Impact of positive and negative corporate social responsibility on automotive firms' financial performance: A market‐based asset perspective

Abstract

Prevailing studies on the economic implication of corporate social responsibility (CSR) for businesses has mainly stressed on the positive facet of corporate social responsibility (PCSR), failing to comprehend that firms also espouse behaviors and initiatives which can be characterized as negative corporate social responsibility (NCSR). Additionally, limited researches have considered how both PCSR and NCSR influence corporate financial performance (CFP). In consideration of this view, we present a framework that connects both PCSR as well as NCSR to CFP. We also analyzed the moderating role of the firm's market‐based asset. Using 924 observations from 2011 to 2017 and a combined secondary data of 132 global automotive firms from CSRHub and Thomson Reuters Datastream, we examined how increases in either PCSR or NCSR relate to CFP via dynamic panel data system Generalise Moment of Method estimates. Our results demonstrate that PCSR improves CFP while and NCSR is detrimental to a firm's financial performance. Correspondingly, the results indicate that market‐based asset moderates the relationship between PCSR and NCSR. Firms that possess higher market‐based assets tend to enjoy higher profitability with PCSR as they are in a better position. However, it has been observed that market‐based assets tend to weaken the relationship between CFP and NCSR.

Full text

RESEARCH ARTICLE
Impact of positive and negative corporate social responsibility
on automotive firms' financial performance: A market-based
asset perspective
Woon Leong Lin
1,2
| Jo Ann Ho
1
| Chin Lee
1
| Siew Imm Ng
1
1
Faculty of Economics and Management,
Department of Management and Marketing,
Universiti Putra Malaysia, Selangor, Malaysia
2
Taylor's Business School, Taylor's University,
Subang Jaya, Malaysia
Correspondence
Jo Ann Ho, Universiti Putra Malaysia, Faculty
of Economics and Management, 43400 Upm
Serdang, Selangor, Malaysia.
Email: ann_hj@upm.edu.my
Abstract
Prevailing studies on the economic implication of corporate social responsibility
(CSR) for businesses has mainly stressed on the positive facet of corporate social
responsibility (PCSR), failing to comprehend that firms also espouse behaviors and
initiatives which can be characterized as negative corporate social responsibility
(NCSR). Additionally, limited researches have considered how both PCSR and NCSR
influence corporate financial performance (CFP). In consideration of this view, we
present a framework that connects both PCSR as well as NCSR to CFP. We also ana-
lyzed the moderating role of the firm's market-based asset. Using 924 observations
from 2011 to 2017 and a combined secondary data of 132 global automotive firms
from CSRHub and Thomson Reuters Datastream, we examined how increases in
either PCSR or NCSR relate to CFP via dynamic panel data system Generalise
Moment of Method estimates. Our results demonstrate that PCSR improves CFP
while and NCSR is detrimental to a firm's financial performance. Correspondingly, the
results indicate that market-based asset moderates the relationship between PCSR
and NCSR. Firms that possess higher market-based assets tend to enjoy higher prof-
itability with PCSR as they are in a better position. However, it has been observed
that market-based assets tend to weaken the relationship between CFP and NCSR.
KEYWORDS
automotive, corporate financial performance, market-based asset, negative corporate social
responsibility, positive corporate social responsibility, system GMM
1|INTRODUCTION
A recent check on the Violation Tracker Industry Summary (Good Jobs
First, 2019) showed almost the entire major car producers in the
world have been embroiled in some form of environmental violation.
These scandals and the recent Volkswagon “dieselgate”issue have
raised concerns about corporate social responsibility (CSR) in the
automobile industry. Although carmakers have implemented numer-
ous green practices to improve sustainability practices in the automo-
tive industry, there is still a need to improve sustainability practices
in the automotive industry. According to Vicianová (2011), CSR is a
commitment aimed toward community welfare through discretionary
business initiatives and corporate contribution and covers legal, ethi-
cal, economic, and philanthropic expectations of society on a com-
pany. It would be expected that when companies are embroiled in
ethical controversies, their firm revenue would be affected due to cus-
tomer backlash or reputation damage and vice-versa when companies
engage in CSR activities, their revenues would increase (Bai & Chang,
2015; Boulouta & Pitelis, 2014). In fact, a common theme identified
from previous researches (Den Hond, Rehbein, de Bakker, & Lankveld,
2014; Lai, Chiu, Yang, & Pai, 2010; Yuen, Thai, Wong, & Wang, 2018;
Lin, Lao, Ho & Sambasivan, 2019) was a positive association between
Received: 30 April 2019 Revised: 22 January 2020 Accepted: 5 February 2020
DOI: 10.1002/csr.1923
Corp Soc Responsib Environ Manag. 2020;1–13. wileyonlinelibrary.com/journal/csr © 2020 John Wiley & Sons, Ltd and ERP Environment 1

CSR and firm performance, where CSR is viewed as a crucial means of
generating wealth and enhancing the performance of the business
entity. However, the performance of car manufacturers embroiled in
such controversies did not show much decline. For example, the year
after the Volkswagen scandal, sales were not affected and on the con-
trary, showed an increase of 4.3% over the previous year (The Local,
2018). This indicates inconclusive evidence with regards to CSR or
the lack of it on the effect on a company's financial performance. In
fact, previous studies have categorized this relationship into three
ways: negative correlation (Brammer & Pavelin, 2006; Heinkel,
Kraus, & Zechner, 2001), positive correlation (Cornett, Erhemjamts, &
Tehranian, 2016; Jo, Park & Kim, 2015), or insignificant correlation
(Aras, Aybars, & Kutlu, 2010). Hence, there is a need to address
this gap.
In most of these studies, CSR has been treated as a unidimen-
sional construct where the CSR concept is treated as positive corpo-
rate social responsibility (PCSR) which only considers the positive side
of CSR (Kotler & Lee, 2005; Luo & Bhattacharya, 2009; Porter &
Kramer, 2006). However, considering only the positive aspects of CSR
activities lead can lead to a loss of validity since this single factor can
neither capture the social performance of a firm properly nor reflect
its breadth of conduct. Hence, it becomes difficult to generalize the
findings of these studies (Griffin & Mahon, 1997; Rowley & Berman,
2000). By primarily focusing on the positive aspects of CSR (PCSR),
many studies overlook the fact that firms also engage in unethical or
socially irresponsible activities that decrease social welfare. Such irre-
sponsible acts are known as negative corporate social responsibility
(NCSR) activities (Bird, Hall, Momentè, & Reggiani, 2007). Ignoring
such socially irresponsible behavior or NCSR activities portrays an
incomplete picture of the financial consequences of a company's CSR.
Bird et al. (2007) argued that a singular focus on PCSR overlooks that
firms' NCSR and this could lead to the inconsistent relationship
between CSR and financial performance. Indeed, Kim, Kim, and Qian
(2018), Mishra and Saur (2010), and Kang, Lee, and Huh (2010) stud-
ied the effect of PCSR and NCSR on company's financial performance
and found that both PCSR and NCSR impacted firm's financial perfor-
mance. They found that PCSR improved corporate financial perfor-
mance (CFP), while socially irresponsible activities or NCSR harmed
financial performance. Therefore, NCSR is thought to coexist with
PCSR throughout the business world (Popa & Salanta, 2014). Hence,
to address the issue of the inconsistent relationship between CSR and
financial performance, according to the suggestion of Bird et al.
(2007) and Kim et al. (2018), this study breaks CSR into PCSR and
NCSR and examines the influences of both PCSR and NCSR on the
CFP of companies in the automobile industry.
Researchers (Margolis & Walsh, 2003; McWilliams & Siegel,
2000) have commented that direct tests are considered imprecise or
spurious as many conditions influence the direct relationship. Further-
more, empirical studies that omit relevant moderators lead to biased
results which overestimate CSR's effect on CFP (Albertini, 2013;
Dixon-Fowler, Slater, Johnson, Ellstrand, & Romi, 2013; Orlitzky,
Schmidt, & Rynes, 2003). Thus, it is essential to consider moderating
variables to obtain a more nuanced explanation of the PCSR/NCSR–
CFP relationship. In particular, scholars such as Jensen and Meckling
(1976) and O'Brien (2003) suggested that firm-level innovation and
firms' competitive action are permanent conditions for effective finan-
cial performance. Therefore, we included the moderating effect of
market-based assets (MBAs) on the relationship between PCSR,
NCSR, and CFP.
There are two primary objectives of this study: (a) To study the
effects of positive and negative CSR on CFP and (b) To investigate the
moderating effects of MBAs on the association among PCSR, NCSR,
and CFP. PCSR is defined as “treating the stakeholders of the firm
ethically or in a socially responsible manager”(Hopkins, 2005, p. 220)
while NCSR refers to activities that result in disadvantages or which
harm to the company's stakeholders (Lin-Hi & Muller, 2013). While a
variety of definitions of the term “corporate financial performance”
have been suggested, this paper will use the definition by Orlitzky
(2005) who saw it as a subjective measure of how well a firm uses
assets from its primary mode of business and generate revenues.
Examples of such a measurement is the return on asset (ROA) or
return on equity (ROE).
This study will generate fresh insight into the CSR–CFP relation-
ship from two perspectives. First, by looking at CSR from the perspec-
tive of PCSR and NCSR. It is hoped that this research contributes to
the CSR literature in general by providing a different perspective that
the separate impacts of PCSR and NCSR activities of automotive
which allows for greater confidence in our findings. Often, PCSR pro-
vides firms with many opportunities to gain profits, while NCSR is
mainly concerned with the fact that if firms unintentionally undertake
negative activities, it could cause significant net harm to the company.
Hence, this study contributes to automotive firms' strategic decision-
making procedures by assisting them in forecasting the different
effects of PCSR and NCSR actions on CFP, which in turn help firms
establish more effective CSR strategies. Second, the integrated model
of this study highlights the significance of PCSR, NCSR, and MBAs,
which are strategies that can be partially controlled by firms, thereby
helping managers maximize (minimize) the effect of PCSR (NCSR) on
CPF. By doing so, this study addressed this concern and establishes
boundary conditions in the PCSR/NCSR–CFP relationship.
To fulfill our research objectives, this study used the system
Generalise Moment of Method (GMM) estimator technique to analyze
a panel dataset that consists of 132 companies from the automotive
industry during 2011–2017. In the upcoming sections, the study
reviews the pertinent literature, followed by the overall approach and
data analysis. Results and discussion are then presented and limita-
tions and recommendations for future research conclude the work.
2|REVIEW OF LITERATURE AND
HYPOTHESIS DEVELOPMENT
2.1 |Definition PCSR and NCSR
PCSR is considered as a firm's responsibility to generate profit in a
way that prevents damage to, conserves or develops societal
2LIN ET AL.

