Corporate Social Responsibility and Firm Financial Performance: The Mediating Role of Productivity

48 Pages Posted: 21 Apr 2016  

Iftekhar Hasan

Fordham University, Gabelli School of Business; Bank of Finland

Nada Kobeissi

Long Island University

Liuling Liu

Bowling Green State University - College of Business Administration

Haizhi Wang

Illinois Institute of Technology - Stuart School of Business

Date Written: 2016

Abstract

This study treats firm productivity as an accumulation of productive intangibles and posits that stakeholder engagement associated with better corporate social performance helps develop such intangibles. We hypothesize that because shareholders factor improved productive efficiency into stock price, productivity mediates the relationship between corporate social and financial performance. Furthermore, we argue that key stakeholders’ social considerations are more valuable for firms with higher levels of discretionary cash and income stream uncertainty. Therefore, we hypothesize that those two contingencies moderate the mediated process of corporate social performance with financial performance. Our analysis, based on a comprehensive longitudinal dataset of U.S. manufacturing firms from 1992 to 2009, lends strong support for these hypotheses. In short, this paper uncovers a productivity-based, context-dependent mechanism underlying the relationship between corporate social performance and financial performance.

Keywords: corporate social responsibility, corporate financial performance, total factor productivity, stakeholder management, discretionary cash, organizational risk

Suggested Citation

Hasan, Iftekhar and Kobeissi, Nada and Liu, Liuling and Wang, Haizhi, Corporate Social Responsibility and Firm Financial Performance: The Mediating Role of Productivity (2016). Bank of Finland Research Discussion Paper No. 7/2016; Gabelli School of Business, Fordham University Research Paper No. 2768097. Available at SSRN: https://ssrn.com/abstract=2768097

Iftekhar Hasan (Contact Author)

Fordham University, Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Nada Kobeissi

Long Island University ( email )

720 Northern Boulevard
Brookville, 11548-1327
United States

Liuling Liu

Bowling Green State University - College of Business Administration ( email )

Bowling Green, OH 43403
United States

Haizhi Wang

Illinois Institute of Technology - Stuart School of Business ( email )

Stuart Graduate School of Business
565 W. Adams St.
Chicago, IL 60661
United States

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