Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top
Journal of Business Ethics
Published in: Journal of Business Ethics 2/2017

01-05-2015

Post-innovation CSR Performance and Firm Value

Author: Dev R. Mishra

Published in: Journal of Business Ethics | Issue 2/2017

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Analyzing a sample of 13,917 US firm–years from 1991 to 2006, we find that more innovative firms demonstrate high corporate social responsibility (CSR) performance subsequent to a successful innovation. These high-CSR innovative firms enjoy significantly higher valuation post-innovation. These findings imply that firms with demonstrated potential growth opportunities, as evident from the number of registered patents and their citations, benefit by strategically investing more in CSR activities; that is, CSR investment entails ‘doing well by [strategically] doing good.’
previous article CSR Performance and the Value of Cash Holdings: International Evidence
next article Consumer Responses to the Food Industry’s Proactive and Passive Environmental CSR, Factoring in Price as CSR Tradeoff

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now
Appendix
Available only for authorised users
Footnotes
1
While we ignore agency problems as drivers of CSR activities in formulating our hypothesis, we do control for firms’ agency issues in many ways in our empirical analysis.
 
2
For robustness, we also replicate Tables 3 and 6 (next subsection) by correcting the standard errors for one-way (by firm) and two-way (by firm and time) clustering. Our conclusions remain unaffected following these corrections.
 
3
Our main tests employ Tobin’s Q as the main dependent variable. For robustness, we replicate Table 6 using average risk-adjusted returns (i.e., returns in excess of the predictions of the Fama–French three-factor model, in which the risk-free rate is the 1-month T-bill yield) for the 12 and 24 months following the observation of CSR. We find that these returns generally decrease with a firm’s level of innovation but increase with the level of innovation for socially responsible firms, which suggests that innovative firms that engage in CSR as strategic choice reap higher valuation post-innovation. A univariate analysis shows innovative high-CSR (CSR_N >0) firms earn approximately 6.36 % (in 12 months) and 9.62 % (in 24 months) more post-innovation compared with low-CSR (CSR_N <0) firms.
 
4
We also consider four examples of product recalls from two industries (the computer industry and the auto industry). We find that the two firms with weaker CSR performances suffered larger market value declines and slower recoveries within 3 days of announcing recalls compared with the two firms that had stronger CSR performances—although the weak CSR firms’ recalls were comparable to or less severe than those of the strong-CSR firms (details available upon request).
 
5
The P IN dataset was obtained from Professor Stephen Brown’s website.
 
6
We conduct several additional tests. First, we use the number of citations per patent and patents scaled by R&D expenses as proxies for innovation. Second, we employ a strong innovation dummy for firms with more than the industry–year average number of patents. Third, in selecting our sample we exclude firms that are not in an industry that reported at least one registered patent per firm–year. Fourth, we repeat our analysis using a CSR index that includes corporate governance qualitative area scores (originally excluded). Fifth, certain items are not covered by KLD for the entire sample period, which might potentially cause the index to endogenously change over time. To mitigate this issue, we estimate industry–year-adjusted CSR_N by subtracting the industry CSR_N medians. Our results continue to remain practically as expected in all these tests.
 