assets (Carroll, 1979). In the literature, PCSR was initially formalized
by Bowen (1953), who claimed normatively that “it defines the
responsibilities of businessmen to practise politics, make decisions or
to perform those actions which are preferable with respect to the
values and aims of the society”(p. 6). PCSR, also described as “the
extensive collection of strategies and operational practices developed
by a firm in its efforts to create and handle relationships with its
several stakeholders and the external environment”(Waddock, 2004,
p.10), has been extensively adopted by organizations.
On the other hand, NCSR can be broadly defined as an overall
absence of responsible actions (PCSR) in a firm (Lange & Washburn,
2012). However, conceptually, this is problematic because scholars have
yet to let go of the notion that NCSR and PCSR are opposites, despite
empirical evidence suggesting otherwise (Mattingly & Berman, 2006). In
this study, NCSR refers to “corporate actions that lead to (potential)
harm and/or disadvantages to other actors”(Lin-Hi & Müller, 2013,
p. 9). Examples of NCSR include a firm's supplier using prohibited chemi-
cal substances, using child labor, bribery or the illegal disposal of wastes.
2.2 |PCSR, NCSR, and automotive firm's financial
performance
Based on the Resource Based Theory (RBT), firms can develop their
resources which are rare, non-substitutable, exclusive, and valuable
(Russo & Fouts, 1997) by engaging in PCSR. A socially reputed firm is
also more long-lasting as it cannot be easily imitated by competitors
(Alniacik, Alniacik & Genc, 2011), thereby improving competitive
advantage and increasing stakeholder values (Srivastava, Shervani &
Fahey, 1998). We contend that PCSR activities would improve a firm's
competitive advantage which enhances the automotive firm's financial
performance. This is based on the studies by Porter and Kramer (2006)
and Bhattacharya & Sen (2004) which has found that CSR (in this case,
it would be PCSR) generally increases the market value of the firm.
Customers' desire to purchase products only from high PCSR perfor-
mance organizations is very important when one considers their high
discretionary purchasing power (Clement-Jones, 2005). Social and
environmental activities targeting customers also positively benefit an
organization with regards to its capability to identify trends and market
changes, which in turn allows the company to act fast and establish
itself at the forefront of the changing market (Falck & Heblich, 2007).
Furthermore, PCSR activities deal with the general community and
help in securing better terms for conducting business (Fombrun, 1996).
For instance, Ford and Volvo engaged in PCSR activities when both
companies looked for cleaner energy sources and alternatives to petrol
or while Toyota designed energy-efficient cars. PCSR activities also
help companies build their competencies more proactively by improv-
ing their scanning skills, systems, and processes which prepare them
for market changes, crises, and turbulence (Welford, Chan & Man,
2008). Additionally, better PCSR activities attract, motivate and retain
hardworking employees, who further improve a firm's efficiency.
On the contrary, NCSR is defined as a socially irresponsible activ-
ity that includes accepting a decision which is inferior to other
alternatives, with respect to its effects on all the parties involved (Lin-
Hi & Müller, 2013) and can include a gain by one party at the expense
of another stakeholder (Armstrong, 1997). For instance, Volkswagen
equipped its diesel vehicles with illegal software so that they could
expand into the US market (a market opportunity) but which had stri-
cter emissions standards. Jones, Bowd, & Tench (2009) observed that
NCSR activities were usually reactive instead of proactive in
addressing corporate issues and could involve the breaking of laws as
well. Hence, it has been suggested by Kotchen and Moon (2012) that
NCSR would decrease firm performance since such activities would
damage stakeholder relationships, affect reputation (Muller & Kräussl,
2011), decrease share market returns (Baron, Harjoto & Jo, 2011) and
increase the seriousness of market reactions during crisis (Muller &
Kräussl, 2011) which increases firm risk (Lioui & Sharma, 2012;
Oikonomou, Brooks, & Pavelin, 2012). Engaging in NCSR activities
would result in firms having a bad relationship with their stakeholders.
Since companies participate in resource exchange with stakeholders,
their NCSR activities could lead to a competitive disadvantage. Also, if
they ignored their stakeholders, they could further damage their rela-
tionships and reputations over time. This is related to the stakeholder
theory, which states that companies that fail to effectively manage
the interests of their main stakeholders (shareholders, employees,
suppliers, customers, community) will show a negative performance as
their stakeholders become adversarial or disengaged with these com-
panies (Freeman, 1984). Thus, this study hypothesized that:
Hypothesis H1a PCSR practices are positively related to Automotive
Firm's financial performance.
Hypothesis H1b NCSR practices are negatively related to Automo-
tive Firm's financial performance.
2.3 |Definition of MBAs
MBAs are defined as the knowledge owned by a firm regarding its com-
petitive environment and it could be illustrated as investments in devel-
oping relationships with customers that allowed them to understand
how a firm provides value to them (Fang, Palmatier, & Grewal, 2011).
Such investments involve executing marketing activities and uncovering
consumer needs (Morgan, Vorhies, & Mason, 2009). In the business
practice, MBAs have been operationalized as the frequency pertaining
to information exchange and interactions between the firm and its
consumers (Srivastava et al., 1998). This interaction generally involves
sales or other exchanges, wherein suppliers give information and
insights regarding customer needs. Maintaining regular interactions
could strengthen customer-firm relationships (Jayachandran, Sharma,
Kaufman, & Raman, 2005) and also allow organizations to satisfy and
identify customer requirements (Luo, Wieseke, & Homburg, 2012). Sim-
ilar to the RBT theory, the realization of the value pertaining to such
assets is achieved when these investments are employed to enhance
customer value (Srivastava, Fahey, & Christensen, 2001). Any firm
which possesses the potential to establish close relations with its
LIN ET AL.3

