No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Social Capital, Trust, and Corporate Performance: How CSR Helped Companies During the Financial Crisis (and Why It Can Keep Helping Them)
Abstract
The authors summarize the findings of their study, published recently in the Journal of Finance, that shows that CSR investments can help companies when they perhaps need it most—that is, during sharp downturns when overall trust in companies and markets declines.
Companies with high‐CSR rankings experienced stock returns that were five to seven percentage points higher than their low‐CSR counterparts during the 2008–2009 financial crisis, and even larger excess returns during the Enron crisis of 2001–2003. High‐CSR companies during the crisis also reported better operating performance, higher growth, higher employee productivity, and greater access to debt markets—while continuing to generate higher shareholder returns as late as the end of 2013. Many of these operating improvements continued well into the post‐crisis period, though at more modest levels.
As the authors view their findings, the ‘social capital’ built up by corporate CSR programs complements effective financial capital management in increasing shareholder wealth mainly by limiting companies' downside risk. CSR is seen as not only reducing systematic as well as firm‐specific risk, but as also providing protection against overall ‘loss of trust.’ The social capital created by CSR programs is said to provide a kind of insurance policy that pays off when investors and the overall economy face a severe crisis of confidence.
... It has even been labeled by the Financial Times as the "ESG acid test" [1]. The previous studies examining the ESG and corporate financial performance (CFP) nexus in the context of crises show that a high ESG profile can facilitate smoother operation and offer better resistance to external distress (see [2][3][4][5]). The very recent studies dealing with the same phenomenon during the COVID-19 spread support those findings (see [6][7][8]). ...
... According to Lins et al. (2017), during the global financial crisis, firms with high social capital, as measured by corporate social responsibility (CSR) intensity before the crisis, had significantly higher stock returns than firms with low social capital. High-ESG firms also experienced, inter alia, higher profitability, productivity, sales growth, and return on assets (ROA) and raised more debt, relative to low-ESG firms [4,27]. In general, those results show that "investors assigned a premium to high-CSR companies during a crisis of trust" [4]. ...
... High-ESG firms also experienced, inter alia, higher profitability, productivity, sales growth, and return on assets (ROA) and raised more debt, relative to low-ESG firms [4,27]. In general, those results show that "investors assigned a premium to high-CSR companies during a crisis of trust" [4]. ...
This paper aims to investigate whether the environmental, social, and corporate governance (ESG) score of New Zealand-listed companies is associated with their stock performance during the COVID-19 pandemic. The idea of socially responsible investing is commonly accepted in New Zealand, and past academic literature has argued for the positive (though often weak) relationship between companies’ stock returns and their ESG profile. The methodology of the research is threefold. First, the average daily return for 11 New Zealand Exchange (NZX) market sectors and the S&P/NZX50 index during the COVID-19 panic and rebound periods are compared. Then, the impact of the COVID-19 outbreak on the average daily return of 11 broad NZX sectors in relation to the average ESG score for a given sector is checked. Finally, the relationship between the daily average performance of 56 NZX-listed companies and their ESG scores proxied by Refinitiv's ESG Combined Score is determined. The analysis reveals no support for the idea that the returns of firms with higher ESG scores are greater than those with a low ESG ranking during the COVID-19 pandemic. The results show a negative, though statistically insignificant, correlation between the ESG score and annualized stock return both on the sector and individual company levels. Even though our reported findings do not confirm the believed positive correlation of the analyzed measures (based on previous studies), they clearly show that high ESG performance does not harm financial performance even in the context of crises.
... implications. The general consensus in the literature is that good ESG/CSR performance serves as an insurance that mitigates the adverse effects of firm-specific risk, market risk, and economic crisis (Koh et al. 2014;Lins et al. 2019;Kim et al. 2021). To intensify such insurance-like effects of social engagement, firms invest more in CSR when faced with high economic policy uncertainty (Dai et al. 2020). ...
... This indicates that the role of ESG performance in improving labor investment efficiency is increasingly important during periods of high uncertainty, when the labor market becomes more rigid. This is in part consistent with prior studies demonstrating the insurance-like role of ESG in mitigating the adverse effects of firm-specific or market-wide uncertainty (Koh et al. 2014;Lins et al. 2019;Kim et al. 2021;Vural-Yavaş 2021). ...
... Climate risk ultimately translates to economic and financial risk to companies, thereby impacting future cashflow-generating prospects (Kouloukoui et al., 2018;Nordhaus, 2019). As a result, stakeholders tend to reward companies that exhibit adequate climate risk disclosure (Lins et al., 2019). Lin and Wu (2023). ...
... There is a positive relationship between climate risk disclosure score and mining company performance as measured by the market-based metrics, namely, Tobin's Q, economic value added (EVA), and market value added (MVA) Climate Risk Disclosure and Accounting-Based Performance Measures. Consistent with expectations for increased stakeholder support for companies that exhibit adequate climate risk disclosure (Lins et al., 2019), it is expected that accounting-based measures should also increase for such companies. It is supported by Kouloukoui et al. (2019), who investigated how climate change is managed among Brazilian companies and found a statistically significant positive relationship between firm profitability and climate performance. ...
The main aim of this study is to develop an unweighted climate risk disclosure index to assess whether climate risk disclosure predicts mining companies’ performance.The catastrophic nature of climate risk has become more topical in recent years. Yet, academic research efforts have been directed to climate risk from the perspective of developed economies only and very little is understood about it in developing economies. 216 firm observations in mining sector for the period covering 2016 through 2021 were analysed using descriptive statistics and estimated generalised least square with period seemingly unrelated regression. The results suggest that the climate risk disclosure is significant in predicting company performance as proxied by earnings per share (EPS), economic value added (EVA) and return on equity (ROE). Policy makers and regulators should encourage companies to intensify climate risk disclosure so as to maximise value and benefit relevant stakeholders. The study contributes to the ongoing debates on climate risk by focusing on extractive industry, mining sector in a developed economy setting. Methodologically, the study developed an unweighted disclosure checklist that can guide companies on pertinent climate risk issues to disclose.
... There is overwhelming evidence to support the positive effect of environmental performance on firm performance, but there is as yet little evidence on the impact of a financial crisis on the relationship between social performance and firm risk (Bouslah et al. 2018;Lins et al. 2017Lins et al. , 2019Marsat et al. 2020). The relationship between environmental performance and financial risk during the COVID-19 pandemic has been recently investigated on a sample of 3356 MSMEs (micro and small-medium sized enterprises) located in southern and eastern Europe (Wellalage and Kumar 2020) and on a sample of 6597 SMEs located in eastern Europe (Wellalage et al. 2021). ...
... These results are consistent with research on listed firms (Farza et al. 2021) before the COVID-19 pandemic: green investments enhance resource efficiency and corporate reputation with corresponding effects on financial performance. The theoretical explanation of the relationship between environmental and financial performance could be that a higher level of trust between firm and shareholders leads stakeholders to increase their level of collaboration and reciprocation and enhances the firm's reputation (Lins et al. 2017(Lins et al. , 2019. High trust levels also boost innovation, which is in turn a competitive advantage in times of crisis, allowing firms to resist and even flourish (Huang et al. 2020) and they provide greater advantages than protection against idiosyncratic firm-specific legal risks (Hong and Liskovich 2019). ...
