-euro-hit-for-diesel-scandal-as-it-makes-4bn-euro-loss [10 March 2017].
Dechow, P., Sloan, R., and Sweeney, A. (1996). Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by SEC, Contemporary Accounting Research, 13, pp. 1–36.
Diebold, F. X. (2001). Elements of Forecasting (2nd ed.). Cincinnati: South Western, p. 254.
Donaldson, T. and Preston, L. E. (1995). The stakeholder theory of the corporation: concepts, evidence, and implication. Academy of Management Review, 20(1), pp. 65–91.
Doh, J. P., Howton, S. D., Howton, S. W. and Siegel, D. S. (2010). Does the market respond to an endorsement of social responsibility? The role of institutions, information and legitimacy. Journal of Management, 36(6), pp. 1461–1485.
Drobetz, W., Schillhofer, A. and Zimmermann, H. (2004). Corporate Governance
64
and Expected Stock Returns: Evidence from Germany. European Financial Management, 10(4), pp. 267–293.
Erickson, M., Hanlon, M. and Maydew, E. (2003). Is There a Link Between Executive Compensation and Accounting Fraud? Working paper, University of Michigan.
European Commission (2011). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, a renewed EU strategy 2011–14 for corporate social responsibility. COM, Vol. 681.
Fama, E. F. and French, K. R. (1992). The Cross-Section of Expected Stock Returns. The Journal of Finance, 47(2), pp. 427–465.
Fama, E. F. and French, K. R. (1993). Common Risk Factors in the Returns on Stocks and Bonds. Journal of Financial Economics, 33, pp. 3–56.
Financial Times (2016). FT 500 2015. Available at https://www.ft.com/ft500 [2 February 2017].
Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston:
Pitman.
Friedman, M. (1962). Capitalism and Freedom. Chicago: University of Chicago Press.
Friedman, M. (1970 September 13). The social responsibility of business is to increase its profits. The New York Times Magazine, pp. 32–33, 122, 124, 126.
Giacomo, B., Giovanna, M. and Kamalesh, K. (2016). How Do Strengths and
65
Weaknesses in Corporate Social Performance Across Different Stakeholder Domains Affect Company Performance? Business Strategy and the Environment, 25, pp. 277–292.
Graafland, J. J., Eiffinger, S. C. W. and Smid, H. (2004). Benchmarking of Corporate Social Responsibility: Methodological Problems and Robustness.
Journal of Business Ethics, 53, pp. 137–152.
Griffin, J. J. and Mahon, J. F. (1997). The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business and Social, 36(1), pp. 5–31.
Hayes, R. and Abernathy, W. (1980). Managing our way to economic decline.
Harvard Business Review, 58(4), pp. 67–77.
Hillman, A. J. and Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues: What's the bottom line? Strategic Management Journal, 22(2), pp. 125–139.
Ho, F. N., Vitell, S. J. and Wang, H. D. (2011). A Global Analysis of Corporate Social Performance: The Effects of Cultural and Geopgrahic Environments.
Journal of Business Ethics, 107(1), pp. 423–433.
Huefner, R. J. and Tschopp, D. (2015). Comparing the Evolution of CSR Reporting to that of Financial Reporting. Journal of Business Ethics, 127(3), pp. 565–577.
KPMG (2011). KPMG international survey of corporate responsibility reporting 2011. Amsterdam: KPMG International.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (2000). Investor Protection and Corporate Governance. Journal of Financial Economics , 58(1), pp.
66
3–27.
Lev, B., Petrovits, C. and Radhakrishnan, S. (2006). Is Doing Good Good for You?
Yes, Charitable Contributions Enhance Revenue Growth. New York University Stern School of Business Working Paper, New York.
Lin, C-H., Yang, H-L. and Liou, D-Y. (2009). The impact of corporate social responsibility on financial performance: Evidence from business in Taiwan.
Technology in Society, 31(1), pp. 56–63.