customers to the extent that it would be difficult for competitors to
duplicate could improve the value for a firm (Lim & Lusch, 2011).
2.4 |Interaction effects between PCSR, NCSR, and
MBAs on automotive firms' financial performance
A firm demonstrates MBAs by providing value to its stakeholders
especially its customers by repetitively making an effort to launch
new methods, launch innovative products/services, and actions as a
business unit (Aupperle, Carroll, & Hatfield, 1985). On the other hand,
a firm's PCSR covers “the society's economic, ethical, legal and discre-
tionary expectations towards organisations at a given time period”
(Carroll, 1979; Porter & Kramer, 2006). PCSR also involves a firm's
ethical responsibility (Carroll & Shabana, 2010; Mackey, Mackey, &
Barney, 2007), that signifies “a company's voluntary actions towards
promoting as well as pursuing social goals going beyond their legal
responsibilities”(Carroll & Shabana, 2010, p.95). Therefore, it can be
said that a firm's ethical and economic responsibilities could coexist or
overlap (Schwartz & Carroll, 2003). Actions like PCSR and MBAs could
have a role in impacting the performance of the automotive firm
where a business's competitive position in the market place can be
enhanced via PCSR and MBAs and meeting both responsibilities sig-
nals fulfilling ethical and economic responsibilities.
In our research framework for this study (Figure 1), we postulate
that an organization's information environment is improved with
MBAs, which results in a rise in consumers' awareness regarding the
companies (potential) and possibly encourages them to get more
information regarding the firm, its practices and products, which also
includes its corporate social performance. Consecutively raises the
demand for socially responsible behavior as well as the returns when
involved in such behavior. As per Nelson's (1974) perspective, adver-
tising offers a way of distributing information to consumers that
would help them to distinguish amongst various types of products/
services. To effectively differentiate their products from their coun-
terparts, firms could spend even more on advertisements. However,
firms could also implement CSR as an approach to differentiate their
products and services, since CSR aids a firm increase and maintain its
reputation as being honest and reliable (McWilliams & Siegel, 2000).
Public awareness regarding the organization can be enhanced via
MBA investment, which makes it possible for customers to remain
informed with regards to the CSR activities of a firm.
On the other hand, for firms that are associated with NCSR
or irresponsible social activities, public disclosure would damage
their CFP since such activities would discourage stakeholders to par-
ticipate, invest or even consider long-term relations with the company
(Werbel & Wortman, 2000). This is because NCSR can trigger stake-
holder dissatisfaction that tarnish a corporate reputation (Klein &
Dawar, 2004) and decrease CFP. This is also particularly true since
negative information results in greater salience pertaining to stake-
holders' perceptions versus positive information (Baumeister, Brat-
slavsky, Finkenauer, & Vohs, 2001). With regards to the above
rationale, we hypothesize that:
Hypothesis H2a The impact of PCSR activities on automotive firms'
financial performance is positively moderated by the market-
based asset. The relationship will be strengthened when
market-based- asset investment is high.
Hypothesis H2b The impact of NCSR activities on automotive firms'
financial performance is negatively moderated by the market-
based asset. The relationship will be strengthened when
market-based- asset investment is high.
3|EMPIRICAL MODEL, METHODOLOGY,
AND THE DATA
3.1 |The empirical model
On the methodological front, this study utilized two steps to evaluate
the moderating impact cast by MBAs on the relationship that exists
between automotive firms' financial performance and CSR. In the first
step, we measure the effect cast by PCSR and NCSR scores on CFP
(by employing the dynamic panel analysis based on system GMM that
allows us to utilize our dataset's dynamic dimension). In the second
step, the impact of MBAs on the CSR–CFP link is evaluated.
Our empirical methodology helps this study to deal with three
problems. First, by fully utilizing our data's dynamic structure, this
study assumes that the previous financial performance can influence
the current financial performance (Lin, Ho, & Sambasivan, 2019;
Surroca, Tribó, & Waddock, 2010) as well as the current CSR. Second,
this study has considered the fact that there is a correlation between
the current financial performance with both unobservable and observ-
able errors (heterogeneity), that has an impact on PCSR and NCSR
too. To be more specific, firms that depended on products and pro-
cesses with high quality were more likely to possess greater CSR com-
mitments. Henceforth, this study was successful in partly correcting
the endogeneity issues such that the contribution made by CSR to
CFP was not deemed exaggerated. Lastly, this study also considered
that causal relationships could run in both directions, that is, from
financial performance to CSR as well as from CSR to financial
performance.
Positve CSR
Corporate
Financial
Performance
Assets
Market-Based
Negave CSR
FIGURE 1 Theoretical framework
4LIN ET AL.

More accurately, this study also determines the association
amongst CFP, CFP
it-1
, the CSR variable labeled CSR
it
, labeled as CFP
it
(ROE, ROA, or Tobin's Q), via its lagged value, as well as a set of firm-
level control variables (ln total asset, ln revenue, free cash flow, lever-
age, R&D ratio, and yearly dummies), labeled CONTROL
it
, that could
be regarded as predetermined instead of endogenous covariates, as
per Equation (1):
Corporate Financial Performance = ðCorporate Social Responsibility:
ð1Þ
We can rewrite and use the following regression equation:
CFPit =α+βCFPit−1+γPCSRit +υNCSRit +δCONTROLit +μi+ϵit:ð2Þ
A possible solution pertaining to the issue of simultaneity is to
determine the impact of PCSR and NCSR on the CFP by employing a
system of equations that consider both types of CSR. Hitherto, such
an approach will likely need to recognize exogenous instruments
strictly, while traditionally, it is tough to justify and identify as a
strictly exogenous instrument. Employing a fixed-effects model might
also mitigate the bias that could result from unobservable heterogene-
ity; however, such a model considers that the present observations
pertaining to the independent variables rely on previous values of the
dependent variable (Nickell, 1981, Arellano & Bond, 1991). Here, as
the current levels of CSR scores could be associated with the previous
financial performance, we needed to depend on an econometric tech-
nique that considered the dynamic endogeneity process. Thus, we
employed the dynamic GMM estimator, known as system GMM
(Arellano & Bover, 1995; Blundell & Bond, 1998).
In the form of first-differenced, the dynamic model of Equation (2)
was presented as:
ΔCFPit =α+βΔCFPit−1+γΔPCSRit +υΔNCSRit +δΔ CONTROLit +Δϵit :
ð3Þ
We employed the following model to evaluate the impact of dif-
ferent firm's MBA based on the existing relationship between CFP
and CSR. In the automotive sector, to verify the moderating role
played by the MBA, we set some models and also evaluated the exis-
ting relationship between the PCSR and CFP and NCSR. The model
that evaluated the impact of the interactions amongst the PCSR,
NCSR, and MBA on CFP is shown in Equation (4):
CFPit = α+βCFPit−1+γ1PCSRit +γ2PCSRit *MBAit
+γ3NCSRit +γ4NCSRit*MBAit +δJCONTROLit +μi+εit:
ð4Þ
The above-mentioned variables included all probable interac-
tionsbetweenPCSR,MBA,andNCSR,whiletheproduct'saffilia-
tions of variables with PCSR and NCSR were considered as the
regressors. Such a method has been adapted to empirical models
that are described by a dynamic relationship between the indepen-
dent and dependent variables and via an endogeneity problem (see
among others Wintoki, Linck, & Netter, 2012; Flannery & Hankins,
2013). Unlike estimation for traditional fixed-effects, the dynamic
panel system GMM estimator allows impacting the current CSR
scores due to previous realizations of previous financial perfor-
mance. Another important characteristic pertaining to the system
GMM methodology is that it depends on a set of internal instru-
ments. Moreover, previous values of financial performance and CSR
scores could be employed as internal instruments to perform present
realizations of CSR. This technique, in part, removes the requirement
for external instruments. At this juncture, we also considered the
lagged values pertaining to financial performance in the model; his-
torical financial performance as well as other firm control variables
(i.e., ln total asset, ln revenue, R&D intensity, leverage, and free cash
flow) that lagged for two periods were employed. All these variables
acted as instruments pertaining to the endogenous CSR variables.
Therefore, consistent estimates could be obtained via the system
GMM estimator by controlling the fixed effects, unobserved hetero-
geneity, endogeneity, and simultaneity.
3.2 |Data and variables
Our analysis included a panel of CFP and CSR data pertaining to
132 global automotive firms from the year 2011 to 2017. Because we
needed a balanced panel to evade the sample selection problem, the total
number of companies sampled changed on a yearly basis; while the esti-
mation strategy employed the maximum number of available observa-
tions. Furthermore, we needed to observe firms for a minimum of seven
consecutive years in order to utilize the dynamic dimension pertaining to
our dataset (e.g., for the introduction of the dependent variable's lagged
value). Thus, we did not consider firms that failed to provide complete
information. Our sample of the final balanced panel included 924 observa-
tions (132 firms per year) during the period 2011–2017.
3.3 |Positive and negative corporate social
responsibility
In this study, firms' PCSR rating was derived from CSRHub (https://
www.csrhub.com), a CSR rating tool that specializes in classifying and
reporting CSR. For the NCSR rating, we used the Thomson Reuters
Environment, Social, and Governance (ESG) database. This database
calculates the Controversies Score based on 23 ESG controversial
topics and is based on a 0–100 rating scale. The higher the score, the
more negative the company is rated.
3.4 |Corporate financial performance
Due to the wide applicability and suggestions from previous studies
(Kim et al., 2018; Lin, Ho, & Sambasivan, 2019; McGuire, Sundgren, &
Schneeweis, 1988; Waddock & Graves, 1997; Zhu & Zhang, 2015) we
used one market-value measure (Tobin's Q) and two accounting-based
LIN ET AL.5