Literature
Aboody, D., & Lev, B. (2000). Information asymmetry, R&D and insider gains. The Journal of Finance, 55, 2747–2766.CrossRef
Aktas, N., de Bodt, E., & Cousin, J.-G. (2011). Do financial markets care about SRI? Evidence from mergers and acquisitions. Journal of Banking and Finance, 35, 1753–1761.CrossRef
Als, B. (2013, 2010). CSR-driven innovation—Combining design and business in a profitable and sustainable way. Nordic Innovation Centre (NICe) project number: 06315.
Andriof, J., & Waddock, S. A. (2002). Unfolding stakeholder engagement. In J. Andriof, S. A. Waddock, B. W. Husted, & S. S. Rahman (Eds.), Unfolding stakeholder thinking: Theory, responsibility, and engagement (pp. 19–42). Sheffield: Greenleaf Publishing.
Bauer, R., Koedijk, K., & Otten, R. (2005). International evidence on ethical mutual fund performance and investment style. Journal of Banking and Finance, 29, 1751–1767.CrossRef
Bebchuk, L., Cohen, A., & Ferrell, A. (2009). What matters in corporate governance? Review of Financial Studies, 22, 783–827.CrossRef
Bebchuk, L., & Fershtman, C. (1994). Insider trading and managerial choice among risky projects. Journal of Financial and Quantitative Analysis, 29, 1–14.CrossRef
Benabou, R., & Tirole, J. (2010). Individual and corporate social responsibility. Economica, 77, 1–19.CrossRef
Berman, S. L., Wicks, A. C., Kotha, S., & Jones, M. T. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42, 488–506.CrossRef
Boehe, D., & Cruz, L. (2010). Corporate social responsibility, product differentiation strategy and export performance. Journal of Business Ethics, 91, 325–346.CrossRef
Brambor, T., Clark, W., & Golder, M. (2006). Understanding interaction models: Improving empirical analyses. Political Analysis, 14, 63–82.CrossRef
Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35, 97–116.CrossRef
Branco, M. C., & Rodrigues, L. L. (2006). Corporate social responsibility and resource-based perspectives. Journal of Business Ethics, 69, 111–132.CrossRef
Brown, W. O., Helland, E., & Smith, J. K. (2006). Corporate philanthropic practices. Journal of Corporate Finance, 12, 855–877.CrossRef
Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32, 946.CrossRef
Campello, M., Graham, J. R., & Harvey, C. R. (2010). The real effects of financial constraints: Evidence from a financial crisis. Journal of Financial Economics, 97, 470–487.CrossRef
Chamberlin, E. (1933). The theory of monopolistic competition. Cambridge, MA: Harvard University Press.
Cheah, E., Chan, W., & Chieng, C. (2007). The corporate social responsibility of pharmaceutical product recalls: An empirical examination of U.S. and U.K. markets. Journal of Business Ethics, 76, 427–449.CrossRef
Chen, Q., Goldstein, I., & Jiang, W. (2007). Price informativeness and investment sensitivity to stock price. The Review of Financial Studies, 20, 619–650.CrossRef
Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic Management Journal, 35, 1–23.CrossRef
Deng, X., Kang, J.-K., & Low, B. S. (2013). Corporate social responsibility and stakeholder value maximization: Evidence from mergers. Journal of Financial Economics, 110, 87–109.CrossRef
Derwall, J., Guenster, N., Bauer, R., & Koedijk, K. (2005). The eco-efficiency premium puzzle. Financial Analysts Journal, 61, 51–63.CrossRef
Dhaliwal, D., Li, O., Tsang, A., & Yang, Y. (2011). Voluntary non-financial disclosure and the cost of equity capital: The case of corporate social responsibility reporting. The Accounting Review, 86, 59–100.CrossRef
Dowell, G., Hart, S., & Yeung, B. (2000). Do corporate global environmental standards create or destroy market value? Management Science, 46, 1059–1074.CrossRef
Easley, D., & O’Hara, M. (2004). Information and the cost of capital. Journal of Finance, 59, 1553–1583.CrossRef
El Ghoul, S., Guedhami, O., Kwok, C., & Mishra, D. (2011). Does corporate social responsibility affect cost of equity capital? Journal of Banking and Finance, 35, 2388–2406.CrossRef
Feddersen, T., & Gilligan, T. (2001). Saints and markets: Activists and the supply of credence goods. Journal of Economics and Management Strategy, 10, 149–171.CrossRef
