Does social performance really lead to financial performance? Accounting for endogeneity

Journal of Business Ethics

Volumn 92, Issue 1, 2010, Pages 107-126

  Garcia Castro, Roberto ^a   Ariño, Miguel A ^b   Canela, Miguel A ^c  

^a UNIVERSIDAD CARLOS III DE MADRID   (Spain)

^b IESE BUSINESS SCHOOL   (Spain)

^c UNIVERSITY OF BARCELONA   (Spain)

Author keywords

Corporate social responsibility; Endogeneity; Financial performance; Social performance; Stakeholder management

Indexed keywords

EID: 75949101892     PISSN: 01674544     EISSN: 15730697     Source Type: Journal    
DOI: 10.1007/s10551-009-0143-8     Document Type: Article

References (57)

1. Agle, B. R., R. K. Mitchell and J. A. Sonnenfeld: 1999, 'Who matters to CEOS? An investigation of stakeholder attributes and salience, corporate performance and CEO values', Academy of Management Journal42(5), 507-525.
2. Alexander, G. J. and R. A. Buchholz: 1978, 'Corporate social responsibility and stock market performance', Academy of Management Journal21(3), 479-486.
3. Aupperle, K. E., A. B. Carroll and J. D. Hatfield: 1985, 'An empirical examination of the relationship between corporate social responsibility and profitability', Academy of Management Journal28(2), 446-463.
4. Baum, C. F.: 2006, An introduction to modern econometrics using Stata (Stata Press, Texas).
5. Baum, C. F., M. E. Schaffer and S. Stillman: 2007, Enhanced Routines for Instrumental Variables/GMM Estimation and Testing. Boston College Economics Working Paper No. 667.
6. Berman, S. L., A. C. Wicks, S. Kotha and T. M. Jones: 1999, 'Does stakeholder orientation matter? The relationship between stakeholder management models and the firm financial performance', Academy of Management Journal42(5), 488-506.
7. Brammer, S. and A. Millington: 2006, 'Firm size, organizational visibility and corporate philanthropy: an empirical analysis', Business Ethics: A European Review15(1), 6-18.
8. Burgstahler, D. and M. Eames: 2006, 'Management of Earnings and Analysts' Forecasts to Achieve Zero and Small Positive Earnings Surprises', Journal of Business Finance and Accounting33(5& 6), 633-652.
9. Campa, J. M. and S. Kedia: 2002, 'Explaining the diversification discount', Journal of Finance57(4), 1731-1762.
10. Cochran, P. L. and R. A. Wood: 1984, 'Corporate social responsibility and financial performance', Academy of Management Journal27, 42-56.
11. Coffey, B. S. and G. E. Fryxell: 1991, 'Institutional Ownership of Stock and Dimensions of Corporate Social Performance: An Empirical Examination', Journal of Business Ethics10(6), 437-444.
12. Collins, J. C. and J. I. Porras: 1994, Built to last: successful habits of visionary companies, (HarperBusiness, New York).
13. Coombs, J. E. and K. M. Gilley: 2005, 'Stakeholder management as a predictor of CEO compensation: Main effects and interactions with financial performance', Strategic Management Journal26, 827-840.
14. Dechow, P. M.: 1994 'Accounting earnings and cash flows as measures of firm performance: The role of accounting accruals', Journal of Accounting and Economics18, 3-42.
15. Eesley, C. and M. J. Lenox: 2006 'Firm responses to secondary stakeholder action', Strategic Management Journal27, 765-781.
16. Fernández, P.: 2002, Valuation methods and shareholder value creation, (Academic Press, San Diego CA).
17. Garcia-Castro, R., M. A. Canela and M. A. Ariño: 2008, 'Over the Long Run? Short-Run Impact and Long-Run Consequences of Stakeholder Management', Business and Society, doi: 10. 1177/0007650308315493.
18. Ghoshal, S. and C. A. Bartlett: 1994, 'Linking organizational context and managerial action: the dimensions of quality of management', Strategic Management Journal15(5), 91-112.
19. Graves, S. B. and S. A. Waddock: 2000, 'Beyond built to last...stakeholder relations in built to last companies', Business and Society Review105, 393-418.
20. Greene, W. H.: 1993, Econometric analysis, 2nd edition, (Macmillan, New York).
21. Griffin J. J. and J. F. Mahon: 1997, The corporate social performance and corporate financial performance debate', Business & Society36(1), 5-31.
22. Hansen, L.: 1982, 'Large sample properties of generalized method of moments estimators', Econometrica50(3), 1029-1054.
23. Hamilton, B. H. and J. A. Nickerson: 2003, 'Correcting for endogeneity in strategic management research', Strategic Organization1(1), 51-78.
24. Hausman, J.: 1978, 'Specification tests in econometrics', Econometrica46, 1251-1271.
25. Hayes, R. and W. J. Abernathy: 1980, 'Managing our way to economic decline', Harvard Business Review58(4), 67-78.
26. Heckman, J.: 1974, 'Shadow prices, market wages, and labor supply', Econometrica 42, 679-94.
27. Hillman, A. J. and G. D. Keim: 2001, 'Shareholder value, stakeholder management, and social issues: What's the bottom line? Strategic Management Journal22(2), 125-139.
