Does Social Performance Really Lead to Financial Performance? Accounting for Endogeneity

Abstract

corporate social responsibility, endogeneity, financial performance, social performance, stakeholder management,

Corporate Social Responsibility and Financial Performance: The Spanish Case

“…The results of Model 1 in Table 3 show a positive but not significant relationship between ROA and the carrying out of CSR activities. These results are in line with those produced by McWilliams and Siegel (1997, 2001 and those by Gil et al(2009), Bajo andDurán (2009), andGarcía-Castro et al (2010) in the case of Spain. …”

“…This is an issue that has received attention since as early as the 1970s (Bragdon & Marlin, 1972;Moskowitz, 1972), continuing until today. Attention has also been paid to it in Spain, with the works of Reverte (2009), Prado, Gallego, García, and Rodríguez (2009), García-Castro, Ariño, and Canela, (2010, and Martínez-Campillo, Cabeza-García, and Marbella-Sánchez (2012) being particularly noteworthy.…”

“…In the reviewed literature of the effects of CSR on firm performance, cross-section data has mainly been used. The use of panel data methodology allows more consistent and robust results to be obtained as well as to correct for the problems of endogeneity inherent to the relationship between CSR and firm performance, a problem that has received much attention in the literature (García-Castro et al, 2010;Gómez-García, 2008).…”

“…This is an issue that has received attention since as early as the 1970s (Bragdon & Marlin, 1972;Moskowitz, 1972), continuing until today. Attention has also been paid to it in Spain, with the works of Reverte (2009), Prado, Gallego, García, and Rodríguez (2009), García-Castro, Ariño, and Canela, (2010, and Martínez-Campillo, Cabeza-García, and Marbella-Sánchez (2012) being particularly noteworthy.The second aspect of the contribution made by this paper lies in the methodology it employs. The methodology in question is panel data, which includes temporal heterogeneity, thus allowing macro-economic effects to be controlled for, as well as individual heterogeneity, which allows the individual characteristics of firms to be controlled for.…”

“…In the reviewed literature of the effects of CSR on firm performance, cross-section data has mainly been used. The use of panel data methodology allows more consistent and robust results to be obtained as well as to correct for the problems of endogeneity inherent to the relationship between CSR and firm performance, a problem that has received much attention in the literature (García-Castro et al, 2010;Gómez-García, 2008).The third contribution made by this study has to do with the fact that it focuses on a sample of Spanish firms while the majority of existing studies look into British and American ones.The problems and particularities of the two groups are quite different.The following section presents the theoretical basis for the study and the hypotheses to be tested, the third describes the database, the fourth discusses the methodology and results, and the fifth summarizes the main conclusions. …”