Does it Pay to Be Good...And Does it Matter? A Meta-Analysis of the Relationship between Corporate Social and Financial Performance

68 Pages Posted: 21 Jun 2011  

Joshua D. Margolis

Harvard University

Hillary Anger Elfenbein

Washington University in St. Louis, Olin School of Business

James P. Walsh

University of Michigan, Stephen M. Ross School of Business

Date Written: March 1, 2009

Abstract

In an era of rising concern about financial performance and social ills, companies’ economic achievements and negative externalities prompt a common question: Does it pay to be good? For thirty-five years, researchers have been investigating the empirical link between corporate social performance (CSP) and corporate financial performance (CFP). In the most comprehensive review of this research to date, we conduct a meta-analysis of 251 studies presented in 214 manuscripts. The overall effect is positive but small (mean r = .13, median r = .09, weighted r = .11), and results for the 106 studies from the past decade are even smaller. We also conduct sensitivity analyses to determine whether or not the relationship is stronger under certain conditions. Except for the effect of revealed misdeeds on financial performance, none of the many contingencies examined in the literature markedly affects the results. Therefore, we conclude by considering whether, aside from striving to do no harm, companies have grounds for doing good - and whether researchers have grounds for continuing to look for an empirical link between CSP and CFP.

Keywords: corporate social performance, social responsibility, financial performance, governance, meta-analysis, ethics

Suggested Citation

Margolis, Joshua D. and Elfenbein, Hillary Anger and Walsh, James P., Does it Pay to Be Good...And Does it Matter? A Meta-Analysis of the Relationship between Corporate Social and Financial Performance (March 1, 2009). Available at SSRN: https://ssrn.com/abstract=1866371 or http://dx.doi.org/10.2139/ssrn.1866371

Joshua D. Margolis

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Hillary Anger Elfenbein (Contact Author)

Washington University in St. Louis, Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

James P. Walsh

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109-1234
United States
734-936-2768 (Phone)
734-936-0282 (Fax)

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