CFP measures (ROE and ROA) to measure firm financial performance
in this study.
1. ROA (ROA
it
) is defined as a profitability measure that shows the
amount of net income plus (before tax) interest payments, but
prior to preferred dividends, which is per unit of the average cur-
rent as well as last year's assets. The measure pertaining to ROA
appears to be suitable as it denotes toward the firm's profitability
with regards to the total set of assets or resources, which are
under its control. The strategy includes employing resources that
allow the company to enjoy a competitive advantage (Barney,
1991), and ROA gives the most direct information regarding the
results of the selected allocation pertaining to that resource. This
study calculates ROA as follows:
Return on Assets ROAðÞ
=EBITA Earning Before Tax, Interest and Amortisation
ðÞ
Total Assets
2. Another profitability measure is the ROE (ROE
it
) which shows the
amount of net income plus (before tax) interest payments but prior
to paying preferred dividends per unit of average current as well
as shareholder equity of the previous year. This provides a mea-
sure of how well the company is performing for its investors. This
study measures ROE as follows:
Return on Equity ROE
ðÞ
=Net Income Before Tax
Total Equity
3. Tobin's Q (Tobin's Q
it
) can be defined as the firm' market value,
which is divided via the replacement value pertaining to its assets.
In economics, finance, and strategy, Tobin's Q has been broadly
employed as a performance measure (Morck, Shleifer, & Vishny,
1988, Waddock & Graves, 1997). It captures the value produced
by the firm along with its asset base. Since the value is in terms of
the present value pertaining to future expected cash flows,
discounted at the rate of return as needed, and has already been
adjusted for risk, we compute Tobin's Q as:
Tobin0sQ=
book value of assets−book value of equity−deferred taxes + market value ofequityð Þ
book value of assets:
3.5 |Market-based asset
MBA based on stakeholder awareness particularly the customer
aspect, which is proxied via Sales, Administration, and General (SA &
G) intensity that improves the effect of CSR on the automotive firms'
financial performance. Thus, SA & G intensity can be defined as the
actual presentation of the message via a medium and fit as a proxy to
represent a MBA. This study estimates MBA as:
Market−Based Asset = Total Sales, Administration,and General Expenditure
Total Revenue
3.6 |Control variables
Four control variables were considered in this study: firm size, capital
structure, R&D intensity, and free cash flow. Firm size can affect a
firm's profitability, decision-making competencies as well as the firm's
structure (Simerly & Li, 2000). We employed total revenue and total
assets as proxies to firm size (Lee, Seo, & Sharma, 2013). Second, capi-
tal structure was controlled and measured by the ratio of debt to asset
(Park and Lee, 2009). Lastly, free cash flow was defined as the firm's
net operating profit less taxes, operating investment required to
sustain the firm, and any additional working capital requirements
(Richard, Devinney, Yip, & Johnson, 2009).
TABLE 1 Descriptive summary
Variable Symbol Obs Mean SD Min Max
Positive CSR PCSR 924 52.4718 6.8397 30.9968 71.9949
Negative CSR NCSR 924 48.4708 20.9659 32.0000 99.0000
Return on assets ROA 924 0.1888 0.7218 −0.3296 10.0680
Return on equity ROE 924 0.7589 3.4053 −11.3143 43.3758
Tobin's Q Tobin's Q 924 0.7516 0.7561 −7.8209 3.3730
Market-based asset Market-based asset 924 0.1212 0.0824 0.0004 0.5446
Leverage Leverage 924 1.8674 6.9251 −45.7000 121.5000
R&D intensity R&D intensity 924 0.0326 0.0569 0.0000 1.0245
Firm size Ln Total assets 924 3.7395 0.7708 2.1139 6.0079
Total revenue Ln revenue 924 3.7587 0.7384 2.0017 5.9434
Free cash flow Free cash flow 924 0.0550 0.5232 −1.5309 8.4951
Note: All values are based on the original values.
6LIN ET AL.

4|RESULTS
4.1 |Descriptive statistic and correlation matrix
The descriptive statistics of the data related to the automotive industry
is summarized in Table 1. The mean NCSR and PCSR of the automotive
companies' CSR scores are found to be 48.4708 and 52.4718%, respec-
tively, which implies that in the majority of the cases, NCSR and PCSR
scores remain within the average level of the sample. The standard
deviation 6.8379 and 20.9659 signify that the PCSR scores of the data
are more clustered around the mean, while the NCSR scores are more
widely spread. The mean value of Tobin's Q, ROA, and ROE is found to
be 0.7516, 0.1888, and 0.7589; their standard deviation is found to be
0.7561, 0.7518, and 3.4053, respectively. The MBA proxied by SG&A
intensity that takes into account the sales, administration, and general
expenses of a firm are found to have a mean value of 0.1212 while the
standard deviation is 0.0824. Moreover, the average R&D intensity is
found to be 0.0326, while the standard deviation is at 0.0569.
The correlation matrix of Pearson is also applied to quantify the
direction and strength of the linear correlation between independent
and dependent variables. It provides confirmation that PCSR is signifi-
cantly negatively/positively associated with certain other parameters
like ROE at 0.0774 (5% significance level), ROA at 0.1068 (1% signifi-
cance level), Tobin' Q at −0.0178 (insignificant), and having firm attri-
butes like leverage at 0.0793 (5% significance level) and firm size at
0.3481 (1% significance level). Nonetheless, NCSR is correlated nega-
tively/positively with factors like ROE at −0.0507 (insignificant), ROA
at −0.0219 (insignificant), Tobin's Q at −0.1115 (1% significance level),
and having firm attributes like leverage at 0.0162 (10% significance
level) and firm size at −0.4060 (1% significance level). All parameters in
this sample contain a VIF value ranging from 1.01 to 1.55 and the toler-
ances average is 0.78 suggesting that the Pearson coefficients are com-
paratively low among all the variables, less than 0.8, which implies that
the multicollinearity problem is non-existent in Table 2.
4.2 |Impact of PCSR and NCSR on CFP
We tested Hypothesis H1a, H1b, H2a, and H2b by demonstrating the
effects of NCSR and PCSR on CFP. Both sets of hypotheses were
confirmed. We include our results of the three models and the find-
ings for the control variables in Table 3; leverage is important and pos-
itive while intensity of research and development and firm size
(overall assets) is negative and significant suggesting that firm size and
R&D on average do not play any role for more profitability. Slack
resources (free flow of cash) have no effect on ROE, ROA, or
Tobin's Q, whereas total revenue has a positive effect on ROE, ROA,
and Tobin's Q.
As predicted in Hypothesis H1a, there was a positive relationship
between PCSR and CFP. Our observations indicated that PCSR was
positively associated with ROA (β= 0.00876, p-value <.01), ROE
(β= 0.0204, p-value <.01), and Tobin's Q (β= 0.00179, p-value <.10).
Thus, Hypothesis H1a is supported. As indicated by the PCSR
TABLE 2 Correlation matrix
ROA ROE Tobin's' Q Lever age Free cash flow Total revenue Total asset R&D intensity Market-based assets PCSR NCSR
ROA 1
ROE 0.8780 (0.0000) 1
Tobin's' Q −0.0768 (0.0195) 0.0765 (0.0201) 1
Leverage 0.0026 (0.9380) 0.4010 (0.0000) 0.1510 (0.0000) 1
Free cash
flow
0.0078 (0.8126) 0.0001 (0.9981) −0.0105 (0.7501) −0.0146 (0.6583) 1
Total
Rrevenue
0.0996 (0.0024) 0.0920 (0.0051) −0.0960 (0.0035) 0.0199 (0.5448) 0.0838 (0.0108) 1
Total asset 0.0690 (0.0360) 0.0035 (0.9155) 0.0035 (0.9155) 0.0144 (0.6628) 0.0657 (0.0458) 0.9528 (0.0000) 1
R&D
intensity
−0.0534 (0.1045) −0.0441 (0.1802) −0.0441 (0.1802) 0.0579 (0.0787) −0.0894 (0.0066) −0.1803 (0.0000) −0.1393 (0.0000) 1
Market-
based
assets
0.1046 (0.0015) 0.0648 (0.0489) 0.0440 (0.1815) −0.0045 (0.8911) −0.0423 (0.1991) −0.3179 (0.0000) −0.2328 (0.0000) 0.4643 (0.0000) 1
PCSR 0.1068 (0.0012) 0.0774 (0.0186) −0.0178 (0.5885) −0.0107 (0.7465) 0.0046 (0.8892) 0.3367 (0.0000) 0.3481 (0.0000) −0.0100 (0.7617) 0.0183 (0.5777) 1
NCSR −0.0219 (0.5060) −0.0507 (0.1233) −0.1115 (0.0007) 0.0162 (0.0623) −0.0283 (0.3901) 0.4043 (0.0000) 0.4046 (0.0000) 0.1020 (0.0019) −0.0293 (0.3731) 0.1657 (0.0000) 1
Note: All values are based on the original values.
LIN ET AL.7

