However no studies have jointly examined the direct influence of CSR on FP and

However no studies have jointly examined the direct

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However, no studies have jointly examined the direct influence of CSR on FP and the reverse relation of FP on CSR. Therefore, there is a need for further research to examine the relations between CSR and firm performance. We make the following observations. Opportunistic CSR and FP : Opportunistic CSR would not lead to higher firm performance and it is unlikely that higher firm performance would lead to opportunistic CSR. Ethical CSR and FP : It is plausible that ethical CSR would lead to higher firm performance if such CSR reduces long-term exposure to risks such as environmental risk, encourages innovative investment, or enhances stakeholder satisfaction in ways that improve productivity or investment value. It is unclear how higher firm performance would influence ethical CSR. On the one hand, managers of high-performing firms would have more resources
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11 to invest in CSR. On the other hand, managers of high-performing firms who are economically motivated may avoid discretionary investments in CSR that were not value-adding. We make the following hypothesis to test for positive relations between CSR and firm performance. H2: CSR is positively related to firm performance. Together with the passage of SOX in 2002, the social atmosphere increasingly places emphasis on the trust, transparency, and social responsibility of firms. CSR has also moved from ideology to reality, and many consider it necessary for organizations to de fi ne their roles in society and apply social and ethical standards to their businesses (Lichtenstein, Drumwright, and Braig, 2004). Companies increasingly employ CSR activities to position their corporate brands in the eyes of consumers and other stakeholders by voluntarily disclosing their CSR activities using annual reports (Sweeney and Coughlan 2008) and websites (Maignan and Ralston 2002; Wanderley, Lucian, and Farache 2008). The activities associated with CSR investments and the amounts of CSR spending have increased compared to the early stages of CSR, and companies’ voluntary reporting of CSR activities has also increased. Clarkson, Li, Richardson, and Vasvari (2008) investigate the relationship between environmental performance and the level of voluntary environmental disclosure by testing competing predictions from economics-based and socio-political theories of voluntary disclosure. They find a positive association between environmental performance and voluntary environmental disclosure. Therefore, CSR initiatives can provide an opportunity for investors to regard high CSR firms as having a relative competitive advantage over competing
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12 firms. Porter and Kramer ( Harvard Business Review , 2006) 2 observed that “corporations would discover that CSR can be much more than a cost, a constraint, or a charitable deed—it can be a source of opportunity, innovation, and competitive advantage.” Thus, we expect that after SOX, the likelihood or intensity of a positive influence of CSR on firm performance would be greater than that of CSR before SOX.
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