This study explores the impact of being “green” as a response to variability in the business environment. We examine the financial resilience of green Small and Medium-sized Enterprises (SMEs) in Italy compared to non-green during the COVID-19 pandemic. We verify whether green SMEs are more able to attract external funding than non-green and whether green SMEs rely more heavily on trade credit than non-green ones. We carry out an analysis with 215,564 observations, of which 6844 refer to “green” firms, over the period 2017–2020 and we find that before and during the pandemic, Italian green SMEs do not attract more external funding than other SMEs, but they rely more on trade credit than non-green SMEs. Our results partially confirm the traditional substitution effect, and we suggest that the reasons for this relationship are also supplied in the literature which sees trade credit as a component of a long-term portfolio management strategy, i.e., as a tool for consolidating relationships with clients, for price discrimination and/or for increasing firm profitability in facing variable demand conditions. Our paper contributes to the literature in two ways. First, it investigates the relationship between the “green” characteristics of a firm and its level of economic and financial resilience during the pandemic. Second, it verifies whether, during a complex economic shock, green orientation increases or decreases the importance of trade credit relative to bank credit in financing the firm.
... ESG provides a comprehensive framework for companies to showcase their commitment to creating long-term value beyond immediate profits. This shift reflects a broader trend from traditional financial performance metrics toward more holistic models that include environmental and social factors in the overall business strategy (Lins et al., 2019). ...
Purpose: This study investigates the tension between short-term shareholder value creation and long-term business sustainability in publicly traded companies. It explores how firms balance the pressure for immediate financial returns with the need to invest in sustainable practices for future viability. Research Design and Methodology: The research employs a Systematic Literature Review (SLR) methodology, analyzing existing literature on strategic frameworks such as ESG integration, strategic agility, and shared value creation. The study synthesizes insights from relevant academic sources to comprehensively understand how companies manage the conflict between short-term and long-term objectives. Findings and Discussion: The findings reveal that companies often prioritize short-term profits due to shareholder pressure, which can hinder long-term sustainability efforts. However, firms that adopt strategic agility and integrate ESG into their core strategies are better equipped to navigate future risks and maintain competitiveness. The study also highlights the effectiveness of shared value creation in helping companies align profitability with social and environmental responsibilities, demonstrating that sustainability practices contribute to long-term shareholder value. Implications: This study offers practical implications for corporate management, emphasizing the need for a balanced approach that meets both short-term financial goals and long-term sustainability. It calls for increased transparency, stakeholder engagement, and adopting integrated reporting to enhance corporate accountability. Future research could further explore how smaller firms and industries address this dilemma.
... Moreover, the costs associated with CSR activities can exert pressure on ROA in the immediate term, particularly for firms with lower profit margins or those in a financially constrained position (Tang et al., 2012). However, even if CSR seems to negatively affect ROA in the short term, these investments may lay the groundwork for future benefits by establishing brand reputation and consumer trust, which can lead to long-term gains (Lins et al., 2019). Nevertheless, there are evidence suggesting positive effects of CSR in the short run (Bayoud et al., 2012;Nguyen et al., 2021;Purbawangsa et al., 2019). ...
This study examines the relationship between corporate social responsibility (CSR) disclosure and financial performance among listed firms in Chengdu, China. Using the Chinese Academy of Social Sciences (CASS)-CSR 4.0 standard, we analyzed the extent and quality of CSR disclosures for 68 firms over the 2019–2020 period. To address endogeneity, we employed Ordinary Least Squares regression (OLS) regression and Two-Stage Least Squares (2SLS) estimations with two novel instruments. The findings reveal a positive correlation between CSR disclosure and accounting-based metrics such as Return on Assets (ROA) and Earnings per Share (EPS), while a negative relationship with Tobin’s Q underscores the complex dynamics with market valuation. Building on these insights, the study suggests policymakers incentivize voluntary CSR disclosures through tax benefits or regulatory advantages and consider mandating specific CSR information based on CASS-CSR and Global Reporting Initiative (GRI) frameworks. This approach could help enterprises define disclosure boundaries, enhance transparency, and foster accountability, offering valuable insights into the CSR-financial performance nexus in the emerging economy.
... Several previous studies have found that involvement in CSR can increase profitability and contribute to firm performance (Lins et al., 2019;Singh and Misra, 2021;Masulis and Reza, 2015;Kang et al., 2010;Lin et al., 2009;McWilliams and Siegel, 2000;Al-Shammari et al., 2022;Nguyen et al., 2021;Giang and Dung, 2022;Salam et al., 2022). Relationship between CSR and corporate firm performance (CFP) is hotly studied by inconclusive mediators and moderators in CSR-CFP relationship. ...
Purpose
This study aims to examine the role of firm reputation as a mediator in the relationship between corporate social responsibility and firm performance, along with the underlying mechanism.
Design/methodology/approach
This research is quantitative research that aims to explain the phenomenon of the relationship between the implementation of corporate social responsibility and firm performance. A total of 573 companies listed on the Indonesia Stock Exchange for the 2019–2021 period were sampled in this study. The analysis method in this study combines time series data and cross-section data called pooled data.
Findings
This research found a significant positive association between corporate social responsibility and firm reputation as well firm reputation is positively related to firm performance. In contrast, corporate social responsibility directly affects firm performance insignificantly. Based on the analyses, firm reputation mediates the effect of corporate social responsibility on firm performance.
Research limitations/implications
This study is limited due to its reliance on secondary data related to publicly listed companies from 2019 to 2021, which involves various downsides, that is many businesses still have not disclosed their engagement in corporate social responsibility practices. This study will ultimately yield practical implications for organizational managers, as it emphasizes the significance of corporate social responsibility in enhancing firm success.
Originality/value
The research presented in this paper contributes to the existing body of knowledge on corporate social responsibility by examining the impact of corporate social responsibility on firm performance. Furthermore, this study provides additional evidence for shared value creation by explaining the impact of corporate social responsibility on firm performance.
... Evidence suggests that collective ESG performance, encompassing ESG factors, can enhance financial performance (Bătae et al. 2021;Lins, Servaes & Tamayo 2019;Muzanya 2022;Velte 2017;Zhang et al. 2023 Notably, South Africa has taken a leading role in implementing ESG finance policies within the African continent, as recognised by the Official Monetary and Financial Institutions Forum (OMFIF) in collaboration with South African bank, Absa (Moneyweb 2022). Despite this commitment, there remains a scarcity of research specifically focusing on the influence of ESG performance on the value and profitability of listed companies in South Africa (Chininga, Alhassan & Zeka 2023). ...
Managerial ownership has been identified as a mechanism to align the interests of the principal and agent and to guarantee superior returns to the principal. This study aims to explore the moderating role of board characteristics on the relationship between managerial ownership and the firm performance of the listed commercial banks in South Africa between 2017 and 2022. To ensure the consistency and robustness of the outcomes, the study applies the pool OLS, fixed effect, robust standard error approach, and fully modified OLS to control for serial correlation, cross-sectional dependence and endogeneity issues. The results show that managerial ownership has a significant and negative effect on the return of equity while its effect on Tobin’s Q is negative but not significant. This outcome supports the existence of the entrenchment hypothesis in the South African banking sector where the impact of managerial ownership is found to hurt firm performance. However, additional findings from the study reveal that board size, independence and diversity mitigate and reduce the detrimental effect of managerial ownership on firm performance. This study provides fresh insight into the importance of board characteristics as vital governance instruments that can be employed to align the interests of owners and managers toward optimal performance.
