Does it pay to be different? An analysis of the relationship between corporate social and financial performance

TLDR

The study investigates the link between corporate social performance, specifically charitable giving, and corporate financial performance. The authors estimate a model of determinants of corporate charitable giving, use it to classify firms by the gap between actual and predicted giving, and then examine the financial performance of each group. Firms with unusually high or low charitable giving outperform others, with poor performers excelling short‑term and good performers excelling long‑term. © 2008 John Wiley & Sons, Ltd.

Abstract

Abstract This study explores the relationship between corporate social performance (CSP) and corporate financial performance (CFP) within the context of a specific component of CSP: corporate charitable giving. A model of the determinants of the extent of corporate charitable giving is estimated and used as the basis of a classification that groups firms according to the difference between their actual and their predicted intensity of gift giving. The financial performance attributes of the classification are explored. We found that firms with both unusually high and low CSP have higher financial performance than other firms, with unusually poor social performers doing best in the short run and unusually good social performers doing best over longer time horizons. Copyright © 2008 John Wiley & Sons, Ltd.