1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

In this article we examine the association between corporate social responsibility (CSR) and firm value. This line of research is important since firms continue to invest in CSR even though past studies reveal a limited linkage between financial value and CSR. However, the business case for CSR or “doing good while making a profit,” appears to be advancing within the business ethics literature as a preferred conception of CSR. We conjecture that the greater unification and refinement of both profit maximization and stakeholder interests through corporate acts, not statements alone, will sustain the financial value of CSR in a less regulated global business environment. We study the triangle of what companies say, what companies do, and firm financial performance. We analyze Fortune 250 firms and find a positive association between what companies do based on KLD Research and Analytics, Inc. (KLD) ratings, and what companies state about ethics in their CSR statements. We then employ regression analysis and find that companies’ socially responsible acts are positively associated with overall firm value and financial performance. Yet we do not find a statistically significant association between what companies say regarding ethics in their CSR statements and their financial outcomes. These results suggest that firm value and financial performance is associated with what companies do and not what they say. Our results seem to be driven by multinational corporations (MNCs) and not by non-MNCs. This is possibly because MNCs generally operate in a less regulated global business environment that often necessitates strong ethical corporate leadership to further stakeholder interests. Overall, these results help reconcile corporate and stakeholder objectives since evidence of a link between financial performance and doing good sustains global CSR.


  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

Doing good while making a profit is perhaps most poignant in today's global economic environment where sustaining financial value is both a priority and a continuous challenge. But whether corporate social responsibility (CSR) is a matter of business strategy, ethics, or altruism (Lantos 2001), sustaining the financial value of CSR should be consistent with fulfilling the corporation's fiduciary duty to shareholders (Friedman 1970) and with meeting stakeholder responsibilities (Freeman 1994). Milton Friedman's assertions of profit maximization are firmly embedded in corporate governance and economic thought, and stakeholder theory is well established (Agle et al. 2008). Neither position, however, operates independently of the other. Acknowledgment of this inextricable relationship has evolved to such an extent that Carroll and Shabana (2010, p. 102) state, “Growing support for the business case among academic[s] and practitioners is evident.” Both CSR as “business strategy” and the more recently refined “sharing of value” (Maltz et al. 2011; Porter and Kramer 2006, 2011) are grounded in what corporations do, and doing good while making a profit underpins the sustainability of corporate financial value globally.

We propose that there is a link between CSR and financial value. The search for this link dates back many decades, where studies generally find an association between CSR and financial value (e.g., Bragdon and Marlin 1972; Pava and Krausz 1996; Waddock and Graves 1997; Cochran and Wood 1984; Margolis et al. 2007). However, continued investigation of this association is worthwhile to determine its significance since doing good and earning a profit sustains both business and society and provides a more unified view of CSR.

CSR appears to have greater impact in a global business environment where corporate regulation is often subordinate to CSR initiatives. This implies that MNCs may already be implementing strategic ethical business practices that serve both corporate and stakeholder interests. As CSR continues to evolve, both MNCs and their stakeholders may reap more benefits and bear fewer burdens of the global business environment where corporate profits are sustained along with the interests of global stakeholders. Perhaps this approach will result in an optimal allocation of business and social responsibilities.

Using a sample of the Fortune 250 firms, we examine the association between CSR and firm value and financial performance. We employ data from KLD Research and Analytics, Inc. (KLD) to measure what companies “do,” and analyze corporate responsibility statements and environmental statements to measure what companies “say,” or their stated aspirations. Our analyses show a positive association between CSR and corporate financial performance. Specifically, we find that social and environmental performance ratings by KLD are associated with higher overall firm value as measured by Tobin's q and with higher cash from operating activities. In contrast, when we assess ethical behavior through the use of corporate ethics statements we fail to find a significant association between a number of ethical aspiration measures and firm value or performance. In other words, we find that what companies say is not associated with the firm's value and performance, while what they do is positively associated with the firm's value and performance.

We then extend our analysis by separately examining MNCs and non-MNCs since they operate in different business environments with varying levels of regulation. We first observe that MNCs CSR statements appear to include more ethical values than non-MNCs. However, for both MNCs and non-MNCs, this ethics discourse is not associated with firm value and performance. Then, when examining the association between KLD ratings and firm value we observe that while MNCs exhibit a positive association between these ratings and firm value and performance, these associations are not significant in models that include non-MNCs.