28. Huselid, M. A.: 1995, 'The impact of human resource management practices on turnover, productivity, and corporate financial performance', Academy of Management Journal38(3), 635-672.
29. Margolis, J. and J. Walsh: 2001, People and profits?, (Lawrence Erlbaum Associates, New Jersey).
30. Margolis, J. and J. Walsh: 2003, 'Misery loves companies: Rethinking social initiatives by business', Administrative Science Quarterly48, 268-305.
31. Masten, S. E.: 1996, 'Empirical research and transaction cost economic: challenges, progress, directions', in J. Grownewegen (ed.), Transaction cost economics and beyond, (Kluwer, Boston MA,), pp. 43-64.
32. Mattingly, J. E. and S. L. Berman: 2006, 'Measurement of corporate social actions: Discovering taxonomy in the Kinder Lydenburg Domini rating data', Business and society45,(1), 20-46.
33. McGuire, J. B., A. Sundgren and T. Schneeweis: 1988, 'Corporate social responsibility and firm financial performance', Academy of Management Journal31, 854-872.
34. McWilliams, A. and D. Siegel: 2000, 'Corporate social responsibility and financial performance: correlation or misspecification? Strategic Management Journal21, 603-609.
35. Mitchell, R. K, B. R. Agle and D. J. Wood: 1997, 'Toward a theory of stakeholder identification and salience: defining the principle of who and what really counts', Academy of Management Review22(4), 853-886.
36. Moskowitz, M.: 1972, 'Choosing socially responsible stocks', Business and Society Review1, 71-75.
37. Mundlak, Y.: 1978, 'On the pooling of time series and cross section data', Econometrica46, 69-85.
38. Ogden, S. and R. Watson: 1999, 'Corporate performance and stakeholder management: balancing shareholder and customer interests in the U. K. privatized water industry', Academy of Management Journal42(5), 526-538.
39. Orlitzky, M., F. Schmidt and S. Rynes: 2003, 'Corporate social and financial performance: a meta-analysis', Organization Studies24, 403-441.
40. Pava, M. and J. Krausz: 1996, 'The association between corporate social responsibility and financial performance: the paradox of social cost', Journal of Business Ethics15, 321-357.
41. Perez-Lopez, J. A.: 1993, 'Fundamentos de la dirección de empresas', (Ediciones Rialp, Madrid).
42. Post, J. E., L. E. Preston and Sachs, S.: 2002, 'Managing the extended enterprise: The new stakeholder view', California Management Review45(1), 6-28.
43. Preston, L. E. and J. E. Post: 1975, 'Measuring Corporate Responsibility', Journal of General Management2(3), 45-52.
44. Rajagopalan, N. and G. M. Spreitzer: 1997, 'Toward a Theory of Strategic Change: A Multi-lens Perspective and Integrative Framework', Academy of Management Review22(1), 48-79.
45. Rehbein, K., S. Waddock and S. B. Graves: 2004, 'Understanding shareholder activism: which corporations are targeted?', Business & Society43(3), 239-267.
46. Roman, R., S. Hayibor and B. R. Agle: 1999, 'The Relationship Between Social and Financial Performance', Business & Society38(1), 5-31.
47. Shaver, J. M.: 1998, 'Accounting for endogeneity when assessing strategy performance: does entry mode choice affect FDI survival?', Management Science44(4), 571-85.
48. Shea, J.: 1997, 'Instrument Relevance in Multivariate Linear Models: A Simple Measure', The Review of Economics and Statistics79(2), 348-352.
49. Stern Stewart: 1996, The Stern Stewart Performance 1000, (Stern Stewart Management Services, New York).
50. Stock, J. H. and M. Yogo: 2004, Testing For Weak Instruments in Linear IV Regression', Working Paper, Harvard University, Boston, MA.
51. Stock, J. H., J. H. Wright and M. Yogo: 2002, 'A survey of weak instruments and weak identification in generalized method of moments', Journal of Business and Economic Statistics20, 518-529.
52. Ullmann, A. A.: 1985, 'Data in Search of a Theory: A Critical Examination of the Relationships Among Social Performance, Social Disclosure, and Economic Performance of U. S. Firms', Academy of Management Review10(3), 540-557.
53. Villalonga, B.: 2004, 'Does Diversification Cause the "Diversification Discount"?', Financial Management33(2), 5-27.
54. Waddock, S. A. and S. B. Graves: 1997a, 'Quality of management and quality of stakeholder relations: Are they synonymous?', Business & Society36(3), 250-279.
55. Waddock S. A. And S. B. Graves: 1997b, 'The corporate social performance - financial performance link', Strategic Management Journal18 (4), 303-319.
56. Wiggins, R. R. and T. W. Rueffli: 2002, 'Sustained competitive advantage: temporal dynamics and the incidence and persistence of superior economic performance', Organization Science13, 82-105.
57. Wooldridge, J. M.: 2002, Econometric analysis of cross section and panel data, (MIT Press, Cambridge, MA).