... First, companies with data regarding the dependent variables for only one year of the study were eliminated (98 companies and 588 observations). Second, financial and insurance firms were excluded (299 companies, 1,794 observations) due to the particular characteristics of these kinds of firms, such as their specific accounting practices and the regulation and structure of financial markets (Ben Saad et al., 2022;Lins et al., 2019). After applying these two filters, the result was an unbalanced panel of 1,786 companies and 10,716 observations of companies from 22 EU countries. ...
We live in a globalised world, characterised in recent times by events that have led to crises of international and global scope, in which companies have played a leading role. These circumstances have created a unique opportunity to study how Corporate Social Responsibility (CSR) varies as companies adapt to this new environment. A key example of this is the situation resulting from the COVID-19 pandemic. This health crisis has obliged companies to adopt new management guidelines to adapt to the difficult conditions of this setting and be able to survive in this “new normal”. Thus, it will be interesting to know whether the impact of this global health crisis, which hit countries differently, has affected companies’ environmental, social and governance (ESG) indicators. Using a large sample of companies from European Union(EU) countries, the results confirm that corporate engagement in CSR increased during the pandemic (2020-2022) compared to the previous period (2017-2019). Additionally, the results of this study confirm that the intensity of the impact of this crisis improves the companies’ ESG indicators. From a practical standpoint, it is possible to establish certain political and management implications based on our findings and use them to plan possible strategies for potential future crises.
... Corporate social responsibility (CSR) can offer a protective buffer for firms and help them avoid the worst economic effects in times of crisis (Lins et al., 2019). Given that the COVID-19 pandemic likely increased the materiality of climate change, it is an appropriate setting to consider whether climate change commitments protected firms from financial losses during this crisis. ...
Corporate social responsibility (CSR) can offer a protective buffer helping firms avoid the worst economic effects in times of crisis. We extend the extant literature by considering whether firm substantive climate commitments are effective at protecting the firm from financial losses during the COVID‐19 pandemic. We assess firm financial outcomes through (1) crash and post‐crash stock performance and (2) the severity of loss in the COVID‐19 stock market crash period. We identify substantive climate commitments as those carbon emission targets aligned with the Science Based Targets initiative (SBTi), which links firm's carbon targets to commitments made under the Paris Agreement. Using a sample of 336 US‐based companies, our findings show that science‐based targets are positively related to crash‐period returns and negatively related to severity of loss. Among firms with science‐based targets, only those externally verified and approved by the SBTi are influential in buffering financial losses during a crisis.
... Evidence suggests that collective ESG performance, encompassing ESG factors, can enhance financial performance (Bătae et al. 2021;Lins, Servaes & Tamayo 2019;Muzanya 2022;Velte 2017;Zhang et al. 2023 Notably, South Africa has taken a leading role in implementing ESG finance policies within the African continent, as recognised by the Official Monetary and Financial Institutions Forum (OMFIF) in collaboration with South African bank, Absa (Moneyweb 2022). Despite this commitment, there remains a scarcity of research specifically focusing on the influence of ESG performance on the value and profitability of listed companies in South Africa (Chininga, Alhassan & Zeka 2023). ...
... At the same time, as a metric, ESG aligns with the currently popular concept of sustainable development internationally. Poor ESG performance can lead to financial risks, such as credit, market, operational, liquidity, and financing risks [6], undermining the stability of the financial system and potentially leading to systemic consequences. ...
In recent years, investors have increasingly focused on the environmental, social, and governance (ESG) performance of businesses, driven by the rising importance of social and environmental challenges. This trend highlights the critical role of ESG factors in the financial sector. This study leverages stakeholder theory, risk management theory, and ESG investment theory, utilising financial data and ESG scores from Chinese listed banks to comprehensively analyse ESG elements and examine their impact on the liquidity risk of commercial banks. The results show that: (1) Enhanced ESG performance can mitigate liquidity risk in commercial banks by reducing the proportion of non-performing loans and improving overall financial performance. (2) By standardising and implementing sustainable business practices, ESG elements can improve commercial banks’ liquidity management levels and lessen the incidence and effects of liquidity risk. As a result, it is critical to lower banks’ liquidity risk and support the long-term growth of commercial banks from five angles: information disclosure, differentiated reform, digital transformation, education and training, and international cooperation.
... This perspective aligns with research examining the impact of the 2008 Global Financial Crisis (GFC) on firms, with most reducing their CSR efforts in response to resource constraints and heightened uncertainty (Bansal et al., 2015). On the contrary, the stakeholder theory postulates that firms may sustain or even augment their CSR investments during economic downturns as a strategic move to safeguard the social capital derived from stakeholder interactions (Lins et al., 2019). ...
This study assesses the strategic value of corporate social responsibility (CSR) investments and their impact on corporate resilience during financial crises. We examine three main hypotheses—“Doing well by doing good,” “Delegated philanthropy,” and “Insider-initiated philanthropy”—to understand what motivates companies to participate in CSR activities in times of economic turmoil. Using a systematic literature review of peer-reviewed journal articles within social sciences, extracted from Scopus and Web of Science, we adhered to Preferred Reporting Items for Systematic Reviews and Meta-Analyses guidelines to screen 1022 studies, ultimately yielding a final sample of 33 key high-quality studies. Our analysis reveals that a significant number of studies support the “Doing well by doing good” hypothesis, which suggests that CSR investments not only sustain financial performance but also serve as a crucial resilience mechanism in tumultuous economic times. Our findings reveal that investment in CSR enables firms to build social capital that pays off during financial crises by fostering trust between the firm and its stakeholders.
... Evidence suggests that collective ESG performance, encompassing ESG factors, can enhance financial performance (Bătae et al. 2021;Lins, Servaes & Tamayo 2019;Muzanya 2022;Velte 2017;Zhang et al. 2023 Notably, South Africa has taken a leading role in implementing ESG finance policies within the African continent, as recognised by the Official Monetary and Financial Institutions Forum (OMFIF) in collaboration with South African bank, Absa (Moneyweb 2022). Despite this commitment, there remains a scarcity of research specifically focusing on the influence of ESG performance on the value and profitability of listed companies in South Africa (Chininga, Alhassan & Zeka 2023). ...
Background: Environmental, social and governance (ESG) factors have become topical in
recent years because of climate change existential threat to humanity. There is, however, a
limited understanding of how the firm’s ESG efforts affect firm outcomes.
Aim: The aim of this study was to investigate the relationship between firm’s ESG indicators
and the financial performance.
Setting: The sample is drawn from Johannesburg Stock Exchange (JSE) listed companies based
on data availability. South Africa is not only plagued by social ills and governance failures, but
it is also one of the world’s largest emitters of greenhouse gases, making it an ideal laboratory
for studying the ESG and firm performance nexus.
Method: We utilized a dataset spanning the years 2012–2022, covering 67 JSE-listed firms.
These panel data were analyzed using the two-step system generalised method of moments
(GMM).
Results: We found that the disaggregated ESG indexes have a positive, albeit insignificant
impact on the financial performance. These findings hold even when financial and nonfinancial firms are examined separately.
Conclusion: Policymakers, including standard setters and regulators, should encourage firms
to be sincere on ESG efforts and avoid greenwashing.
Contribution: The study employs a relatively robust estimation technique (two-step system GMM) over a relatively long period (2012–2012). Furthermore, the sectoral analysis of financial and non-financial firms adds to the body of literature and policy development.
... Also, from the resource-based perspective, scholars argued that incorporating a CSR strategy into a company's operations can serve as a valuable complement to a differentiation strategy (Barney et al., 2010). This is because CSR initiatives can bolster a firm's reputation and brand value, enhancing the other assets' value (Cheng et al., 2014;Helmig et al., 2013;Lins et al., 2019). This line of research suggests that CSR could play a pivotal role in enhancing a company's reputation and strengthening its external links to improve external performance . ...