Overall, our results have a number of implications. First, the overall lack of a positive relationship between ethical aspirations and financial performance indicates that corporate actions are more relevant than CSR statements. Thus, when examining CSR from a value perspective, stakeholders should concentrate on how company actions support these statements. In addition, the variations we find between MNCs and non-MNCs could potentially suggest that the lack of regulation in other countries has a positive impact on CSR sustainable investments. Future research should examine whether it is worthwhile to encourage increased regulation or standards in the United States.

To create a better perspective on the significance of and justification for sustaining the financial value of CSR, it is helpful to review the evolution of CSR and past studies that investigate the link between it and corporate profits. This article briefly summarizes these developments and includes two research questions to advance knowledge on the association between firm value maximization and stakeholder interests.

Literature Review and Research Question Development

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

The Business Case: Maximizing Profits and Doing Good

CSR has evolved since the 1950s, culminating in today's more objective attempts to reconcile corporate profits and stakeholder interests (Carroll and Shabana 2010). Lantos (2001) describes CSR as altruistic, ethical or strategic. These categories are helpful in setting broad parameters of business responsibilities; however Lantos rejects altruistic CSR as illegitimate; thereby appearing to anticipate the current prominence of the business case. This approach to CSR places far greater emphasis on what companies do rather than on what they say. (Carroll and Shabana 2010). Thus a more highly integrated and measurable focus on business and societal objective outcomes may ultimately sustain the financial value of CSR.

The business case approach is also perceived as benefiting from some underlying long-term assumptions about CSR: that it is a better approach than regulation and serves corporate financial self-interest since it is socially proactive (Carroll and Shabana 2010). Further, the business case approach to CSR is directly linked to sustainable financial value and not the altruistic model that Lantos (2001) identifies and rejects. British Petroleum and Exxon are but two examples of strategic “social investments” where protection of the environment is viewed as sustaining corporate and stakeholder financial value through developing alternative energy sources (Munilla and Miles 2005). In the paper industry, Bragdon and Marlin (1972) describe pollution control and financial benefit working in tandem.

Porter and Kramer (2011) attempt to re-define CSR by calling for a more highly integrated form of economic and social benefit where corporate profits and societal interests are more mutual and long-term. They envision the use of core competencies to create social value and a new capitalism (Porter and Kramer 2011). Maltz et al. (2011) continue this emphasis on value as being consistent with stakeholder theory, the best interests of the firm and morality. As the literature advances the discussion of the potential financial impact of CSR, perhaps more global firms are currently sustaining their financial value through integrating business and societal interests. Further in the text, we briefly trace the history of studies that investigate the link between CSR and financial impact.

Financial Impact of CSR

Four decades ago, Bragdon and Marlin (1972) identified a linkage between CSR and financial performance. However, ten years later Arlow and Gannon (1982) found no such linkage. Cochran and Wood (1984) then assert that it is important to determine whether financial performance and CSR are related before attempting to establish a causal link. It should also be noted that no prior study has established causation; however, when extending previous research, these authors find some weak correlation by controlling for asset age (Cochran and Wood 1984, p. 43). By 1996, Pava and Krausz reviewed 21 past studies of correlation between corporate financial and social performance. Expressing surprise due to the cost of social endeavors, these researchers reported that “nearly all empirical studies to date have concluded that firms which are perceived as having met social-responsibility criteria have either outperformed or performed as well as other firms which are not (necessarily) socially-responsible” (Pava and Krausz 1996, p. 322).

Pava and Krausz (1996) also conducted their own study using a financial control group and a sample of 53 companies. Their study revealed some evidence of a positive correlation. A study of corporate social performance by Waddock and Graves (1997) also revealed a link, thereby acknowledging the “emerging influences” of business strategies set forth by Prahalad and Hamel (1994) who emphasize core competencies, an aspect of corporate shared value (Porter and Kramer 2006, 2011). More recently, Margolis et al. (2007), observe a minimal link with a 27% positive correlation between financial performance and CSR in their comprehensive meta-analysis review of 167 past studies. This review was further examined by Reinhardt et al. (2008) who found that while the Margolis study generally shows some CSR impact on profits, it may be due to the fact that more financially viable companies embrace it. In other words it means that for most firms, CSR “pays for itself” (Reinhardt et al. 2008). However, Margolis et al. (2007) also concludes that some firms will benefit from the business strategy for CSR some of the time.

