Does Competing Through Corporate Social Responsibility Engagements Lead to Superior Financial Performance?

70 Pages Posted: 19 Sep 2019

See all articles by Gabriele Lattanzio

Gabriele Lattanzio

Southern Methodist University (SMU) - Finance Department

Lubomir P. Litov

University of Oklahoma - Michael F. Price College of Business; University of Pennsylvania - Wharton Financial Institutions Center

Date Written: August 6, 2019

Abstract

We develop a novel metric of corporate social responsibility (CSR) rivalry to capture the environmental sustainability engagements of a firm relative to its “green” and “toxic” peers. We document that our measure has superior predictive power about firms’ future pollution levels when compared to alternative unitary CSR scores. Firms with superior relative CSR performance exhibit higher sales growth, profitability, corporate valuation, and future stock returns. Our results suggest that firms compete for CSR ratings and that relative – in addition to unitary – CSR metrics are linked to financial performance.

Keywords: corporate social responsibility; ESG (environmental, social, governance performance; KLD data; ratings; performance measurement; competitive advantage; reputational capital; sustainability

JEL Classification: M14; G30; G32

Suggested Citation

Lattanzio, Gabriele and Litov, Lubomir P., Does Competing Through Corporate Social Responsibility Engagements Lead to Superior Financial Performance? (August 6, 2019). Available at SSRN: https://ssrn.com/abstract=3449259 or http://dx.doi.org/10.2139/ssrn.3449259

Gabriele Lattanzio (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

Lubomir P. Litov

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

University of Pennsylvania - Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

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