coefficient in Model 1, an increase by 1 unit of PCSR activity produces
0.876% ROA growth rate, 2.04% ROE, and 0.18% Tobin's Q, provided
that other parameters remain constant. A final clarification is that
organizations usually keep a balance while conducting a suitable
TABLE 3 The impact of PCSR and NCSR on CFP
Variables
Model 1 Model 2 Model 3
ROA ROE Tobin's Q
ROA
t−1
0.829***
(0.00287)
ROE
t−1
0.275***
(0.00748)
Tobin's Q
t−1
0.993***
(0.0129)
PCSR 0.000876*** 0.0204*** 0.00179*
(0.000263) (0.00220) (0.00100)
PCSR −0.000110** −0.00146*** −0.000507***
(0.000048) (0.000445) (0.000193)
Leverage 0.000572*** 0.205*** 0.00164*
(0.000214) (0.000272) (0.00106)
Free cash flow 0.00785 −0.162 −0.00675
(0.00688) (0.134) (0.0235)
Ln revenue 0.195*** 1.589*** 0.433***
(0.0184) (0.0932) (0.0472)
Ln Total assets −0.180*** −1.153*** −0.415***
(0.0160) (0.0955) (0.0402)
R&D intensity −0.282*** −9.111*** −0.192*
(0.0427) (0.589) (0.144)
Constant −0.0866*** −3.714*** 0.135
(0.0256) (0.217) (0.0945)
Year Yes Yes Yes
Observations 765 765 765
Number of firms 131 131 131
Number of
instruments
64 64 64
AR (1) −3.37 (0.001) −1.77
(0.077)
−3.30 (0.001)
AR (2) −0.02.00
(0.981)
−1.84
(0.066)
−0.17 (0.867)
Hansen test 69.33 (0.078) 63.38
(0.179)
61.78 (0.218)
Different in Hansen
test
7.12 (0.310) 7.98 (0.240) 4.31 (0.635)
Note: The standard errors are reported in parentheses, except for Hansen
test, AR (1), AR (2), and Difference-in-Hansen which are p-values. ***,**,
and *indicate significance at 1, 5, and 10% levels, respectively. Time
dummies are included in the model specification, but the results are not
reported to save space. System GMM model is estimated by using the
Blundell and Bond (1998) dynamic panel system GMM estimations and
Roodman (2009)-Stata xtabond2 command.
TABLE 4 The moderating effect of market-based asset on the
impact of PCSR and NCSR on CFP
Variables (1) ROA (2) ROE (3) Tobin's Q
ROA
t−1
0.881***
(0.0208)
ROE
t−1
0.261***
(0.00812)
Tobin's Q
t−1
0.961***
(0.00709)
PCSR −0.00109 −0.00165 0.00470*
(0.000785) (0.00456) (0.00250)
NCSR 0.000483*** 0.00498*** 0.000128
(0.000126) (0.00176) (0.000484)
Market-based
assets*PCSR
0.00950* 0.154*** 0.0276**
(0.00542) (0.0309) (0.0137)
Market-based
assets*NCSR
−0.00331*** −0.0554*** −0.00192*
(0.000925) (0.0133) (0.00324)
Market-based
assets
−0.388 5.577*** 1.720**
(0.293) (2.096) (0.837)
Leverage −0.000517** 0.205*** 0.00214**
(0.000218) (0.000278) (0.00108)
Free cash flow 0.00751 −0.132 −0.0240**
(0.00808) (0.120) (0.0110)
Ln revenue 0.194*** 1.457*** −0.384***
(0.0195) (0.0962) (0.0557)
Ln Total assets −0.181*** −1.018*** 0.369***
(0.0162) (0.103) (0.0457)
R&D intensity −0.229*** −8.264*** −0.165
(0.0517) (0.611) (0.129)
Constant 0.0115 −2.827*** −0.201
(0.0486) (0.367) (0.170)
Year Yes Yes Yes
Observations 765 765 765
Number of firms 131 131 131
Number of
instruments
63 63 63
AR (1) −3.31
(0.001)
−1.86
(0.063)
−3.26
(0.001)
AR (2) 0.29 (0.243) −1.55
(0.122)
−0.25
(0.801)
Hansen test 67.36
(0.082)
53.64
(0.374)
67.82 (0.098)
Different in Hansen
test
9.69 (0.288) 14.60
(0.097)
14.393
(0.172)
Note: The standard errors are reported in parentheses, except for Hansen
test, AR (1), AR (2), and Difference-in-Hansen which are p-values. ***,**,
and *indicate significance at 1, 5, and 10% levels, respectively. Time
dummies are included in the model specification, but the results are not
reported to save space. System GMM model is estimated by using the
Blundell and Bond (1998) dynamic panel system GMM estimations and
Roodman (2009)-Stata xtabond2 command.
8LIN ET AL.

amount of PCSR activities that provide the best monetary returns
in their condition. This discovery is supported by Kim et al. (2018).
Conversely, NCSR is negative statistically significant with ROA
(β=−0.00011, p-value = .050), ROE (β=−0.00146, p-value < .001),
and Tobin's Q (β=−0.000507, p-value < .01), indicating that NCSR
does significantly affect CFP, but in a negative manner. Hence,
Hypothesis H1b is supported and in line with Kim et al. (2018).
4.3 |Moderating effect of MBAs on the impact of
PCSR and NCSR on CFP
Table 4 shows the interaction effect of MBAs*PCSR and MBAs*NCSR
on CFP. The test Hypothesis H2a and H2b are based on Model 1, 2,
and 3, since they are complete and offer an exact picture of the effect
of each parameter. Hypothesis H2a and H2b determine that MBAs
positively regulate the correlation between PCSR and automotive
firm's financial performance. The positive correlation between PCSR
and CFP becomes more effective with more MBAs. As shown in
Table 4, the coefficient for the interaction between MBA and PCSR
is significant and positive for ROE (β= 0.154, p-value < .01), ROA
(β= 0.0095, p-value < .10), and Tobin's Q (β= 0.0276, p-value < .05).
This outcome suggests that when an organization performs more
MBAs, the impact of PCSR and CFP gets enhanced, which is as per
Hypothesis H2a. Hypothesis H2a assumes a more effective and posi-
tive correlation between the PCSR and the organization's financial
performance when more MBAs exist. In Table 4, the coefficient for
the interaction between NCSR and MBAs is negative and significant
for ROA (β= 0.00331, p-value < .01), ROE (β= 0.0554, p-value < .01),
and Tobin's Q (β= 0.00192, p-value < .10). This negative correlation
indicates that when the level of the MBAs of the organization is
PCSR
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
ROA
low med high
ROA-MBA-PCSR
MB
A
high
med
low
FIGURE 2 Effects of PCSR on ROA: Contingent on market-based
assets
-3
-2.5
-2
-1.5
-1
-0.5
0
0.5
low med high
ROE
PCSR
ROE-MBA-PCSR
MBA
high
med
low
FIGURE 3 Effects of PCSR on ROE: Contingent on market-based
assets
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
low med high
TOBINQ
PCSR
TOBIN's Q-MBA-PCSR
MBA
high
med
low
FIGURE 4 Effects of PCSR on Tobin's Q: Contingent on market-
based assets
-1
-0.9
-0.8
-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0
low med high
ROA
NCSR
ROA-MBA-NCSR
MBA
high
med
low
FIGURE 5 Effects of NCSR on ROA: Contingent on market-based
assets
-2.5
-2
-1.5
-1
-0.5
0
low med high
ROE
NCSR
ROE-MBA-NCSR
MBA
high
med
low
FIGURE 6 Effects of NCSR on ROE: Contingent on market-based
assets
LIN ET AL.9