Corporate Social Responsibility (CSR) is a critical indicator for bridging corporately responsible behavior and stakeholder inclusion towards achieving long-term development. While stakeholder and reputation-building theories suggest that CSR can affect organizational performance, slack resource theory proposes organizational performance can affect CSR. Accordingly, it indicates that CSR initiatives and firm performance have a bidirectional relationship. Despite many unidirectional studies conducted to examine CSR and firm performance interplay in diverse contexts, studies on bidirectional analyses to test contrasting theoretical standpoints in a single study are rare. However, examining the bi-directional role of CSR is crucial as it provides insights into using CSR as a strategic investment decision within the competitive organizational context. Therefore, this study aims to examine the relationship between CSR and market-based performance as a bidirectional study from an emerging country perspective. Study data was collected from the sustainability/CSR disclosures in annual reports published between 2011 and 2020 by the top hundred companies (identified based on market capitalization) listed on the Colombo Stock Exchange (CSE) in Sri Lanka using judgmental sampling. The CSR was measured using a weighted CSR score assessed based on a comprehensive CSR index with thirty sub-dimensions. Market-based performance was measured using earnings per share (EPS) and firm value, and the control variables were firm size and leverage. The data was analyzed in two phases to examine the two-way linkage between CSR and market-based performance using the fixed effect panel regression technique. The findings concluded that CSR positively impacts market-based performance, confirming the role of CSR as a strategic driver to enhance future profitability. However, the study could not find any bidirectional impact of market-based performance on CSR in an emerging context. Although higher CSR affects higher external performance, higher market-based performance does not affect increased CSR in Sri Lanka. It may be because external performance indicators represent only the future profitability of firms, and these indicators are generally highly volatile over a long period, especially in emerging countries like Sri Lanka.
... The new phenomenon that risk management should be considered for is the growing importance of the non-financial factors, such as environmental, social and governance (ESG) issues on corporate value (Aybars et al. 2019). The social capital built by ethical operations, such as the Corporate Social Responsivity (CSR) activities, can provide a downside protection in the times of stress (Lins et al. 2019). The firm's ESG/CSR profile and activities are influenced by many factors like ownership, market and leadership but the direction of the causal relation is not obvious (Gillan 2021). ...
Micro-level risk awareness affects macro-level financial stability as well. Thus, the corporate risk management practice impacts the exposures and the potential fragility of an economy. While corporate risk management is accepted to create value in an imperfect market, the effect of the firm size is not straightforward. Smaller, financially constrained firms can benefit more by engaging in risk management programs, but larger corporations face more complex risks and have more resources for this activity. Empirical studies on risk management focusing mainly on the US market, highlight a positive relation between the firm size and the quality of risk management that includes not just the hedging of financial risks, but the concept of integrated risk management as well. The aim of this paper is two-fold: first, to summarize the existing literature on corporate risk management with a special focus on the effect of corporate size; second, to contribute to the existing literature by investigating a Central European market, Hungary. The findings are similar to those of the existing global literature, as derivatives usage, and applications of an integrated risk management concept increase with firm size. Although all firms in the sample manage their foreign exchange risk, interest rate hedging and more sophisticated derivatives, like options, are much less widespread in Hungary, compared to the US and Asian peers. The size effect is proven for the objective criteria of risk management quality by comparative analysis and a structured modelling framework, however, the subjective self-evaluation was uncorrelated to the size.
... Aboud and Diab (2019) show that firms with high ESG ratings enjoy better financial and market performance. Meanwhile, Lins et al. (2019) suggest that during crisis periods, companies with high CSR report better operating performance, higher growth, higher employee productivity and greater access to debt markets. Additionally, Shaikh (2022) and Nguyen et al. (2022) reveal that better ESG practices could enhance firms' financial performance measured by return on assets, return on equity, and Tobin Q. ...
ESG performance has become vital for business in recent years. Consumers, stakeholders and investors alike seek companies that can show that they are environmentally and socially responsible, especially in periods of uncertainty. Using a new measure of uncertainty, the Climate Policy Uncertainty Index developed by Gavriilidis (Measuring climate policy uncertainty, 2021), this study investigates environmental, social and governance (ESG) performance, firm performance and carbon dioxide emission performance in the context of major developments related to climate policy and events. Further, the study provides insights into how ESG performance moderates the impact of climate policy uncertainty on firm performance and carbon dioxide emission performance. Finally, this paper examines how investor sentiment influences ESG performance during periods of high uncertainty. Based on a large sample of 2640 firms (6462 firm-year observations) from the US Fortune 1000 list covering the years 2008–2018, the empirical results demonstrate that climate policy uncertainty positively affects ESG performance and negatively affects firm performance and carbon dioxide emission performance. In addition, we find that firms enhance their ESG performance when investors are pessimistic, especially during periods of high uncertainty. Finally, we show that ESG performance does not moderate the effects of climate policy uncertainty on firm performance and carbon dioxide emission performance. These findings may help managers and policymakers to boost ESG performance to reap the benefits of ESG activities during periods of uncertainty related to changes in climate policy. Further, the results identify a promising channel via investor power that the government and ESG reporting advocates can utilise to encourage firms to act responsibly during periods of uncertainty.
... The implementation of CSR, nowadays, is no longer seen as a potential competitive advantage for companies, but as a real strategic need (Falkenberg & Brunsael 2011). CSR can bring benefits to companies in the midst of a financial crisis (Lins et al., 2019), investors (Petersen & Vredenburg 2009), employees (Kim et al., 2010;Wang et al. 2013), management (Du et al., 2013), and consumers (Groza et al. 2011;Moosmayer 2012). However, on the other hand CSR can be very expensive and few companies can measure its benefits (Bhattacharyya 2007). ...
This study aims to obtain an overview of the performance of Corporate Social Responsibility in Teluk Bintuni Regency in the social, economic, agricultural and environmental fields. Measurement of CSR performance is carried out by examining the gap between the level of importance and the performance of CSR implementation, as well as the priorities needed for program sustainability. There were 40 beneficiaries as respondents, located in the villages of Onar Baru, Onar Lama, Saengga, Tanah Merah, Tofoi, Babo and Bintuni. Data were analyzed using Importance Performance Analysis (IPA). The findings show that the level of conformity between interests and performance is 67%, and from the 14 attributes of the assessment, there are 7 attributes of program management that must be prioritized, namely planning and implementing programs that are as expected, accompanied by clear monitoring and evaluation. The program must be in accordance with the objectives, provide opportunities for the community for community involvement to provide input and have an orientation to the satisfaction of the target community.
... Similarly, Dou et al. (2013) argue that firms use CSR investment to maintain a strong bond with their stakeholders, particularly during the existence of information asymmetries. Lins et al. (2019) reveal that firms enhance their social capital through CSR engagement and build profitable relationships with their stakeholders, which helps them in mitigating the negative effect of the economic crisis. Kim et al. (2021) empirically assess the value of CSR-as-insurance using implied volatility as a proxy of market risk and found that firms increase CSR to mitigate the adverse effect of market risk. ...
Purpose
This study aims to examine the impact of economic policy uncertainty (EPU) on firm investment in corporate social responsibility (CSR)’s environmental, social and governance (ESG) dimensions. Additionally, the study examines whether firm size moderates the EPU–CSR relationship.
