On the relation between corporate social responsibility and financial performance

Abstract

Research Summary: This study reexamines the relation between corporate social responsibility (CSR) and financial performance by benchmarking firms against industry peers in a given year to identify best-in-class and worst-in-class firms. We also address distributional

Does Technological Innovation Drive Corporate Sustainability? Empirical Evidence for the European Financial Industry in Catching-Up and Central and Eastern Europe Countries

“…Overall, and in light of the reviewed literature (e.g., [1,17]), we expect that a firm's innovation capability, understood as its commitment of resources and investments in internal and external activities and knowledge to build up innovation capabilities, is also positively related to corporate sustainability. In this vein, the following hypothesis is stated:…”

“…In this chain of thought, Luo and Du [26] empirically encounter that analysts reduce information asymmetry related to CSR between firms and in this way, firms gain visibility by being recognized as best-in-class. Awaysheh et al [17] find that best-in-class firms in CSR do receive higher relative market valuations than industry peers. CSR and its relationship with financial performance, however, is fuzzy, as there are also diverse studies that do not show that positive relationship (e.g., [27]).…”

“…General literature, on the one hand, has intensively focused on the relationship between CSR and financial performance, pointing out a huge heterogeneity of results, depending on the sample utilized and the country of study (e.g., [12,17,[23][24][25]). In this chain of thought, Luo and Du [26] empirically encounter that analysts reduce information asymmetry related to CSR between firms and in this way, firms gain visibility by being recognized as best-in-class.…”

“…These unique capabilities can also drive sustainability. Literature has connected innovation capability from internal and external sources of knowledge to sustainability-oriented innovation (e.g., [17,34]) and to the financial and banking industry [1]. Sustainability-oriented innovation can also be part of a firm's innovation capability, albeit different scholars claim that sustainability-oriented innovation capability is more "complex and sophisticated" [62].…”

“…Thus, our study is contextualized at the intersection of the literature on sustainability-oriented innovation [10,[15][16][17] in the financial industry [10] and in the particular case of catching-up and CEE countries that require further investigation on the topic [12]. This study's goal, therefore, consists of determining whether there is a relationship between innovation and corporate sustainability in the financial industry of catching-up and CEE countries, an exercise not yet accomplished.…”