high, the effect of NCSR on CFP is inverse; as determined by
Hypothesis H2b.
Figures 2–4 illustrate a positive relationship between PCSR and
CFP in general, and this positive correlation is reinforced when the
organization actively performs MBAs. Our findings suggest that the
MBAs of the firm complement PCSR by boosting the impact of PCSR
on CFP. Also, this study discovered that NCSR damages a firm's CFP
when its level of MBAs is high as shown in Figures 5–7, though
NCSR's negative effect is diminished when the extent of MBAs gets
lower. This result with respect to the correlation between NCSR and
CFP may suggest that NCSR generally damaging, it plays an important
in a particular condition for the firm.
5|DISCUSSION AND CONCLUSION
5.1 |Theoretical implications
The results of this study advance the literature of CSR in many ways.
Firstly, our study shed light the CSR literature by decomposing CSR
into NCSR and PCSR and analytically investigating the influences of
both variables on CFP concurrently. Many CSR researches have
stressed that NCSR and PCSR are distinct notions and should be con-
sidered differently to obtain a clearer insight of the association
between CSR and CFP (Kotchen & Moon, 2012; Kim et al., 2018).
Also, Mishra and Modi (2013) have called for the simultaneous exami-
nation of NCSR and PCSR so that their distinct effects can be thor-
oughly examined. As far as we know, this research is the first
investigation to empirically express the different impacts of NCSR and
PCSR on the firm's CFP. We found that PCSR's impacts on the perfor-
mance of the firm is positively affected by innovation and competitive
activities, while NCSR's impact is negatively moderated by the same
variables. These findings also indicate that both CSR activities should
be disconnected when investigating the effects of PCSR, NCSR
on CFP.
Second, our study highlights the importance of examining both
the negative and positive facets of CSR in a general framework as well
as understanding their driving aspects. To further establish our asser-
tion, a partial image could occur when only concentrating on favorable
CSR or only on unfavorable CSR in automotive industry. Additionally,
from the conceptual claim and the experimental results in this
research, it is emphasized that examining CSR impact with regards a
driving force such as MBAs, is crucial in explaining the procedure
through which CSR impacts the organizational performance. As a
commercial unit functioning in the community, an organization is
anticipated to satisfy both ethical and financial obligations (Carroll,
1979; Carroll & Shabana, 2010). Since CSR and MBAs are organiza-
tional activities that chiefly represent ethical and financial obligations,
respectively, the present study asserts that an organization's MBAs
should be a critical consideration in examining CSR' performance
implications. Our findings indicate that MBAs can be significant
boundary condition of CSR–CFP link besides many contingencies
observed by earlier studies (Clarkson, 1995; Van de Ven & Drazin,
1985; Wood, 1991). With this regard, this research advances the liter-
ature of CSR by recognizing a new possibility that explains the intri-
cate association between CSR and CFP.
Lastly, the previous study contends that the link between CSR
and CFP is a dynamic form, with past CFP influencing the current CFP
and also being influenced by it (Mishra & Modi, 2013). Still, these
studies generally do not explain this possible endogeneity concern
(Lin, Ho, & Sambasivan, 2019). For example, the only research of CSR
and CFP by McGuire et al. (1988) uses chiefly cross-sectional data
and Kim et al. (2018) analyze the association between PCSR and
NCSR and CFP by employing OLS which ignores endogeneity con-
cerns. On the contrary, we used the system GMM process with longi-
tudinal information for the duration 2011–2017 to explain the
intrinsic dynamism present in the CSR- CFP link. This enables us to
produce a robust result.
5.2 |Managerial implications
This study has some key managerial implications. First, our findings
indicate that executives of carmakers should be very particular regard-
ing what benefits they require from their socially favorable or unfa-
vorable actions, and what actions of the performance of the
carmakers to utilize to assess NCSR or PCSR. For instance, our find-
ings indicate that the PCSR increase will improve CFP but NCSR will
reduce CFP in a pronounced manner. Therefore, it would be wise for
the managers in automotive sector to conduct PCSR since our find-
ings indicate that the carmakers can enhance financial success, effi-
ciency and market worth. These are very distinct and significant
monetary benefits. Even further, CSR investment may deal with any
potential adverse impact from NCSR. Managers of carmakers may
specifically get it associated with the angel-halo effect notion and find
comfort in knowing that funding in PCSR seems to recompense in
several ways and goes on paying off even in the presence of NCSR.
Our findings indicate that carmakers can “get away”with a little
NCSR in a couple of ways. While returns (specifically ROE, ROA, and
Tobin's Q) may be influenced by NCSR, the firm may fund more in less
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
low
0.2
med high
TOBINQ
NCSR
MBA
TOBIN's Q-MBA-NCSR
high
med
low
FIGURE 7 Effects of NCSR on Tobin's Q: Contingent on market-
based assets
10 LIN ET AL.

MBAs to minimize NCSR effect. Also, the NCSR effect can be done
away with by performing less in MBAs as these two activities cannot
exist simultaneously.
The outcome of the interaction among the CSR obligations and
the MBA is consistent with the academic study indicating that without
knowledge, shareholders are not able to accept CSR activities
(McWilliams & Siegel, 2000; Sen & Bhattacharya, 2001). It is consis-
tent too with the opinion that CSR activities have to be associated
with the earlier reputation of the organization to create merit, as men-
tioned by Schuler and Cording (2006). If we presume that customers
are one of the major channels via which CSR impacts the value of the
firm, then our findings provide several managerial inferences: When a
firm in the automotive industry gets involved in CSR, though it does
not function in a rigorous advertising environment, the manager
should review its CSR actions, or seek for opportunities to improve
CSR benefits. This can be done for instance by publicising the firm's
CSR efforts. This proposition is only applicable, of course, in case the
organization is interested in maximizing the wealth of the share-
holders instead of following other goals (for instance, CSR involve-
ment could be considered a goal in itself). Nonetheless, it is totally
likely that firms get involved in CSR efforts to maximize shareholder
wealth though they find it challenging to evaluate whether these
efforts create value or not.
In the automotive industry, the significance of CSR awareness
turns out to be even more salient, since there is no standardization
among the competitors. Each of the car-maker encounters is a result
of co-production via the consumer and producer concurrently, while
due to its intangible nature, there is less previous evidence with
regards to the various attributes pertaining to the service versus prod-
ucts. For the products or services, there is a higher uncertainty versus
a tangible product (Berry, 2000). One method through which a car-
maker can address this issue of abstraction is by establishing its own
brand identity and positioning (Mittal & Baker, 2002). In a bid to cre-
ate brand equity and image, customers who know about CSR prac-
tices could resolve some uncertainty with regards to spillover, which
could also come from the firm's image to firm's services/products.
Prominently, this implies that firms involved with the automotive line
should publicize regarding their socially responsible activities, and at
the same time minimizing negative potentials pertaining to their
socially irresponsible responsible.
6|LIMITATION AND FUTURE RESEARCH
There are some limitations that give rise to the potential for future
research. Firstly, future studies may analyze how NCSR is related to
the organization and society in a more exhaustive way (Muller &
Kräussl, 2011). We discover that NCSR is not harmful at all times to
the organization since it can be favorable in a specific situation. Nev-
ertheless, if the firm continues to perform NCSR actions, its costs may
surpass the advantages by harming the firm's prestige and associa-
tions with various stakeholders. Thus, more research on NCSR and
ways in which it can benefit the firm should be carried out. On a
related note, PCSR–NCSR dynamics can be more thoroughly exam-
ined in future studies. Even though the findings of our study indicate
that NCSR and PCSR may operate differently, the organization can
get involved in PCSR to balance NCSR (Kotchen & Moon, 2012). Then
again, a firm having high PCSR activities could be possibly involved in
more NCSR activities if it satisfactorily performs its PCSR. Therefore,
investigating the influence of NCSR and PCSR on each other, how
PCSR can balance NCSR, and how high-PCSR firms can engage in
NCSR would be fascinating research that will add to the CSR litera-
ture. Even though the automotive domain is a suitable context for
testing our concepts, the findings derived from multi-domain research
can be more standardizable. In the same way, multi-domain research
may offer domain-specific inferences on the link between CSR and
CFP and competitive activities' moderating influence on this connec-
tion. Thirdly, even though this study provides certain important infer-
ences, it also suffers limitations regarding data accessibility that
indicate potential areas for future studies. Due to database limitations,
the samples were limited to organizations in the developed nations
such as the US, Japan, and European countries. Scholars have rec-
ommended that various geographic regions provide different sets of
organizational contexts, which may affect the CSR–CFP relationship
(Cormier & Magnan, 2007). Future studies may examine organizations
from other nations and geographical areas to standardize the implica-
tions of the research.
ORCID
Woon Leong Lin https://orcid.org/0000-0002-6568-412X
REFERENCES
Albertini, E. (2013). Does environmental management improve financial
performance? A meta-analytical review. Organization & Environment,
26(4), 431–457.
Alniacik, U., Alniacik, E., & Genc, N. (2011). How corporate social responsi-
bility information influences stakeholders' intentions. Corporate Social
Responsibility and Environmental Management,18(4), 234–245.
Aras, G., Aybars, A., & Kutlu, O. (2010). Managing corporate performance.
International Journal of Productivity and Performance Management,59
(3), 229–254.
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data:
Monte Carlo evidence and an application to employment equations.
The Review of Economic Studies,58(2), 277–297.
Arellano, M., & Bover, O. (1995). Another look at the instrumental variable
estimation of error-components models. Journal of Econometrics,68(1),
29–51.
Armstrong, S. J. (1997). Social irresponsibility in management. Journal of
Business Research,5, 185–213.
Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. (1985). An empirical
examination of the relationship between corporate social
responsibility and profitability. Academy of Management Journal,28(2),
446–463.
Bai, X., & Chang, J. (2015). Corporate social responsibility and firm perfor-
mance: The mediating role of marketing competence and the moderat-
ing role of market environment. Asia Pacific Journal of Management,32
(2), 505–530.
Barney, J. (1991). Firm resources and sustained competitive advantage.
Journal of Management,17(1), 99–120.
Baron, D. P., Harjoto, M. A., & Jo, H. (2011). The economics and politics of
corporate social performance. Business and Politics,13(2), 1–46.
LIN ET AL.11