Design/methodology/approach
The sample includes 2,017 US. firms from 2002 to 2018. Data on ESG scores are drawn from the Asset-4 database in Thomson Reuters to measure CSR investment. ordinary least square regression, including fixed effects at the year and industry level, is used as the main econometric specification. Moreover, the study employed the two-step system Generalized Method of Moments to address the endogeneity concerns.
Findings
The findings reveal that firms increase their CSR investment in response to high EPU. The results are consistent in all the three ESG/CSR dimensions: ESG. Moreover, the positive association between EPU and CSR is driven by firm size, indicating that large-sized firms have the resources and incentives to invest more in CSR. Our main findings remain consistent after addressing the endogeneity concerns and controlling for the effect of omitted variable biasness.
Originality/value
Using a unique sample of US firms, this study empirically contributes to the current literature on the association between EPU and CSR investment. Moreover, firm size plays a vital role in moderating this relationship.
... The socialization process helps in the formation of informal and formal ties which act as a conduit for the seamless flow of project social capital and knowledge integration. Lins and Tamayo (2019) have viewed community social capital as an insurance policy for organizations that pays off during crisis and uncertainty, when being reliable is more valuable. Scheinbaum and Wang (2018) highlights the prevalence of personal relationships (Guanxi) embedded cultural context of the firm can act as a sustainable advantage and help in driving firm competitiveness. ...
The COVID-19 pandemic appeared to be an unprecedented shock to both individuals and organizations alike. Taken by surprise, businesses across the world had to adapt to working remotely. The employees and the employers both had to learn and simultaneously implement the new strategies for managing their operations. The leadership process on the other hand also underwent a substantial change. This is why the concept of “remote leadership” was adapted to ensure employee wellness, which became the mantra. Therefore, in times of crisis, corporate leaders are expected to take possible corrective measures to address the crisis while maintaining a sense of normality. Hence in the time of the pandemic caused by COVID-19, corporate leaders had to drive organizations remotely while maintaining motivation, fostering accountability, and providing clear guidelines. This chapter, therefore, dwells on the dynamics of remote leadership required to be considered during policy reshaping—basically to help corporations ensure employee wellness—particularly in the context of trying times such as the pandemic COVID-19. Various issues discussed in the chapter include the need and use of remote leadership before and after the pandemic COVID-19, remote leadership, and employee wellness, the impact of technology on remote leadership, challenges for remote leadership, and insights for achieving excellence in remote leadership. The discussion and conclusions of the chapter will provide both its readers and corporate policymakers a spotlight on the perspectives of remote leadership and its role in maintaining employee wellness.KeywordsRemote leadershipEmployee engagementTechnology
... The theoretical basis to examine ESG as a safe haven trait during times of crisis is attributable to the resilience and social capital it endows the underlying asset/company with (Guiso et al., 2008;Marti et al., 2015). More specifically, firms that present higher levels of sustainability have been found more resilient to systemic shocks than their peers with weaker ESG profiles (Lins et al., 2017(Lins et al., , 2019Manabe and Nakagawa, 2022), demonstrating a higher level of trust among investors and other stakeholder and a buffer of moral capital to mitigate responses to negative events. Given the loss of the first during the Great Financial Crisis (Guiso, 2010) and the strong appearance of the second during the pandemic, we have good reason to assume ESG may have assumed an insurance nature in investment decisions in these times of crisis, since institutional investors' demand for resilience assets only increased so far (Pagano et al., 2020). ...
Purpose
The authors compare two market collapse incidents, focusing on their role as turning points for ESG considerations among investors that do not fall under the SRI class. The authors draw from the signaling theory to posit that ESG performance acts as a buffer to retain institutional shareholders under stress conditions.
Design/methodology/approach
The authors collect extensive data on institutional shareholdings and corporate performance during the pandemic and the 2008 financial crisis to examine the potential of ESG to act as a downward risk hedging mechanism. The authors test whether superior ESG scores function as insurance and resilience signals that lock investors in through times of high probability of divestments.
Findings
Findings indicate that ESG weighs in investment decisions during economic downturn and poor returns. The nature of this positive relationship is not static but dynamic contingent on overall risk materiality considerations.
Research limitations/implications
The authors update regulators, firms, investors and academics on ESG, risk and crisis management. The shifting materiality and the altering impact of ESG practices is our core implication, as well as limitation, in terms of metrics, temporal evolution and interaction with institutional factors, along with portfolio alpha and safe haven potential in ESG asset classes.
Originality/value
The authors extend current literature focusing on portfolio returns and firm valuations to highlight the role of ESG in shareholder retention during poor return periods. The authors further add to existing studies by examining the shifting materiality of ESG pillars during different crisis settings.
... This is an important issue to be examined through the mediating effect of corporate social responsibility (CSR), as companies' investments in social capital are not constant over time. The financial crisis provides such a setting in which identifying trustworthiness during different periods is more valuable (Lins et al., 2019). I chose these four countries as they are among the largest Eurozone countries. ...
Purpose
This paper aims to examine the impact of the recent financial crisis on audit quality by analysing discretionary accruals.
Design/methodology/approach
This study considers a sample of German, French, Italian and Spanish non-financial firms from 2005 to 2013 to investigate the auditor’s independence. It uses a cross-sectional and time-series ordinary least squares regression model to control for other predictors of the auditor’s independence when the financial crisis produces a decrease in audit quality.
Findings
The proportion of the non-financial firms having lower audit quality was higher during the financial crisis. In addition, during the crisis auditors were less likely to provide a higher audit quality for these non-financial firms. The level of audit quality returned to normal levels during the post-crisis years when the crisis had ceased.
Originality/value
These findings contribute to the literature on the impact of economic and financial changes on audit quality. In addition, this research finds that the Big Four accounting firms provide a higher audit quality in different circumstances from non-Big Four accounting firms, and that audit quality decreased during the crisis and returned to normal in the post-crisis period.
... External financing providers acknowledge eco-friendly practices as ways for a firm to decrease its degree of idiosyncratic risk. In general, our finding remains in line with Lins et al. (2017Lins et al. ( , 2019, who report that the firms with high CSR activities experienced higher profitability, growth, sales, and accessibility to external financing during the financial crisis of 2008-2009. Our findings are underpinned by the reciprocity idea which holds that stakeholders are inclined to help firms with high CSR standing during negative economic shocks, given that such firms have shown greater regard for stakeholders in the past. ...
The COVID-19 pandemic has resulted in substantial constraints for small and medium enterprises (SMEs) worldwide. The techniques in which SMEs handle recent crises and the degree to which environmental performance is advantageous when the marketplace experiences an adverse shock is fairly untouched in the literature. To assess this probability, we examine, using data from 6,597 SMEs in 13 developing countries, the effect of firm environmental efficiency on firm financing during the COVID-19 outbreak. We consider three aspects of external financing – bank, non-bank and trade credit – and suggest that it pays for firms to show devotion to environmental obligations in a global pandemic. Our research implies that the trust between a firm and its stakeholders, if it is based on environmental performance, pays off when the trust freefall during periods of shock and adversity.
... Compact (2011) But only a few of these frameworks explicitly address the stakeholder group of investors (Bassen & Senkl, 2010 Moreover, there is an ongoing crisis of confidence regarding companies and markets in general (O*11), but implementing sustainability could help to overcome this (Lins et al., 2019). Companies that do sustainability reporting or who disclose sustainability-related information voluntarily may follow nonmaterial motives, such as consequences for reputation (Cho et al., 2012;Luo, 2019), credibility, trust, and image (Arnold, 2011). ...
