The Interactive Financial Effects between Corporate Social Responsibility and Irresponsibility

ICMA Centre Discussion Papers in Finance No. DP2012-02

42 Pages Posted: 14 Jan 2012

See all articles by Ioannis Oikonomou

Ioannis Oikonomou

University of Reading - ICMA Centre

Chris Brooks

University of Reading - ICMA Centre

Stephen Pavelin

University of Bath - School of Management; University of Reading - Department of Economics

Date Written: January 13, 2012

Abstract

Firms typically present a mixed picture of corporate social performance (CSP), with positive and negative indicators exhibited by the same firm. Thus, stakeholders’ judgements of corporate social responsibility (CSR) typically evaluate positives in the context of negatives, and vice versa. We present two alternative accounts of how stakeholders respond to such complexity, which provide differing implications for the financial effects of CSP: reciprocal dampening and rewarding uniformity. Our US panel study finds a U-shaped relationship – firms that exhibit solely positive or solely negative indicators outperform firms that exhibit both – which supports the notion that stakeholders’ judgements of CSR reward uniformity.

Keywords: Corporate social responsibility, Corporate social performance, Socially responsible investing

JEL Classification: C31, C33, M14

Suggested Citation

Oikonomou, Ioannis and Brooks, Chris and Pavelin, Stephen, The Interactive Financial Effects between Corporate Social Responsibility and Irresponsibility (January 13, 2012). ICMA Centre Discussion Papers in Finance No. DP2012-02. Available at SSRN: https://ssrn.com/abstract=1984917 or http://dx.doi.org/10.2139/ssrn.1984917

Ioannis Oikonomou

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Stephen Pavelin

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom

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