Sustaining the Financial Value of Global CSR: Reconciling Corporate and Stakeholder Interests in a Less Regulated Environment

Abstract

In this article we examine the association between corporate social responsibility (CSR) and firm value. This line of research is important since firms continue to invest in CSR even though past studies reveal a limited linkage between financial value and CSR. However, the business case for CSR or "doing good while making a profit," appears to be advancing within the business ethics literature as a preferred conception of CSR. We conjecture that the greater unification and refinement of both profit maximization and stakeholder interests through corporate acts, not statements alone, will sustain the financial value of CSR in a less regulated global business environment. We study the triangle of what companies say, what companies do, and firm financial performance. We analyze Fortune 250 firms and find a positive association between Mark S. and 9600 Garsington Road, Oxford OX4 2DQ, UK. what companies do based on KLD Research and Analytics, Inc. (KLD) ratings, and what companies state about ethics in their CSR statements. We then employ regression analysis and find that companies' socially responsible acts are positively associated with overall firm value and financial performance. Yet we do not find a statistically significant association between what companies say regarding ethics in their CSR statements and their financial outcomes. These results suggest that firm value and financial performance is associated with what companies do and not what they say. Our results seem to be driven by multinational corporations (MNCs) and not by nonMNCs. This is possibly because MNCs generally operate in a less regulated global business environment that often necessitates strong ethical corporate leadership to further stakeholder interests. Overall, these results help reconcile corporate and stakeholder objectives since evidence of a link between financial performance and doing good sustains global CSR.

The impact of cultural factors on the implementation of global accounting standards (IFRS) in a developing country

“…According to Hofstede (2001, p. 1), "Culture is defined as collective programming of the mind; it manifests itself not only in values, but in more superficial ways: in symbols, heroes, and rituals". Prior research suggests that the accounting practices of a country are highly influenced by cultural forces (Blodgett, Hoitash, & Markelevich, 2014;Burchell, Clubb, Hopwood, Hughes, & Nahapiet, 1980;Ferrero, Hoffman, & McNulty, 2014;Lowe, Puxty, & Laughlin, 1983;Mustafa & Lines, 2013;Walker & Dyck, 2014). This is because accounting is a product of its environment and a particular environment is unique to its time and locality (Perera, 1989).…”

Institutional Determinants of Environmental Corporate Social Responsibility: Are Multinational Entities Taking Advantage of Weak Environmental Enforcement in Lower‐Income Nations?

“…One possible answer is that endoisomorphism is responsible for environmental performance in low-income and middle-income nations, where exoisomorphic pressure is low, that endoisomorphic and exoisomorphic pressures are balanced in upper-middleincome nations, and that exoisomorphic pressure is higher than endoisomorphic pressure in upper-income nations, as shown in Figure 1 below: Consistent with our results, this figure suggests that endoisomorphic pressure to be environmentally responsible is higher than exoisomorphic pressure in low-and middle-income nations, and is the cause of higher environmental CSR than expected. While not explicitly researching the source of CSR activity, Blodgett et al (2014) suggest that corpoarate performance goals are better attained for MNEs when environmental CSR activity exceeds local requirements in countries or regions with low standards. In uppermiddle-income nations, the exoisomorphic pressure is close enough to endoisomorphic pressure that neither has more effect-meaning that MNEs tend to simply follow local regulations here.…”

“…Consistent with our results, this figure suggests that endoisomorphic pressure to be environmentally responsible is higher than exoisomorphic pressure in low‐ and middle‐income nations, and is the cause of higher environmental CSR than expected. While not explicitly researching the source of CSR activity, Blodgett et al () suggest that corpoarate performance goals are better attained for MNEs when environmental CSR activity exceeds local requirements in countries or regions with low standards. In upper‐middle‐income nations, the exoisomorphic pressure is close enough to endoisomorphic pressure that neither has more effect—meaning that MNEs tend to simply follow local regulations here.…”

Law, Business Strategy, And Social Change In The Global Environment

“…Due to the rise in CSR, there is greater corporate recognition of the connection between social consciousness and profit (Singh, Iglesias, & Batista-Foguet, 2012). The corporative pursuit of profits with societal advantages is vital to sustaining the fiduciary duties and values mandate by global CSR (Blodgett, Hoitash, & Markelevich, 2014). Although further regulation may alleviate the contentions of profit over ethics, a more revolutionary approach to corporate responsibility is necessary and achievable.…”