In summary, studies generally indicate some relationship between CSR and financial performance. However, there appears to be ample room for exploring the full significance and impact of their correlation. As the literature advances the business case for CSR, perhaps additional empirical studies will further enhance its credibility.

Based on these previous studies, we formulate the following research questions:

  1. Is there an association between what companies do and say and firm value and performance?
  2. Is that association different for MNCs and non-MNCs?

We posit that the greater unification and refinement of maximizing profits along with meeting stakeholders’ interests will sustain the financial value of global CSR. What firms do as opposed to what they say, may have more impact on the integration and unification of shareholder and stakeholder interests.


  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

We examine CSR statements of U.S. Fortune 250 companies and compare the use of their ethics values to ratings of corporations' social behavior. Our goal is to test whether the use of these ethics values and the extent of their use in corporate reporting are aligned with the ratings of companies’ actions. We then examine the association of financial performance with measures of what companies say based on their use of ethical values in CSR statements and what companies “do,” as measured by KLD ratings.

We first identify three types of documents on corporate websites that are generally referred to as CSR statements (Blodgett et al. 2009):

  1. Corporate Social Responsibility Statement
  2. Global Corporate Social Responsibility Statement
  3. Environmental Statement

Though the names and titles of these statements may vary across companies, we group these statements according to their actual content. It should be noted that some companies include these as PDF documents whereas others present this information in HTML format. We examine both.

We then search each document to identify whether it contains any of 23 ethics values. We examine the use of the 6 universal values (Schwartz 2005) and an additional 17 values identified by past research and presented in Appendix A (Blodgett et al. 2009, 2011). We then construct a variable that counts how many of the universal values (ETHIC6) and how many of all the values are present in these documents (ETHIC23).

We then contrast what companies present in their documents with the ratings companies receive from KLD, a well-known social index (Scalet and Kelly 2010). The KLD ratings provide evidence of companies' actions and their social behavior. KLD focuses on two main areas: social and environmental performance and controversial business issues. KLD constructs the data through examination of specific actions and behavior within each focus area. For example, in the social and environmental performance rating, KLD reports on behavior in several areas like: community, corporate governance, diversity and others. For each of these areas, KLD reports both strengths and concerns. We create an indicator variable that equals 1 for each reported strength or weakness, and zero otherwise. We then sum all strengths and subtract all weaknesses to get an overall rating for the reported area. We hence construct a variable that summarizes the ratings for social and environmental performance (SEP) and one that summarizes the ratings for the controversial business issues (BUS). We further construct a variable that combines both ratings (KLD).

We divide our sample into multinational corporations (MNCs) and non-MNCs based on their financial disclosures. We further examine whether there are differences between MNCs and non-MNCs within our sample, in the use of ethics values, the association between ethics values and companies’ KLD ratings, or the association of both with financial performance and firm value.

To measure the association with firm value we examine TOBIN'S Q as an overall measure of the market to the aggregate of corporate assets. We define TOBIN'S Q as the book value of assets minus the book value of equity plus the market value of equity divided by the book value of assets. To measure company financial performance we study cash flows from operating activities OP-CASH, measured as the operating cash flows divided by total assets. In the multivariate regression models we rely on past research (e.g., Berger and Ofek 1995; Yermack 1996; Anderson and Reeb 2003; Coles et al. 2008) and include the following control variables: FIRM-SIZE, measured as the natural log of total assets, MTB, measured as the market to book ratio; BOARDSIZE, measured as the natural log of the number of board members; LEVERAGE, measured as the ratio of total liabilities to total assets; CAPEXSALES, measured as the ratio of capital expenditure over sales; SEGMENTS, measured as the sum of reported geographic and business segments; FIRM-AGE, measured as the number of years with Compustat coverage. In the Tobin's q regression we also control for the current and lagged returns on assets ratio with ROA, and ROAt-1 and in the OP-CASH regression we control for the standard deviation of operating cash with STD-OP-CASH. Appendix B includes a complete list of variables along with variable definitions and Table 2, discussed in the Results section, presents the descriptive statistics for both the test variables (Panel A) and the variables used in the multivariate analysis (Panel B).


  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

As presented in Table 1, our sample consists of U.S. Fortune 250 companies, as published by Fortune magazine. Out of those, 40 companies had no CSR statements, and 13 companies had CSR statements that were unsearchable, leaving us with a sample of 197 companies. This sample is used to analyze the inclusion of the 23 different ethics values. We also note that 11 companies did not have KLD ratings, so our initial univariate analysis includes only 186 companies. Additional data requirements for the multivariate analysis further reduce the sample by 30 observations to 156.