How companies report their data is undergoing digitization and sustainable transformation. Sustainability is important; therefore, various stakeholders are interested in sustainability information. Companies provide the required information and strive toward the use of information systems to ensure efficient data processing. A possible approach for information provision is open data. This research introduces the idea of corporate sustainability open data (CSOD) as one new mechanism of companies' sustainability self‐reporting. Since CSOD is not yet commonly practiced by companies, a strategic analysis of the situation and its possible consequences is conducted with an analysis of strengths, weaknesses, opportunities, and threats. This research provides an overview of companies' sustainable development through open data. Moreover, it identifies drivers, challenges, and reasonable strategies for CSOD adoption. Thus, the research contributes to the establishment of an innovative application of open data in the private sector to support sustainable transformation worldwide.
... Corporate social responsibility (CSR) and green technology innovation (GTI) are two key driving forces for sustainable development and for the social value of firms (Lins et al., 2019;Satapathy and Paltasingh, 2019). The goal of CSR is to take into account the expectations of various stakeholders and encourage a positive impact on the economic, social, and environmental performance (Aguinis and Glavas, 2012). ...
This study focuses on the impact of corporate social responsibility (CSR) on green technology innovation (GTI) of firms and the moderating influence of the chief executive officer (CEO) narcissism through the lens of stakeholder theory and upper echelons theory. This research deconstructs CSR into internal CSR and external CSR in order to reveal the effects of different types of CSR on GTI. Based on a sample of 1,745 firm-year observations from 349 Chinese-listed firms across sectors between 2014 and 2018, we find that the fulfillment of internal CSR has a significant positive impact on GTI. This relationship is strengthened when the CEOs are narcissistic. The external CSR has a significant negative impact on GTI and this relationship is strengthened by CEO narcissism. The major contribution of our study is that it provides a theoretical contribution to the existing literature by deconstructing CSR into internal and external CSRs and enriches the studies in the context of CSR from a point of view of the particular personality trait of a CEO.
Objetivo: Este estudo tem por objetivo comparar a performance das ações das companhias que constam na carteira do Índice de Sustentabilidade Empresarial (ISE) com as que participam do segmento tradicional da Brasil, Bolsa, Balcão (B3). Fundamento: Segundo a teoria de mercados eficientes, todos os títulos são precificados corretamente, refletindo a totalidade das informações disponíveis sobre eles. O retorno esperado das ações é explicado pelo risco de mercado associado à empresa. Assim, no caso daquelas que adotam práticas ESG, espera-se que eventuais ganhos estejam precificados na mitigação de seus riscos. Tais argumentos suportam a hipótese H1 de que empresas que adotam práticas de sustentabilidade têm retorno superior às demais. Método: Essa análise se dá por meio de um estudo de evento, considerando a data do primeiro óbito oficial pela Covid-19 no Brasil em 15 de março de 2020. Resultados: Os retornos acumulados anormais são negativos para ambas subamostras. Porém, a média das companhias que compõem o ISE é de -1.28%, enquanto que a do segmento tradicional é de -10.15%. Assim, é possível afirmar que as empresas que adotam práticas de ESG apresentam um resultado 8.87% estatisticamente significativo e superior as que não o fazem. Segundo o teste t, essa diferença é estatisticamente significativa, confirmando a H1 desse estudo. Contribuições: Esse estudo contribui para a análise do impacto da adoção de práticas de ESG no Brasil – durante a Covid-19, bem como em mercados e economias emergentes.
Purpose
This research aims to investigate the relationship between environmental, social and governance (ESG) factors and the performance of real estate companies before and after the COVID-19 pandemic. By conducting a comprehensive case study analysis, we will explore how real estate companies' adoption of ESG practices has influenced their financial performance, market value and resilience during these uncertain times. The findings of this study will contribute to the existing body of knowledge on the relationship between ESG factors and company performance, specifically within the real estate sector. Moreover, the research outcomes will offer practical implications for real estate companies, investors, policymakers and other stakeholders, aiding them in making informed decisions regarding ESG integration and its potential benefits in uncertain times. Overall, this research aims to shed light on whether ESG factors truly enhance the performance of real estate companies, considering the unique challenges posed by the COVID-19 pandemic and sanctions. By examining the case study before and during uncertain times including COVID-19 pandemic and sanctions, we provide valuable insights into the role of ESG practices in shaping the future of the real estate industry.
Design/methodology/approach
The study focuses on the selection process and main model used to investigate the relationship between ESG factors and firm performance. The data is divided into four groups based on ESG quartiles to analyze differences between firms with high and low ESG scores. The Difference-in-Differences (DID) model is employed to assess anomalous returns and stock volatility across different ESG quartiles before and after the COVID-19 pandemic. Panel data models are utilized to study the association between ESG and firm performance, with random effects and fixed effects estimators considered. The study builds a model to analyze the impact of ESG on financial performance indicators, incorporating various factors and control variables. Additionally, the Average Treatment Effect on the Treated (ATET) analysis and DID model are explored to evaluate the causal impact of ESG on firm performance. The study emphasizes the importance of testing for parallel trends to ensure the validity of the ATET analysis and it presents a generalized DID model to examine the relationship between ESG scores and company performance outcomes.
Findings
Our study's main conclusions show that, in a world with some degree of stability, ESG not only does not improve but, in some situations, also hurts firms' success. On the other hand, at times of notable worldwide unrest, like the COVID-19 pandemic, firms with better ESG ratings demonstrate exceptional stock market success and a noteworthy ability to rebound from a crisis. Moreover, we note that investors truly prioritize sustainable investments as a risk mitigation strategy in addition to their environmental and social duties only when companies face sufficiently significant risks. The results will highlight the significance of sustainable and responsible investment for investors and provide management with more knowledge to create effective ESG strategies for their companies.
Practical implications
By incorporating sustainability and responsibility into their operations, businesses may reduce risk, perform better over the long run and benefit society and the environment. As investors come to understand the importance of ESG issues in their decision-making, the global landscape is experiencing a transformation. Therefore, in the era when stakeholders, such as consumers, workers and shareholders, want more responsibility and transparency when it comes to ESG practises, it is crucial that companies should devote their priority to their ESG performance in order to reduce the danger of slipping behind, especially in light of the increasing importance of sustainability issues and changing laws. However, in the case of small-sized firms, investment policies to improve companies’ governance need to be controlled in moderation during the period of stability because it will create financial pressure and leave them without enough resources to cope with negative impacts during uncertain period. In sum, sustainable and ethical investment is not only a fad; rather, it is a vital and unavoidable route for companies looking to prosper in an unpredictable and complicated global environment.
Originality/value
This research study significantly enhances the existing academic discourse surrounding the relationship between ESG factors and firm performance, particularly, in periods of uncertainty. The findings underscore the critical importance for real estate companies to place a greater emphasis on ESG practices in order to not only benefit themselves but also to improve their overall performance and sustainability in the long term. By shedding light on the positive outcomes associated with prioritizing ESG considerations, this study offers valuable insights for real estate firms seeking to enhance their competitive advantage and stakeholder value in today's dynamic business landscape.
Purpose
This study aims to investigate the relationship between integrated reporting, environmental innovation and the mediating effect of shareholder scores within the context of Japan.
Design/methodology/approach
SEM on panel data are used to study the impact of the role of shareholder scores in mediating the effect of integrated reporting on environmental innovation. This empirical study was based on a sample of 420 companies operating in Japan for the period spanning 2010 and 2022.