Lo, S-F. (2009). Performance evaluation for sustainable business: a profitability and marketability framework. Corporate Social Responsibility and Environmental Management, 17(6), pp. 311–319.
Mackey, A., Mackey, T. B. and Barney, J. B. (2007). Corporate social responsibility and firm performance: investor preferences and corporate strategies.
Academy of Management Review, 32(3), pp. 817–835.
Mahoney, L. and Roberts, R. W. (2007). Corporate Social Performance, Financial Performance and Institutional Ownership in Canadian Firms. Accounting Forum.
Maignan, I. and Ralston, D. A. (2002). Corporate Social Responsibility in Europe and the U.S: Insights from Businesses’ Self-presentations.Journal of International Business Studies, 33(3), p. 497.
Makni, R., Francoeur, C. and Bellavance, F. (2009). Causality Between Corporate Social Performance and Financial Performance: Evidence from Canadian Firms.
Journal of Business Ethics, 89(3), pp. 409–422.
Margolis, J. D. and Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48, pp. 268–305.
67
Margolis, J. D., Elfenbein, H. A. and Walsh, J. P. (2009). Does it pay to be good...
and does it matter? A meta-analysis of the relationship between corporate social and financial performance. Working paper, Cambridge, MA, Harvard University.
Mattingly, J. E. and Berman, S. L. (2006). Measurement of Corporate Social Action: Discovering Taxonomy in Kinder Lydenberg Domini Ratings Data.
Business and Society, 45(1), pp. 20–46.
Maxwell, J. W., Lyon, T. P. and Hackett, S. C. (2000). Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism. Journal of Law and Economics, 43(2), pp. 583–618.
McGuire, J. B., Schneeweis, T. and Sundgren, A. (1988). Corporate Social Responsibility and Firm Financial Performance. Academy of Management Journal , 31(4), pp. 854–872.
McWilliams, A. and Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26, pp. 117–127.
McWilliams, A., Siegel, D. and Wright, P. (2006). Corporate Social Responsibility:
Strategic Implications. Journal of Management Studies, 18, pp. 1–18.
Miglo, A. (2013). Moral Hazard and Earnings Manipulation. Advances in Economics and Business, 1(2), pp. 39–48.
Mitchell, R. K., Agle, B. R. and Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: defining the principle of whom and what really counts.
Academy of Management Review, 22(4), pp. 853–886.
Ogden, S. and Watson, R. (1999). Corporate performance and stakeholder
68
management: balancing shareholder and customer interests in the U.K. privatized water industry. Academy of Management Journal, 42(5), pp. 526–538.
Orlitzky, M. (2001). Does firm size confound the relationship between corporate social performance and financial performance? Journal of Business Ethics , 33(2), pp. 167–180.
Orlitzky, M. (2008). Corporate Social Performance and Financial Performance: A Research Synthesis. In A. Crane, A. McWilliams, D. Matten, J Moon and D. S.
Siegel (eds.). The Oxford Handbook of Corporate Social Responsibility. Oxford:
Oxford University Press, pp. 113–134.
Orlitzky, M., Schmidt, F. L. and Rynes, S. L. (2003). Corporate social and financial performance: A Meta-analysis. Organization Studies, 24, pp. 403–441.
Ouchi, W. (1980). Markets, bureaucracies, and clans. Administrative Science Quarterly, 25, pp. 121–141.
Perrini, F., Russo, A., Tencati, A. and Vurro, C. (2011). Deconstructing the relationship between corporate social and financial performance. Journal of Business Ethics, 102, pp. 59–76.
Porter, M. E. and Kramer, M. R. (2002). The Competitive Advantage of Corporate Philanthropy. Harvard Business Review, 80(12), pp. 56–69.
Preston, L. E. and O’Bannon, D. P. (1997). The Corporate Social-Financial Performance Relationship: A Typology and Analysis. Business and Society, 36, pp. 419–429.
