Corporate Social Responsibility, Customer Satisfaction, and Market Value

Abstract

Although prior research has addressed the influence of corporate social responsibility (CSR) on perceived customer responses, it is not clear whether CSR affects market value of the firm. This study develops and tests a conceptual framework, which predicts that (1) customer satisfaction partially mediates the relationship between CSR and firm market value (i.e., Tobin's q and stock return), (2) corporate abilities (innovativeness capability and product quality) moderate the financial returns to CSR, and (3) these moderated relationships are mediated by customer satisfaction. Based on a large-scale secondary data set, the results show support for this framework. Notably, the authors find that in firms with low innovativeness capability, CSR actually reduces customer satisfaction levels and, through the lowered satisfaction, harms market value. The uncovered mediated and asymmetrically moderated results offer important implications for marketing theory and practice.

Strengthening Stakeholder–Company Relationships Through Mutually Beneficial Corporate Social Responsibility Initiatives

“…While this concept has been operationalized in various ways in the literature, perhaps the most common measurement is a company's total monetary spending on CSR initiatives, a figure often available through annual company reporting (Margolis and Walsh, 2003;Orlitzky et al, 2003). CSR activity may also be captured through measures such as CSR-related awards (e.g., Klassen and McLaughlin, 1996) or third-party ratings such as KLD Research and Analytics (e.g., Graves and Waddock, 2000) and Fortune magazine's reputation ratings (e.g., McGuire et al, 1988;Luo and Bhattacharya, 2006).…”

The Worth of Values – A Literature Review on the Relation Between Corporate Social and Financial Performance

“…Bridging refers to a firm's ability to adapt to its environment or to meet and exceed external expectations. Luo and Bhattacharya (2006) investigated the link between CSR and firm market value, with the belief that customer satisfaction would serve as a moderator. They found a positive relationship.…”

Does CSR practice pay off in East Asian firms? A meta-analytic investigation

“…Western researchers began to use the term commonly in the late 1960s and early 1970s after many multinational corporations formed the concept of stakeholders; that is, internal, external, and environmental constituents who can influence or are influenced by firms' activities (Freeman, 1984). CSR henceforth became a hotspot in business ethics research (Luo & Bhattacharya, 2006). Most global academic CSR studies focus on America and Europe (Wood, 2010).…”

“…In the CSR research area, CSR and business performance have mixed relationships partly because of diverse performance measures (Lev, Petrovits, & Ranhakrishnan, 2010;Luo & Bhattacharya, 2006). CSR studies have adopted various business performance measures for ascertaining CSR benefits, including return on assets (ROA), return on equity (ROE), market share, and employee commitment.…”