Findings
Drawing upon empirical results, this research uncovers the pivotal role of the shareholder's score as a mediating factor in this relationship. A higher shareholder score signifies a governance structure that values shareholder input and fairness in treatment. Empowered shareholders leverage their influence to advocate for transparent reporting practices that encompass environmental considerations. Consequently, firms with elevated shareholder scores are more inclined toward environmental innovation, aligning their strategies with sustainability imperatives.
Originality/value
The findings contribute to understanding of how corporate governance mechanisms, particularly shareholder empowerment, interact with reporting practices to drive environmental initiatives, providing valuable implications for sustainable business practices globally.
Purpose
This study aims to examine the impact of corporate social responsibility (CSR) on earnings management (EM). Furthermore, the authors assessed the mediating effect of accounting conservatism (AC) on the CSR-EM relationship over the long term. The authors also tested the moderating effect of corporate governance (CG) on the AC-EM relationship in the Finnish context.
Design/methodology/approach
Linear regressions were applied to panel data using Thomson Reuters’ ASSET4 database. Data were collected from 140 Finnish firms between 2005 and 2022.
Findings
The results confirm that negative CSR has an impact on EM. Moreover, AC mediates the relationship between CSR and EM. Likewise, CG moderates the relationship between AC and EM.
Practical implications
This paper may interest academic researchers and potential and current investors. This paper will help investors make relevant investment decisions. Managers should pay special attention to their EM. These firms must take social responsibility vis-a-vis all their stakeholders.
Originality/value
To the best of the authors’ knowledge, this study is the first to use AC as a mediator and CG as a moderating variable in the Finnish context. This research will enrich the literature by providing a comprehensive picture of the relationships between CSR and EM through AC and CG in developed markets. Therefore, it is crucial to understand the implications of CSR in Finnish companies.
Esse estudo teórico tem como objetivo explorar de que maneira a qualidade das relações sociais, representada pelo Capital Social, impacta o desempenho e a resiliência das redes empresariais, buscando explorar a interseção entre o capital social e as redes empresariais. Abordagem: Revisão da literatura, com estrutura narrativa, orientada para perquirição teórica sobre Capital Social e redes de cooperação empresariais. Na sequência, são explorados os tópicos relacionados às dimensões do Capital Social, a relação entre Capital Social e as redes e a influência dos relacionamentos em redes sociais sobre o Capital Social. Na perspectiva deste estudo, o Capital Social se constitui em um ativo intangível para as organizações e o êxito ou insucesso das redes tem capacidade de impactar indiretamente no Capital Social. A principal contribuição trazida pelo presente trabalho é a importância de se compreender e otimizar o Capital Social, posto que é uma estratégia essencial para a prosperidade sustentável das redes empresariais no cenário econômico contemporâneo.
Purpose
The purpose of this research is to verify whether the disclosure of intellectual capital (IC) positively affects the level of integration of financial and sustainability information.
Design/methodology/approach
The sample of the analysis relies on European public companies. The data were gathered from Refinitiv, focussing on a multi-year observation from 2013 to 2021 and performing a fixed-effect regression. According to the extant literature, the authors developed the Intellectual Capital Score and the Integrated Thinking and Reporting Score.
Findings
The more disclosure of IC, the more financial and sustainability information is integrated. Indeed, the results confirm that the disclosure of IC enhances the level of integration of financial and sustainability information.
Research limitations/implications
The study enriches academic knowledge about IC in conjunction with integrated reporting (IR) and integrated thinking by highlighting its relevance in the value-creation process and acting as a trait d’union of the disciplines.
Practical implications
For standard setters, the research may be framed to redefine the guidelines explaining the information on IC to be disclosed. Moreover, it could be helpful for practitioners when identifying the IC information that deserves to be disclosed, other than being exploitable to conduct enterprises geared towards adopting integrated reports.
Originality/value
This study answers the call for further research on the relationship between financial information and sustainability information to highlight their joint perspectives quantitatively.
A more precise and rigorous assessment of the impact of environmental, social, and governance (ESG) performance in business necessitates evaluating various firm characteristics. This study, focused on the ESG impact on enterprise credit risk, employed logistic models that incorporated the ESG rating index alongside other financial-related factors, including organizational structure, risk, and performance. The data were selected from all related listing companies in the Shanghai and Shenzhen stock exchanges. The results affirmed that (1) the risk of default decreased with improved ESG performance; (2) the return on assets, asset turnover ratio, leverage ratio, and operating income growth rate were the main financial factors affecting the default probability of enterprises; and (3) including ESG variables in the prediction model significantly improved the prediction accuracy of the model. The potential policy implications are presented in three perspectives. Businesses should prioritize developing good governance, fulfilling social obligations, and protecting the environment. Second, investors should integrate ESG ratings when making investment strategies. Third, the regulatory authorities are obligated to rapidly harmonize the ESG rating criteria and gradually develop the enterprise ESG information disclosure framework.
This study explores gender differentiation in access to credit which penalizes Italian female-led green SMEs compared to male-led ones. We carry out a panel analysis with 184,425 observations, of which 5855 refer to green firms, observing how the percentage of women among directors and managers (PWDM) affects access to bank credit and its costs. Our results demonstrate that green SMEs show different levels of financial debt compared to non-green ones depending on the PWDM. Our paper contributes to the literature in three ways. First, we investigate whether women-led green SMEs show different demands for financial credit in terms of amounts borrowed and mix between long/short-term bank credit; second, whether this potentially different credit demand is associated with coherent or incoherent effects on the cost of credit; and third, whether the credit demand of women-led green SMEs depends on the PWDM in the company.
This research examined how CSR has helped businesses cope with rising populations, higher industrial needs, and recent global crises. The research uses a mixed methodology of qualitative and quantitative techniques. The research analyzes how corporate social responsibility (CSR) activities relate to financial outcomes using both theoretical frameworks and actual evidence. The strength of CSR funds compared to more conventional funds can be gauged by looking at how they fare in the financial markets. Most research finds a beneficial relationship between corporate social responsibility and financial performance. In particular, CSR funds provide a more stable alternative to conventional funds by providing more excellent protection against losses during times of crisis. The findings imply that integrating CSR into business models boosts overall performance and resilience, bearing implications for corporate strategy and investment decisions, especially during economic instability.
This paper provides a theoretical framework and empirical support for an examination of corporate financial performance (CFP) from the perspective of an effect that is analogous to corporate social responsibility (CSR) advertising. We propose that not all companies are capable of “doing well by doing good.” Through an analytic model, we identify three key elements for determining a company's CSR advertising‐analogous effect on CFP: the incremental margin (gross profit rate), the sales–CSR elasticity and sales demand in the market (market share). By re‐examining the equivocal relationship between CSR and CFP based on a sample of publicly held US companies from 1991 to 2018, we document that companies in the best position to undertake CSR activities (with gross profit rates, sales–CSR elasticities and market shares above the industry medians) have a superior advertising‐analogous effect to other companies. Moreover, our empirical results show that companies in the best position to undertake CSR activities face less severe agency problems when they conduct more CSR activities than other companies. Finally, in a test of whether regular advertising expenditures and CSR devotion could jointly enhance current CFP, the results show that the positive joint effect is more pronounced for companies in the best position to undertake CSR activities than for other companies.
