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

TLDR

In an era of growing concern over financial performance and social ills, researchers have examined for 35 years whether corporate social performance (CSP) benefits corporate financial performance (CFP). This study conducts the most comprehensive meta‑analysis to date of 251 studies on CSP–CFP relationships. The authors perform sensitivity analyses to test whether the CSP–CFP link varies under different conditions. The meta‑analysis finds a small positive CSP–CFP effect (r≈0.11), which is even weaker in recent studies, and no contingency substantially alters the relationship, suggesting limited financial incentive for doing good.

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.