Feldman, S. J., Soyka, P., & Ameer, P. (1997). Does improving a firm’s environmental management system and environmental performance result in a higher stock price? Journal of Investing, 6, 87–97.CrossRef
Fishman, R., Heal, G., & Nair, V. (2006). A model of corporate philanthropy. University of Pennsylvania Working Paper.
Fombrun, C., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33, 233–258.CrossRef
Francis, J., & Smith, A. (1995). Agency costs and innovation: Some empirical evidence. Journal of Accounting and Economics, 19, 383–409.CrossRef
Freedman, M., & Stagliano, A. (1991). Differences in social cost disclosures: A market test of investor relations. Accounting, Auditing and Accountability Journal, 4, 68–83.CrossRef
Gompers, P., Ishii, J., & Metrick, A. (2003). Corporate governance and equity prices. The Quarterly Journal of Economics, 118, 107–155.CrossRef
Goss, A., & Roberts, G. R. (2011). The impact of corporate social responsibility on the cost of bank loans. Journal of Banking and Finance, 35, 1794–1810.CrossRef
Griliches, Z., Pakes, A., & Hall, B. (1987). The value of patents as indicators of inventive activity. In P. Dasgupta & P. Stoneman (Eds.), Economic policy and technological performance. Cambridge, MA: Cambridge University Press.
Hadlock, J., & Pierce, J. (2010). New evidence on measuring financial constraints: Moving beyond the KZ index. Review of Financial Studies, 23, 1909–1940.CrossRef
Hall, B., Jaffe, A., & Trajtenberg, M. (2001). The NBER patent citations data: Lessons, insights and methodological tools. NBER Working Paper 8498.
Hamilton, S., Jo, H., & Statman, M. (1993). Doing well while doing good? The investment performance of socially responsible mutual funds. Financial Analysts Journal, 49, 62–67.CrossRef
Hart, S., & Ahuja, G. (1996). Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business Strategy and the Environment, 5, 30–37.CrossRef
Heinkel, R., Kraus, A., & Zechner, J. (2001). The effect of green investment on corporate behavior. Journal of Financial and Quantitative Analysis, 36, 431–449.CrossRef
Helme, M., & Laurila, J. (2009). Philanthropy, integration or innovation? Exploring the financial and societal outcomes of different types of corporate responsibility. Journal of Business Ethics, 84, 325–339.CrossRef
Hillman, A., & Keim, G. (2001). Shareholder value, stakeholder management, and social issues: What’s the bottom line? Strategic Management Journal, 22, 125–139.CrossRef
Hirshleifer, J. (1971). The private and social value of information and the reward to inventive activity. American Economic Review, 61, 561–574.
Hong, H., & Kacperczyk, M. (2009). The price of sin: The effects of social norms on markets. Journal of Financial Economics, 93, 15–36.CrossRef
Ioannou, I., & Serafeim, G. (2012). What Drives corporate social performance? The role of nation-level institutions. Journal of International Business Studies, 43, 834–864.CrossRef
Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20, 404–437.
Kaplan, S. N., & Zingales, L. (1997). Do investment-cash flow sensitivities provide useful measures of financing constraints? Quarterly Journal of Economics, 112, 169–215.CrossRef
Kapstein, E. B. (2001). The corporate ethics crusade. Foreign Affairs, 80, 105–119.CrossRef
King, A., & Lenox, M. (2001). Does it really pay to be green? Accounting for strategy selection in the relationship between environmental and financial performance. Journal of Industrial Ecology, 5, 2001.CrossRef
Klassen, R. D., & Whybark, D. C. (1999). The impact of environmental technologies on manufacturing performance. Academy of Management Journal, 42, 599–615.CrossRef
Lamont, O., Polk, C., & Saa-Requejo, J. (2001). Financial constraints and stock returns. Review of Financial Studies, 14, 529–554.CrossRef
Larkin, Y. (2013). Brand perception, cash flow stability and financial policy. Journal of Financial Economics, 110, 232–253.CrossRef
Lee, D., & Faff, R. (2009). Corporate sustainability performance and idiosyncratic risk: A global perspective. The Financial Review, 44, 213–237.CrossRef
