Revisiting the vexing question: Does superior corporate social performance lead to improved financial performance?

Lee, Darren D., Faff, Robert W. and Langrield-Smith, Kim (2009) Revisiting the vexing question: Does superior corporate social performance lead to improved financial performance?. Australian Journal of Management, 34 1: 21-49. doi:10.1177/031289620903400103


Author Lee, Darren D.
Faff, Robert W.
Langrield-Smith, Kim
Title Revisiting the vexing question: Does superior corporate social performance lead to improved financial performance?
Journal name Australian Journal of Management   Check publisher's open access policy
ISSN 0312-8962
1327-2020
Publication date 2009-06-01
Sub-type Article (original research)
DOI 10.1177/031289620903400103
Open Access Status
Volume 34
Issue 1
Start page 21
End page 49
Total pages 29
Place of publication Sydney, NSW Australia
Publisher Australian Graduate School of Management
Language eng
Subject 1400 Business, Management and Accounting
Abstract The empirical evidence documenting the association between a firm's level of corporate social performance (CSP) and corporate financial performance (CFP) remains divided. This paper reinvestigates the CSP/CFP association using a more rigorous methodology whilst taking advantage of a superior measure of CSP. In contrast to the findings of much of the prior research, the market-based tests suggest a negative association between CSP and CFP, while the accounting tests indicate no association exists. We suggest that the negative market CSP/CFP relation should not be interpreted as CSP having no value. Rather, our results may suggest that leading CSP firms trade at a price premium (i.e. returns discount) relative to lagging CSP firms, thereby indicating that financial markets value CSP and are prepared to realise lower returns. For firms, this signals an ability to obtain a lower cost of equity capital when they proactively manage their CSP profiles. [PUBLICATION ABSTRACT]
Keyword Corporate social responsibility (CSR)
Mutual Fund Performance
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collection: UQ Business School Publications
 
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Created: Thu, 03 Sep 2009, 17:51:41 EST by Mr Andrew Martlew on behalf of UQ Business School