Baumeister, R. F., Bratslavsky, E., Finkenauer, C., & Vohs, K. D. (2001). Bad
is stronger than good. Review of General Psychology,5(4), 323–370.
Berry, L. L. (2000). Cultivating service brand equity. Journal of the Academy
of Marketing Science,28(1), 128–137.
Bhattacharya, C. B., & Sen, S. (2004). Doing better at doing good: When,
why, and how consumers respond to corporate social initiatives. Cali-
fornia Management Review,47(1), 9–24.
Bird, R., Hall, A. D., Momentè, F., & Reggiani, F. (2007). What corporate
social responsibility activities are valued by the market? Journal of
Business Ethics,76(2), 189–206.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions
in dynamic panel data models. Journal of Econometrics,87(1), 115–143.
Boulouta, I., & Pitelis, C. N. (2014). Who needs CSR? The impact of corpo-
rate social responsibility on national competitiveness. Journal of Busi-
ness Ethics,119(3), 349–364.
Bowen, H., (1953). Social Responsibilities of the Businessman. New York:
Harper & Row.
Brammer, S. J., & Pavelin, S. (2006). Corporate reputation and social per-
formance: The importance of fit. Journal of Management Studies,43(3),
435–455.
Carroll, A. B. (1979). A three-dimensional conceptual model of corporate
performance. Academy of Management Review,4(4), 497–505.
Carroll, A. B., & Shabana, K. M. (2010). The business case for corporate
social responsibility: A review of concepts, research and practice. Inter-
national Journal of Management Reviews,12(1), 85–105.
Clarkson, M. E. (1995). A stakeholder framework for analyzing and evaluat-
ing corporate social performance. Academy of Management Review,20
(1), 92–117.
Clement-Jones, T. (2005). Bottom line issue or public relations exercise.
Investing in Corporate Social Responsibility: A Guide to Best Practice,
Business Planning and the UK's Leading Companies (Kogan Page,
London), 5–13.
Cormier, D., & Magnan, M. (2007). The revisited contribution of environ-
mental reporting to investors' valuation of a firm's earnings: An inter-
national perspective. Ecological Economics,62(3–4), 613–626.
Cornett, M. M., Erhemjamts, O., & Tehranian, H. (2016). Greed or good
deeds: An examination of the relation between corporate social
responsibility and the financial performance of US commercial
banks around the financial crisis. Journal of Banking & Finance,70,
137–159.
Den Hond, F., Rehbein, K. A., de Bakker, F. G., & Lankveld, H. K. V. (2014).
Playing on two chessboards: Reputation effects between corporate
social responsibility (CSR) and corporate political activity (CPA). Journal
of Management Studies,51(5), 790–813.
Dixon-Fowler, H. R., Slater, D. J., Johnson, J. L., Ellstrand, A. E., &
Romi, A. M. (2013). Beyond “does it pay to be green?”Ameta-analysis
of moderators of the CEP–CFP relationship. Journal of Business Ethics,
112(2), 353–366.
Falck, O., & Heblich, S. (2007). Corporate social responsibility: Doing well
by doing good. Business Horizons,50(3), 247–254.
Fang, E., Palmatier, R. W., & Grewal, R. (2011). Effects of customer and
innovation asset configuration strategies on firm performance. Journal
of Marketing Research,48(3), 587–602.
Flannery, M. J., & Hankins, K. W. (2013). Estimating dynamic panel models
in corporate finance. Journal of Corporate Finance,19,1–19.
Fombrun, C. J. (1996). Reputation: Realising value from the corporate image.
Boston, Massachusetts: Harvard Business School Press.
Freeman, R. (1984). Strategic management. New York: A Stakeholder
Approach.
Good Jobs First. (2019). Violation Tracker Industry Summary Page.
Washington, USA: Good Jobs First. Retrieve from https://
violationtracker.goodjobsfirst.org/industry/motor%20vehicles.
Griffin, J. J., & Mahon, J. F. (1997). The corporate social performance and
corporate financial performance debate: Twenty-five years of incom-
parable research. Business & Society,36(1), 5–31.
Heinkel, R., Kraus, A., & Zechner, J. (2001). The effect of green investment
on corporate behavior. Journal of Financial and Quantitative Analysis,
36(4), 431–449.
Hopkins, M. (2005). Measurement of corporate social responsibility. Inter-
national Journal of Management and Decision Making,6(3-4), 213–231.
Jayachandran, S., Sharma, S., Kaufman, P., & Raman, P. (2005). The role of
relational information processes and technology use in customer rela-
tionship management. Journal of Marketing,69(4), 177–192.
Jensen, M. C., & Meckling, W. H. (1976). Agency Costs and the Theory of
the Firm. Journal of Financial Economics,3(4), 305–360.
Jo, H., Kim, H., & Park, K. (2015). Corporate environmental responsibility
and firm performance in the financial services sector. Journal of Busi-
ness Ethics,131(2), 257–284.
Jones, B., Bowd, R., & Tench, R. (2009). Corporate irresponsibility and cor-
porate social responsibility: competing realities. Social Responsibility
Journal,5(3), 300–310.
Kang, K. H., Lee, S., & Huh, C. (2010). Impacts of positive and negative cor-
porate social responsibility activities on company performance in the
hospitality industry. International Journal of Hospitality Management,29
(1), 72–82.
Kim, K. H., Kim, M., & Qian, C. (2018). Effects of corporate social responsi-
bility on corporate financial performance: A competitive-action per-
spective. Journal of Management,44(3), 1097–1118.
Klein, J., & Dawar, N. (2004). Corporate social responsibility and con-
sumers' attributions and brand evaluations in a product–harm crisis.
International Journal of Research in Marketing,21(3), 203–217.
Kotchen, M., & Moon, J. J. (2012). Corporate social responsibility for irre-
sponsibility. The BE Journal of Economic Analysis & Policy,12(1), 1–23.
Kotler, P., & Lee, N. (2005). Corporate social responsibility. Doing the most good
for your company and your cause. New Jersey, EUA: John Wiley & Sons.
Lai, C. S., Chiu, C. J., Yang, C. F., & Pai, D. C. (2010). The effects of corpo-
rate social responsibility on brand performance: The mediating effect
of industrial brand equity and corporate reputation. Journal of Business
Ethics,95(3), 457–469.
Lange, D., & Washburn, N. T. (2012). Understanding attributions of corpo-
rate social irresponsibility. Academy of Management Review,37(2),
300–326.
Lee, S., Seo, K., & Sharma, A. (2013). Corporate social responsibility and
firm performance in the airline industry: The moderating role of oil
prices. Tourism Management,38,20–30.
Lim, S. C., & Lusch, R. F. (2011). Sales margin and margin capitalization
rates: Linking marketing activities to shareholder value. Journal of the
Academy of Marketing Science,39(5), 647–663.
Lin-Hi, N., & Müller, K. (2013). The CSR bottomline: Preventing corporate
social irresponsibility. Journal of Business Research,66(10), 1928–1936.
Lin, W., Ho, J., & Sambasivan, M. (2019). Impact of corporate political activity
on the relationship between corporate social responsibility and financial
performance: A dynamic panel data approach. Sustainability,11(1), 60.
Lin, W. L., Law, S. H., Ho, J. A., & Sambasivan, M. (2019). The causality
direction of the corporate social responsibility–corporate financial per-
formance nexus: Application of panel vector autoregression approach.
The North American Journal of Economics and Finance,48, 401–418.
Lioui, A., & Sharma, Z. (2012). Environmental corporate social responsibil-
ity and financial performance: Disentangling direct and indirect effects.
Ecological Economics,78, 100–111.
Luo, X., & Bhattacharya, C. B. (2009). The debate over doing good: Corpo-
rate social performance, strategic marketing levers, and firm-
idiosyncratic risk. Journal of Marketing,73(6), 198–213.
Luo, X., Wieseke, J., & Homburg, C. (2012). Incentivizing CEOs to build
customer-and employee-firm relations for higher customer satisfaction
and firm value. Journal of the Academy of Marketing Science,40(6),
745–758.
Mackey, A., Mackey, T. B., & Barney, J. B. (2007). Corporate social respon-
sibility and firm performance: Investor preferences and corporate
strategies. Academy of Management Review,32(3), 817–835.
12 LIN ET AL.

Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking
social initiatives by business. Administrative Science Quarterly,48(2),
268–305.
Mattingly, J. E., & Berman, S. L. (2006). Measurement of corporate social
action: Discovering taxonomy in the Kinder Lydenburg Domini ratings
data. Business & Society,45(1), 20–46.
McGuire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate social
responsibility and firm financial performance. Academy of Management
Journal,31(4), 854–872.
McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and
financial performance: Correlation or misspecification? Strategic Man-
agement Journal,21(5), 603–609.
Mishra, S., & Suar, D. (2010). Does corporate social responsibility influence
firm performance of Indian companies? Journal of Business Ethics,95(4),
571–601.
Mishra, S., & Modi, S. B. (2013). Positive and negative corporate social
responsibility, financial leverage, and idiosyncratic risk. Journal of Busi-
ness Ethics,117(2), 431–448.
Mittal, B., & Baker, J. (2002). Advertising strategies for hospitality
services. Cornell Hotel and Restaurant Administration Quarterly,43(2),
51–63.
Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership
and market valuation: An empirical analysis. Journal of Financial Eco-
nomics,20, 293–315.
Morgan, N. A., Vorhies, D. W., & Mason, C. H. (2009). Market orientation,
marketing capabilities, and firm performance. Strategic Management
Journal,30(8), 909–920.
Muller, A., & Kräussl, R. (2011). Doing good deeds in times of need: A stra-
tegic perspective on corporate disaster donations. Strategic Manage-
ment Journal,32(9), 911–929.
Nelson, P. (1974). Advertising as information. Journal of Political Economy,
82(4), 729–754.
Nickell, S. (1981). Biases in dynamic models with fixed effects. Eco-
nometrica: Journal of the Econometric Society, 1417–1426.
O'brien, J. P. (2003). The capital structure implications of pursuing a strat-
egy of innovation. Strategic Management Journal,24(5), 415–431.
Oikonomou, I., Brooks, C., & Pavelin, S. (2012). The impact of corporate
social performance on financial risk and utility: A longitudinal analysis.
Financial Management,41(2), 483–515.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and
financial performance: A meta-analysis. Organization Studies,24(3),
403–441.
Orlitzky, M. (2005). Payoffs to social and environmental performance. The
Journal of Investing,14(3), 48–52.
Park, S. Y., & Lee, S. (2009). Financial rewards for social responsibility: A
mixed picture for restaurant companies. Cornell Hospitality Quarterly,
50(2), 168–179.
Porter, M. E., & Kramer, M. R. (2006). The link between competitive
advantage and corporate social responsibility. Harvard Business Review,
84(12), 78–92.
Popa, M. & Salanta, I. (2014). An empirical approach on the sme versus big
companies csr investment arguments. Managerial Challenges of the
Contemporary Society. Proceedings,7(2), 99.
Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009). Measuring
organizational performance: Towards methodological best practice.
Journal of Management,35(3), 718–804.
Roodman, D. (2009). How to do xtabond2: An introduction to difference
and system GMM in Stata. The Stata Journal,9(1), 86–136.
Russo, M. V., & Fouts, P. A. (1997). Aresource-based perspective on corpo-
rate environmental performance and profitability. Academy of Manage-
ment Journal,40(3), 534–559.
Rowley, T., & Berman, S. (2000). A brand new brand of corporate social
performance. Business & Society,39(4), 397–418.
Schuler, D. A., & Cording, M. (2006). A corporate social performance–
corporate financial performance behavioral model for consumers.
Academy of Management Review,31(3), 540–558.
Schwartz, M. S., & Carroll, A. B. (2003). Corporate social responsibility: A
three-domain approach. Business Ethics Quarterly,13(4), 503–530.
Sen, S., & Bhattacharya, C. B. (2001). Does doing good always lead to
doing better? Consumer reactions to corporate social responsibility.
Journal of Marketing Research,38(2), 225–243.
Simerly, R. L., & Li, M. (2000). Environmental dynamism, capital structure
and performance: A theoretical integration and an empirical test. Stra-
tegic Management Journal,21(1), 31–49.
Srivastava, R. K., Shervani, T. A., & Fahey, L. (1998). Market-based assets
and shareholder value: A framework for analysis. Journal of Marketing,
62(1), 2–18.
Srivastava, R. K., Fahey, L., & Christensen, H. K. (2001). The resource-
based view and marketing: The role of market-based assets in gaining
competitive advantage. Journal of Management,27(6), 777–802.
Surroca, J., Tribó, J. A., & Waddock, S. (2010). Corporate responsibility and
financial performance: The role of intangible resources. Strategic Man-
agement Journal,31(5), 463–490.
The Local (2018). Despite emissions scandal, Volkswagen clinches record
sales. Stockholm, Sweden: The Local Europe AB. Retrieved from https://
www.thelocal.de/20180117/despite-emissions-scandal-volkswagen-
clinches-record-sales.
Van de Ven, V., & Drazin, R. (1985). The concept of fit in contingency the-
ory. In B. Staw & L. Cummings (Eds.), Research in organizational behav-
ior. Greenwich, CT: JAI Press. (Vol. 7, pp. 333–365).
Vicianová, J. (2011). Corporate social responsibility in the automobile
industry in Slovak Republic. Studia Universitatis Vasile Goldis¸, Arad-Seria
S¸tiint¸e Economice,21(1), 192–201.
Waddock, S. A., & Graves, S. B. (1997). The corporate social performance–
financial performance link. Strategic Management Journal,18(4),
303–319.
Waddock, S. (2004). Parallel universes: Companies, academics, and the pro-
gress of corporate citizenship. Business and Society Review,109(1), 5–42.
Werbel, J. D., & Wortman, M. S. (2000). Strategic philanthropy:
Responding to negative portrayals of corporate social responsibility.
Corporate Reputation Review,3(2), 124–136.
Welford, R., Chan, C., & Man, M. (2008). Priorities for corporate social
responsibility: a survey of businesses and their stakeholders. Corporate
Social Responsibility and Environmental Management,15(1), 52–62.
Wintoki, M. B., Linck, J. S., & Netter, J. M. (2012). Endogeneity and the
dynamics of internal corporate governance. Journal of Financial Eco-
nomics,105(3), 581–606.
Wood, D. J. (1991). Corporate social performance revisited. Academy of
Management Review,16(4), 691–718.
Yuen, K. F., Thai, V. V., Wong, Y. D., & Wang, X. (2018). Interaction
impacts of corporate social responsibility and service quality on ship-
ping firms' performance. Transportation Research Part A: Policy and
Practice,113, 397–409.
Zhu, Q., & Zhang, Q. (2015). Evaluating practices and drivers of corporate
social responsibility: The Chinese context. Journal of Cleaner Produc-
tion,100, 315–324.
How to cite this article: Lin WL, Ho JA, Lee C, Ng SI. Impact
of positive and negative corporate social responsibility on
automotive firms' financial performance: A market-based asset
perspective. Corp Soc Responsib Environ Manag. 2020;1–13.
https://doi.org/10.1002/csr.1923
LIN ET AL.13