Causality between Corporate Social Performance and Financial Performance: Evidence from Canadian Firms
Rim Makni Gargouri
University of Sfax - Faculty of Economics and Management (FSEGS)
HEC Montréal - CGA Professorship in Strategic Financial Information
HEC Montreal - Department of Management Sciences
April 2, 2009
Journal of Business Ethics, 2008
This study assesses the causal relationship between corporate social performance (CSP) and financial performance (FP). We perform our empirical analyses on a sample of 179 publicly held Canadian firms and use the measures of CSP provided by Canadian Social Investment Database for the years 2004 and 2005. Using the "Granger causality" approach, we find no significant relationship between a composite measure of a firm's CSP and FP, except for market returns. However, using individual measures of CSP, we find a robust significant negative impact of the environmental dimension of CSP and three measures of FP, namely return on assets, return on equity, and market returns. This latter finding is consistent, at least in the short run, with the trade-off hypothesis and, in part, with the negative synergy hypothesis which states that socially responsible firms experience lower profits and reduced shareholder wealth, which in turn limits the socially responsible investments.
Number of Pages in PDF File: 14
Keywords: corporate social performance, financial performance, causality, environmental activities
JEL Classification: G10, M14Accepted Paper Series
Date posted: April 4, 2009 ; Last revised: October 18, 2009
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo5 in 0.485 seconds