Table 1. Sample Selection
SampleNumber of Observations
U.S. Fortune 250250
Companies with no CSR(40)
Companies with unsearchable CSR(13)
Sample for ethical value analysis197
Companies with no KLD ratings(11)
Sample for univariate KLD analysis186
Missing other financial data(30)
Final sample for multivariate analysis156
Table 2. Descriptive Statistics
Panel A—test variables
VariableEntire SampleNon-MNCMNC
Social Responsibility62%39%68%***
Human Rights49%29%54%***
Number of observations19741156
Panel B—Variables in Multivariate Analysis
 Entire SampleMNCNon-MNC
  1. *, **, *** denotes that the difference between MNCs and non-MNCs is statistically significant at the 10%, 5%, and 1% level, respectively.

TOBIN'S Q1561.5451.2711211.6141.330351.3081.165


  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

Of the 40 companies with no CSR statements, 16 are non-MNCs and 24 are MNCs. The proportion of non-MNCs without a CSR statement is 24.24%, which is significantly higher than the proportion of MNCs without a CSR statement, 12.37%. The difference is significant at the 5% level. This may serve as initial evidence for differences between MNCs and non-MNCs.

Ethical Value Use—What Companies Say

We next examine the use of the 6 universal values (Schwartz 2005) and the additional 17 values. Table 2 shows the frequency of the use of those values in our sample. As can be seen in the Table, the term “Commit” appears in 91% of the CSR statements in our entire sample, followed by “Environment” (86%), “Safe” (85%), “Global” (84%) and “Responsible” (83%). It is interesting to note that out of the 6 universal values, “Responsible” is used most frequently. On the lower end, only 31% of companies in our sample mention the value “Devote,” followed by “Honest” (35%), and “Transparent” (38%). On average, companies in our sample use about 4 of the 6 universal values and about 15 of the 23 values.

In addition to examining the use of ethics values in our sample as a whole, we are interested in the differences in use of ethics values between MNCs and non-MNCs since MNCs generally operate in a less regulated business environment. MNCs comprise the majority of our sample (79%), with non-MNCs comprising only 21% of our sample. This is not surprising given that we are focusing on the largest companies in the United States. We use T-tests to examine whether differences in the use of the various ethics values are statistically significant across these two groups.

One striking difference that appears between MNCs and non-MNCs is that MNCs seem to use more ethics values than non-MNCs. As shown in the Table, non-MNCs tend to use about three of the six universal values, whereas MNCs use about four. The differences between the two groups are statistically significant for all six values with the exception of “Caring.” When examining all 23 values, non-MNCs tend to use about 12 of the 23 values, whereas MNCs use about 15. This result could suggest that on average, CSR statements for MNCs seem to be more comprehensive than CSR statements for non-MNCs. It may be helpful to view examples of uses of ethics values in MNCs’ CSR statements. A complete set of examples may be found in Appendix A. The examples in Appendix A are grouped as “the six universal ethics values” and “the other 17.” In general, they embody and invite a rich discourse in ethics values, often combining more than one value in each example. Among these terms are “Responsibility,” “Trust,” “Honesty,” and “Fairness,” and the language of sustainability that tells us much about what MNCs say.

For example, a very high percentage of MNCs embrace “Responsibility” (83%) which is fundamental to creating “Trust” and influencing societal reliance and expectations (France 2005). One company speaks of their “core values and culture” as they relate to “Responsibility.” In regard to “Trust”, one MNC refers to “retaining the public trust” and another to “sustaining the trust it has built over many decades.” One MNC expresses “Honesty” as “defining the character of the company through its employees’ honesty.” Another expresses “Fairness” as “ensuring superior service to all” and another as “treating all fairly as part of its profitability.” We also observe striking differences in the use of the term “Human Rights,” where 54% of MNCs include it in their CSR statements and 29% of non-MNCs do not. This result may suggest that human rights seem of less concern for non-MNCs. A similar difference is observed with the terms “Global,” “Social Responsibility,” and “Environment.” These terms are used significantly more by MNCs compared to non-MNCs. Perhaps this indicates that MNCs are more in tune with fundamental aspects of global sustainability.

