Corporate Social Performance, Competitive Advantage, Earnings Persistence and Firm Value

Gregory, Alan; Whittaker, Julie M.; Xiao, Yan

doi:10.1111/jbfa.12182

Cited by 90 publications

(102 citation statements)

References 97 publications

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“…Gregory et al. () study the VR of corporate social performance and interactions of this rating with earnings and BVE. They show that corporate social performance is not value relevant and the interaction of this item with earnings is statistically significant and positive while the interaction of this item with BVE is not statistically significant .…”

Section: Selected Literaturementioning

confidence: 99%

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How Does Unobserved Heterogeneity Affect Value Relevance?

Ertuğrul

Demir

2018

Australian Accounting Review

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Most value relevance (VR) studies consider an accounting item value relevant if the regression coefficient (RC) of that item is statistically significant. Unobservable heterogeneity leads to biased RCs, interpretation of which generates incorrect inferences. To obtain unbiased RCs, the effect of unobservable heterogeneity on RCs should be mitigated. As two dimensions of unobservable heterogeneity are at the firm level and time level, outcomes with the following unobservable heterogeneity concerns are discussed: i) no fixed-effects (FE); ii) firm FE; iii) time FE; and iv) two-way (firm and time) FE. By employing a sample of Turkish firms from 2005-2014, we report several findings. First, we find that regressions with firm (time) FE yield large (low) RCs vis-à-vis regressions with no FE, and regressions with two-way FE generate balanced RCs compared to the others. Second, we compare RCs with i and iv, and conclude that the book value of equity becomes more value relevant while net income does not after controlling for unobservable heterogeneity. Last, we arbitrarily divide the entire period into two to reveal how unobserved endogeneity affects the comparison of RCs belonging to different periods. Our outcomes robustly reveal that unobserved endogeneity leads to erroneous RC comparisons.

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Section: Selected Literaturementioning

confidence: 99%

“…Gregory et al. () present several outcomes. This result is from their regression table obtained by using BVE as the deflator, using industry FE and time FE.…”

mentioning

confidence: 99%

How Does Unobserved Heterogeneity Affect Value Relevance?

Ertuğrul

Demir

2018

Australian Accounting Review

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“…Our study contributes to the literature in three main ways. First, we contribute to the literature on the link between CSR and the cost of financing (both equity and debt; e.g., Chava, ; El Ghoul et al, ; El Ghoul et al, ; Goss & Roberts, ; Gregory et al, ; Hoepner et al, ; Plumlee et al, ) by showing that this relationship depends on the country corporate governance systems. Our results suggest that the country corporate governance system is an important omitted variable in prior studies that examine the effect of CSR on the cost of financing using an international sample (El Ghoul et al, ) and highlight the limited external validity of studies focusing on a single setting (e.g., El Ghoul et al, ; Goss & Roberts, ; Oikonomou, Brooks, & Pavelin, ; Plumlee et al, ).…”

Section: Introductionmentioning

confidence: 99%

“…Although prior research on the link between the firm's engagement in CSR and the cost of equity and debt (e.g., Chava, ; El Ghoul, Guedhami, Kim, & Park, ; El Ghoul, Guedhami, Kwok, & Mishra, ; Goss & Roberts, ; Gregory, Whittaker, & Yan, ; Hoepner, Oikonomou, Scholtens, & Schröder, ; Plumlee, Brown, Hayesa, & Marshall, ) reports conflicting results, little attention has been paid to how CSR performance interacts with the national corporate governance system to influence the cost of equity and debt. This neglect is noteworthy because, as argued by several comparative scholars, one cannot understand the CSR strategy and policies of organizations without understanding the nature of the institutional environments in which they operate (Aguilera, Filatotchev, Gospel, & Jackson, ; Devinney et al, ).…”

Section: Introductionmentioning

confidence: 99%

Corporate social responsibility and cost of financing—The importance of the international corporate governance system

Desender

LópezPuertas‐Lamy

Pattitoni

et al. 2020

Corporate Governance

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Research Question/Issue: Our study examines whether international corporate governance systems shape the relationship between a firm's engagement in corporate social responsibility (CSR) and their cost of financing (both equity and debt).Research Findings/Insights: Using a large international sample, our findings reveal that although the link between CSR performance and the cost of equity is negative in a shareholder-oriented system, this relationship is positive in a stakeholder-oriented system. Furthermore, the link between CSR performance and the cost of debt is negative for firms that are close to default in both systems.Theoretical/Academic Implications: Our study highlights the importance of considering the shareholder/stakeholder orientation at the country level to explain the link between CSR performance and the cost of financing. Our findings help to explain and place into context the previous mixed findings on the relationship between CSR and the cost of equity and debt and add to the debate about whether CSR is beneficial or detrimental to corporate governance.Practitioner/Policy Implications: The analysis of how the country corporate governance system influences the effect of CSR performance on the cost of financing allows for a deeper understanding of how investors respond to CSR initiatives worldwide and offers managers, directors, and policy makers context-specific recommendations. Our analysis also highlights the limitations of transferring insights regarding CSR from one corporate governance system to another. K E Y W O R D Scorporate governance, corporate social responsibility, cost of debt, cost of equity

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“…The second stream of literature concerns the relationship between CSR activities and the performance of the firm in the financial market as well as the impact of CSR activities on disclosure policies and real decision‐making. Many empirical analyses focus on the impact of CSR on different aspects of firm performance, such as the cost of capital (Dhaliwal et al ., ), stock liquidity (Kim et al ., ), information asymmetry (Lopatta et al ., ; Benlemlih and Bitar, ) and financial market performance (Gregory et al ., ).…”

Section: Related Literaturementioning

confidence: 97%

The real effects of stock prices: learning, disclosure and corporate social responsibility

Zhao

2019

Accounting & Finance

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This paper develops a tractable model to study the impact of corporate social responsibility (CSR) on real decisions (i.e., production and disclosure decisions) of a firm which can learn from the stock price. Firms with high CSR disclose more precise information, improving the stock liquidity and price efficiency, which also benefit liquidity traders and consumers. Interventions by regulators in firms' disclosure decisions, such as mandatory disclosure, can improve social welfare, but their effectiveness depends on the degree of CSR. We also discuss the implications of learning from the price.

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Corporate Social Performance, Competitive Advantage, Earnings Persistence and Firm Value

Cited by 90 publications

References 97 publications

How Does Unobserved Heterogeneity Affect Value Relevance?

How Does Unobserved Heterogeneity Affect Value Relevance?

Corporate social responsibility and cost of financing—The importance of the international corporate governance system

The real effects of stock prices: learning, disclosure and corporate social responsibility

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