Corporate Social Performance, Innovation Intensity, and Financial Performance: Evidence from Lending Decisions

Abstract

This study examines how loan requests for intensifying corporate social performance (CSP) activities and loan requests for increasing innovation intensity affect loan officers' credit judgments and lending decisions. In addition, the impact of a balanced loan request for both CSP and innovation intensity was examined. An experiment was designed by manipulating the purpose of a loan request from a pharmaceutical company in order to create four alternative lending scenarios: (1) a full loan request for intensifying CSP activities; (2) a full loan request for increasing innovation intensity; (3) a loan request for a balanced investment in both CSP and innovation; and (4) a general purpose loan request (control group). The findings support that CSP investment is interpreted by loan officers as an indicator of superior corporate financial performance. However, no clear positive relationship between innovation intensity and lending decisions was found. These results are consistent with the view that lenders could be reluctant to fund innovation intensity initiatives because there may be a considerable time lag between this investment and its payoff. Contrary to expectations, a balanced loan request for both CSP and innovation was not interpreted by loan officers as the most favorable lending scenario for an innovative firm.

Corporate social responsibility research in accounting

“…For instance, CSR can repair reputational damage following earnings restatements (Chakravarthy et al 2014). Along similar lines, Guiral (2012) finds that positive A c c e p t e d M a n u s c r i p t 16 CSR activities improve auditors' perceptions of firms' internal control systems, though negative CSR activities do not affect such perceptions. These reputational effects may be linked to the ethical standards that exist in firms that care about CSR.…”

CSR, Innovation, and Firm Performance in Sluggish Growth Contexts: A Firm-Level Empirical Analysis

“…This difficulty becomes especially acute when the goal is to assess the impact of CSR on financial performance. Empirical research uses different accounting-or market-based measures (Guiral 2012). As Tang et al (2012) note, most studies also focus on defining exogenous factors that might affect the relationship of CSR with firm performance, such as the contexts in which a positive link becomes more robust.…”

Inovatividade e Performances Social, Ambiental e Econômica em MPMES: Uma Investigação Empírica

“…Já o desempenho social é destacado no estudo de Menon e Menon (1997) (Guiral, 2012). Outro estudo suporta a premissa de que inovações tecnológicas e organizacionais estão mais relacionadas ao desempenho econômico, enquanto inovações de produtos possuem um maior impacto sobre o desempenho social das organizações (Garrido e Camarero, 2010).…”

“…Estudos relacionados à sustentabilidade e a preocupação coorporativa com aspectos ambientais e sociais têm emergido com grande força nos últimos anos de modo a abordar questões ambientais importantes (Elkington, 1998;Newell e Muro, 2006;Schaefer, 2004;Wagner, 2005). Evidências de estudos anteriores já sugerem a existência de uma associação positiva entre a performance social e econômica (Orlitzky, Schmidt e Rynes, 2003;Guiral, 2012) assim como da performance ambiental e econômica (Wagner, 2005; Russo e Fouts, 1997; Rao e Holt, 2005) e da performance social e ambiental (Schaefer, 2004). Logo, tais embasamentos dão sustentação para as três primeiras hipóteses deste estudo.…”