The basis of green development is the sustainable development of enterprises, and the core of enterprises’ sustainable development is the transformation of business models through the reconstruction of corporate value. Under the paradigm of ecological civilization, the concept of ESG (Environmental, Social and Corporate Governance) is becoming an important force behind corporate value reconstruction, guiding enterprises to innovate business models in the direction of sustainability. Based on the idea of the dimensions of the “shareholder channel-industrial chain channel-consumer channel,” this paper builds up a theoretical framework to interpret how ESG creates corporate value through the shareholder channel, the industrial chain channel, and the consumer channel, and provides empirical tests. We find that: first, the sustainable transformation of shareholder preferences is the center for ESG’s creation of corporate value; second, ESG performance helps reduce the transaction costs between upstream and downstream enterprises in industrial chains; and third, differences in ESG products create differentiated value for consumers. This study reveals the transformation of the direction and mode of corporate value creation in the course of green transition and provides micro-evidence of enterprises’ transition toward ESG goals in the Chinese context.
Firms tend to seek optimal distinctiveness when choosing CSR engagement timing. Building on the perspectives of optimal distinctiveness and competitive dynamics, this paper explains why firms' CSR engagement timing toward a certain event is affected by dynamic competitive effects. That is, to achieve optimal distinctiveness, focal firms pay more attention to their main competitors that are similar in market, size and resources. We apply a discrete‐time survival analysis of 869 Chinese listed firms' CSR engagement action toward the COVID‐19 pandemic during the first half of 2020. The results support the mechanism that when a highly similar competitor engages in CSR activities, it raises the probability that the focal firm engages itself beyond levels based solely on its own characteristics and common time‐dependent factors.
The main objective of this paper is to assess the non-linearities between the ESG activities and firm performance in case of an emerging market. China is identified as a case study for the present examination. Even though this research objective has been explored by past researcher, the evidence presented in literature is not conclusive. The paper hypothesizes that such conflicting or inconclusive results can potentially be attributed to wrong modeling, datasets that include both developing and the developed markets, and the prevalent endogeneity issue in corporate governance literature. For the purpose of this paper, the author uses the dynamic panel approach of First difference and the System Generalized Method of Moments. The findings from the analysis of 232 Chinese listed firm show a positive association between ESG activities and the firm performance. However, the relationship is nonlinear. In other words, the relationship between ESG activities and the firm performance is inverted U-shaped. This indicates the relationship is positive up to a certain threshold and once the ESG activities cross that threshold it start to have negative effect. The key insight from this research is that the firm has to find their threshold of ESG activities to gain maximum benefits from such activities.
The economic instrumentality of organizations has amplified since the industrial revolution. However, more recently, globalization and disruptions in the business environment have added new dimensions of complexity and uncertainty. This paved way for social capital from community studies to management by viewing it as a resource that can be leveraged by multiple stakeholders for sustainable advantage in organizations. The chapter focuses on understanding the multi-dimensional concept of social capital in organizations by systematically reviewing literature over the past decade (2011–2020). Insights have been presented using the 4P framework: Purpose, Product, Place, and Price of social capital. Taking a perspective of social exchange and social embeddedness, social capital has been shown to positively impact the business ecosystem, communities, minorities, businesses, and employees. Also, during uncertain times, social capital acts as a rainy-day investment that can be used to construct, convert, transfer, or complement needful resources. Findings from the study can be leveraged by both practitioners and academicians to drive organization success.KeywordsSocial capitalSystematic literature reviewEvidence-based4P FrameworkUncertain timesInclusive growth
In the literature on sustainable investing, most studies assume normal market conditions. However, research is limited regarding the specific role of sustainable investing during stressed market conditions. In this paper, we contribute to the literature by investigating the role of ESG investing in market turbulence for the case of China. To that end, we examine the performance of ESG equity indices and compare against their benchmarks amid market turmoil in China, which were triggered in response to the 2020 Wuhan Lockdown and the recent 2022 Shanghai Lockdown. Specifically, we address two key issues that are of particular concern to most investors: (i) is ESG investing safe haven in times of crisis?; and (ii) can ESG investing improve portfolio diversification? Overall, our findings shed light on the role of sustainable investing amid uncertainty in turbulent times.
This study empirically explores the role of social capital in creating collaborative innovation and collective intelligence and maintaining organisational sustainability in the unprecedented COVID-19 crisis. Data were collected from a sample of 289 managers, directors and heads of departments of top 50 manufacturing firms in Jordan and analysed using Smart-PLS-SEM. The results indicate that social capital significantly impacts collaborative innovation, collective intelligence and organisation sustainability during the COVID-19 crisis. They also reveal that collective intelligence significantly impacts collaborative innovation and organisation sustainability. This study enriches the literature on social capital, collaborative innovation and collective intelligence. It elucidates the role of such dynamic capabilities in maintaining both organisational sustainability and the chance of recovery from unprecedented crises.
The study investigates the effects of Corporate Social Responsibility on Unity Banks Tudun-hatsi Branch Gombe. The study utilized secondary sources of data, which were sourced from current journal articles, text books, and previous researches of scholars that are related to the study (effects of Corporate Social Responsibility on Unity Banks Tudun-hatsi Branch Gombe.) and draw a conclusion base on related literature and empirical reviewed. The content analysis technique was employed in reviewing literature related to the problem identified. The study, therefore concludes that, wealth and income disparities have a significant effect on the performance of Unity Bank Tudun-hatsi Branch Gombe, it depicts that corporate citizenship can involve incurring short-term costs that do not provide an immediate financial benefit to the company but instead promote positive social and environmental change. Social mobility does not significantly improves the financial performance of Unity Bank Tudun-hatsi Branch Gombe, the support lend to the society through banks CSR will thereby make the business environment more friendly and habitable for organization survival in the long run. And lastly health and education levels also significantly improve the performance of Unity Bank Tudun-hatsi Branch Gombe. The implication of the study recommends that management of the firms must be reviewing their policy since we are in a global society where technologies rule. In addition, the study suggests that the company corporate social responsibility need to be expanding to the immediate communities and the state at large. In order to bypass any hitches that may hinder the performance of the business.
Firms with high social capital systematically outperform their peers during periods of economic distress. Yet, it is not clear under which institutional conditions corporate social capital is the most valuable to shareholders. By studying the performance of 1,789 firms in 27 countries during the initial phases of the COVID-19 pandemic, we document that the resilience effect of social capital is heterogeneous across countries. We identify the flexibility of a country's labor market as a critical determinant of corporate's returns on social capital-related investments. These findings are consistent with social capital hedging firms against systematic shocks by mitigating employee-related litigation risk.
This paper presents an industry equilibrium model where firms have a choice to engage in corporate social responsibility (CSR) activities. We model CSR as an investment to increase product differentiation that allows firms to benefit from higher profit margins. The model predicts that CSR decreases systematic risk and increases firm value and that these effects are stronger for firms with high product differentiation. We find supporting evidence for our predictions. We address a potential endogeneity problem by instrumenting CSR using data on the political affiliation of the firm’s home state.
This paper was accepted by Gustavo Manso, finance.
An overlooked but important benefit of CSR is to insure a firm against a decline in reputation in the face of adverse events. Through a case study and a multi-year analysis of stock price responses for S&P 500 companies following product recalls, we find that firms that have high CSR ratings fare better than those that do not. Furthermore, a firm that is exceptional in both doing good and avoiding harm suffers virtually no reputational damage following negative media publicity. Using the results of this study, we offer a guide to managers for determining the appropriate amount and mix of CSR activities.
Crime, Punishment and the Value of Corporate Social Responsibility
- See Hong
- Inessa Liskovich
See Hong, Harrison, and Inessa Liskovich, 2016, "Crime, Punishment and the Value of Corporate Social Responsibility,"
Working paper Princeton University and University of Texas at Austin.