Open Access Senior Thesis
Bachelor of Arts
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
© 2012 Harmony J. Palmer
The prominence of corporate social responsibility (CSR) initiatives today suggests that the corporate perception of such policies has shifted from an unnecessary addition to a critical business function. Using a reliable source of data on corporate social performance (CSP), this study explores and tests the relationship between CSP and corporate financial performance (CFP). Unlike prior research, this study additionally tests the impact CSP has on sales and gross margin in hopes of providing insight on sales strategies that can be implemented to maximize the impact of the relationship. The dataset includes most of the S&P 500 firms and covers years 2001-2005. The relationships are tested using time-series regressions. Results indicate that CSP and CFP have a significantly positive relationship in both directions, supporting the view that CSR programs have positive impacts on the bottom-line. Results also indicate that increased CSP leads to increases in gross margin, indicating that some customers are willing to pay a premium for the products and/or services of a company with CSR initiatives. Lastly, results also indicate that increases in CSP leads to a decrease in sales, which implies a decrease in customer base because less people are willing to buy the products at premium. Despite the result on sales, I argue in this paper that firms can increase sales by increasing CSR investments—assuming increases in CSR investments leads to higher CSP—as long as the perception of programs transform from socially responsible, philanthropic actions to programs promoting corporate shared value (CSV).
Palmer, Harmony J., "Corporate Social Responsibility and Financial Performance: Does it Pay to Be Good?" (2012). CMC Senior Theses. 529.