Lee, D., Faff, R., & Langfield-Smith, K. (2009). Revisiting the vexing question: Does superior corporate social performance lead to improved financial performance. Australian Journal of Management, 34, 21–49.CrossRef
Lee, D., Faff, R., & Rekker, S. (2013). Do high and low-ranked sustainability stocks perform differently? International Journal of Accounting and Information Management, 21, 116–132.CrossRef
McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management Journal, 21, 603–609.CrossRef
McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 28, 117–127.
McWilliams, A., Siegel, D., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43, 1–18.CrossRef
Miles, M. P., Munilla, L., & Covin, J. G. (2002). The constant gardener revisited: The effect of social blackmail on the marketing concept, innovation and entrepreneurship. Journal of Business Ethics, 41, 287–295.CrossRef
Miles, M. P., Munilla, L., & Covin, J. G. (2004). Innovation, ethics, and entrepreneurship. Journal of Business Ethics, 54, 97–100.CrossRef
Minor, D. (2010). Corporate social responsibility as reputation insurance: Theory and evidence. UC Berkeley Working Paper.
Orlitzky, M., Schmidt, F., & Rynes, S. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24, 403–441.CrossRef
Padgett, R., & Galan, J. (2010). The effect of R&D intensity on corporate social responsibility. Journal of Business Ethics, 93, 407–418.CrossRef
Park, J., Lee, H., & Kim, C. (2014). Corporate social responsibilities, consumer trust and corporate reputation: South Korean consumers’ perspectives. Journal of Business Research, 67, 295–302.CrossRef
Pil, F., & Rothenberg, S. (2003). Environmental performance as a driver of superior organizational performance. Journal of Production and Operations Management, 12, 404–415.CrossRef
Porter, M., & Kramer, M. (2002). The competitive advantage of corporate philanthropy. Harvard Business Review, 80, 57–68.
Porter, M., & van der Linde, C. (1995). Green and competitive: Ending the stalemate. Harvard Business Review, 73(5), 121–134.
Renneboog, L., Ter Horst, J., & Zhang, C. (2008). The price of ethics and stakeholder governance: The performance of socially responsible mutual funds. Journal of Corporate Finance, 14, 302–322.CrossRef
Roberts, P., & Dowling, G. (2002). Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23, 1077–1093.CrossRef
Shane, P., & Spicer, B. (1983). Market response to environmental information produced outside the firm. Accounting Review, 58, 521–538.
Stein, J. (1988). Takeover threats and managerial myopia. Journal of Political Economy, 96, 61–80.CrossRef
Waddock, S., & Graves, S. (1997). The corporate social performance–financial performance link. Strategic Management Journal, 18, 303–319.CrossRef
Werther, W., & Chandler, D. (2005). Strategic corporate social responsibility as global brand insurance. Business Horizons, 48, 317–324.CrossRef
Xiao, Y., Faff, R., Gharghori, P., & Lee, D. (2013). An empirical study of the world price of sustainability. Journal of Business Ethics, 114, 297–310.CrossRef
Metadata
Title
Post-innovation CSR Performance and Firm Value
Author
Dev R. Mishra
Publication date
01-05-2015
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 2/2017
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-015-2676-3

Other articles of this Issue 2/2017

Journal of Business Ethics 2/2017 Go to the issue

OriginalPaper

CSR Performance and the Value of Cash Holdings: International Evidence

OriginalPaper

Exploring the Relationship Between Board Characteristics and CSR: Empirical Evidence from Korea

OriginalPaper

Corporate Social Responsibility and Management Forecast Accuracy

OriginalPaper

Improving Diversification Opportunities for Socially Responsible Investors

OriginalPaper

A Scale for Measuring Consumer Perceptions of Corporate Social Responsibility Following the Sustainable Development Paradigm

OriginalPaper

The Importance of Consumer Trust for the Emergence of a Market for Green Products: The Case of Organic Food