Pätäri, S., Arminen, H., Tuppura, A. and Jantunen, A. (2014). Competitive and responsible? The relationship between corporate social and financial performance
69
in the energy sector. Renewable and Sustainable Energy Reviews, 37, pp.
142–154.
Pätäri, S., Arminen, H., Tuppura, A. and Jantunen, A. (2016). Corporate social and financial performance in different industry contexts: The chicken or the egg? Social Responsibility Journal, 12(4), pp. 672–686.
Rappaport, A. (1992). CFOs and strategists: forging a common framework.
Harvard Business Review, 70(3), pp. 84–91.
Reverte, C. (2016). Corporate social responsibility disclosure and market valuation: Evidence from Spanish listed firms. Review of Managerial Science, 10(2), pp. 411–435.
Roberts, R. W. (1992). Determinants of Corporate Social Responsibility Disclosure: An Application of Stakeholder Theory. Accounting, Organizations and Society, 17(6), pp. 595–612.
Rowley, T. J. and Berman, S. L. (2000) A Brand New Brand of Corporate Social Performance. Business & Society, 39(4), pp. 397–418.
Russo, M. V. and Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal , 40(3), pp. 534–559.
Rutherford, M. A., Shahzad, A. M. and Sharfman, M. P. (2016).
Stakeholder-Centric Governance and Corporate Social Performance: A Cross-National Study. Corporate Social Responsibility and Environmental Management, 23(2), pp. 100–112.
Schreck, P. (2011). Reviewing the business case for corporate social
70
responsibility: new evidence and analysis. Journal of Business Ethics , 103, pp.
167–188.
Scholtens, B. (2008). A note on the interaction between social responsibility and financial performance. Ecological Economics, 68(12), pp. 46–55.
Schwaiger, M. (2004). Components and Parameters of Corporate Reputation – an Empirical Study. Schmalenbach Business Review, 56(1), pp. 46–71.
Sen, S. and Bhattacharya, C. B. (2001). Does Doing Good Always Lead to Doing Better? Consumer Reactions to The Business Case for CSR 187 Corporate Social Responsibility. Journal of Marketing Research, 38(2), pp. 225–243.
Servaes, T. and Tamayo, A. (2013). The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness. Management Science, 59(5), pp. 1045–1061.
Smith, S. M. and Alcorn, D. S. (1991). Cause Marketing: A New Direction in the Marketing of Corporate Social Responsibility. Journal of Consumer Marketing , 8(3), pp. 19–35.
Stanwick, P. A. and Stanwick, S. D. (1998). The Relationship between Corporate Social Performance, and Organizational Size, Financial Performance, and Environmental Performance: An Empirical Examination. Journal of Business Ethics, 17, pp. 195–204.
Surroca, J., Tribó, J. A., and Waddock, S. (2010). Corporate responsibility and financial performance: The role of the intangible resources. Strategic Management Journal, 31, pp. 463–490.
SustainAbility (2006). Buried Treasures. Uncovering the Business Case for
71
Corporate Sustainability. London: L&S Printing.
Theo, S. H, Welsh, I. and Wazzan, C. P. (1999). The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African Boycott. Journal of Business, 72(1), pp. 35–88.
Waddock, S. A. and Graves, S. M. (1997). The Corporate Social Performance-Financial Performance Link. Strategic Management Journal, 18(4), 303–319.
Watts, R. and Zimmerman, J. (1978). Towards a positive theory of determination of accounting standards. Accounting Review, 53, pp. 112–133.
Watts, R. and Zimmerman, J. (1990). Positive accounting theory: a ten year perspective. Accounting Review, 65, pp. 131–156.
Weidenbaum, M. and Sheldon, V. (1987). Takeovers and Stockholders: Winners and Losers. California Management Review, 29(4), pp. 57–168.
Williamson, O. E. (1985). The Economic Institutions of Capitalism. New York: Free Press.
Wu, M. L. (2006). Corporate social performance, corporate financial performance, and firm size: A meta-analysis. Journal of Academy of Business, 8(1), pp.
163–171.