In summary, MNCs employ many ethics values beneficial to corporate and stakeholder discussion. By identifying and extracting values and their extended meaning and purpose, they can be used to further the business strategy for CSR or its shared value. In this way, the ethics values of CSR are steeped in sustainability. However, it is important that what companies say be congruent with what they do. The analysis of the differences in the use of the various ethics values within the additional context of their KLD ratings can serve as a valuable tool for examining and re-evaluating the ethics issues that MNCs face as part of such a balanced financial sustainability that reconciles corporate and stakeholder interests.

KLD Ratings—What Companies Do

KLD ratings focus on controversial business issues and on social and environmental performance when rating companies. The combined KLD rating (KLD) is higher (less negative) for MNCs compared to non-MNCs suggesting that MNCs, on average, behave more ethically than non-MNCs. This difference is statistically significant. When examining companies’ performance in the controversial business issues (BUS measure) and on social and environmental performance (SEP measure) separately, we can observe that MNCs are more ethical in their social and environmental performance and not necessarily their controversial business issues.

The association between what companies say and do and their financial performance

Univariate Analysis

We next examine the association between the use of the different ethics values and companies’ KLD ratings to study the association between what companies say and what companies do, as well as the association between these variables and firm value and performance. The correlation analysis is presented in Table 3. Panel A of Table 3 presents results of the correlations for the entire sample (both MNCs and non-MNCs). These results show a positive and significant correlation between ETHIC6 and ETHIC23, suggesting that more frequent use of the 6 universal terms is associated with increased utilization of the 23 values that we examine. In addition, we observe a positive and significant correlation between ETHIC6 and ETHIC23 and the overall KLD rating as well as with the social and environmental performance, SEP. This result suggests that companies that use more ethics values in their CSR statements behave more ethically. In other words, on average, companies in our sample do as they say. We observe no significant association between ETHIC6 and ETHIC23 and companies' rating for the controversial business issues (BUS). We find no association between what companies say (as observed in ETHIC6 and ETHIC23) and the firm's value and financial performance. In addition, we find a positive and significant association between firm ratings on social and environmental performance (SEP) and TOBIN'S Q and OP-CASH. These results suggest that what impacts firm value and performance is the way they behave socially and environmentally and not what they say about ethics in their CSR statements.

Table 3. Correlations
  1. This Table shows the Pearson correlations between the summary ethics values, the KLD ratings, firm value and financial performance variables. Panel A shows the correlation analysis for the entire sample. Panel B shows the correlation for multinational companies (MNCs) and Panel C for non-multinational companies (non-MNCs) separately. *P < 0.05, **P < 0.01, ***P < 0.001 Panels A, B and C are based on 186, 145, 41 observations, respectively.

Panel A—complete sample
TOBIN'S Q0.1050.0770.0460.296***0.293***1.000  
Panel B—MNCs
TOBIN'S Q0.0990.0630.0230.308***0.303***1.000  
Panel C—Non-MNCs
TOBIN'S Q−0.128−0.1000.124−0.060−0.0391.000  

Since we are interested in the potential differences between MNCs and non-MNCs, we next separate the sample into groups. The correlation analysis for these two groups is presented in Panels B (for MNCs) and C (for non-MNCs). As can be seen in Panels B and C of Table 3, results for MNCs are essentially the same as those presented for the entire sample. However, results for non-MNCs are very different.

We do not observe any significant association between the use of ETHIC6 and ETHIC23 by non-MNCs and their KLD ratings for social and environmental performance (SEP), or to their overall KLD rating (KLD). We observe a negative and significant association between ETHIC23 and BUS (the rating for the controversial business issues). This result may be interpreted to mean that the more a non-MNC uses ethics values, the lower their BUS rating, or the more controversial business issues they have, the more the need to use ethics values in their disclosures. Suggesting that not only some non-MNCs do not do what they say, but rather, the less they do, the more they say. An additional interpretation is that non-MNCs are trying to conceal their controversial business issues by including more ethics values in their CSR statements.1

Ideally, one might conclude from this data that MNC ethical sustainability has progressed far beyond the days of initial CSR initiatives, although, 12.3% of the MNCs in the Fortune 250 list have no CSR website statement.

Multivariate Analysis

Table 4 presents results for regression analyses that examine how ethics and social responsibility are associated with firm value and financial performance. Panel A presents the results for the entire sample, whereas Panels B and C present the results for MNCs and non-MNCs, respectively. In each panel we estimate four regression models wherein the dependent variable in the first and third columns is TOBIN'S Q and the dependent variable in columns 2 and 4 is OP-CASH. The use of ethical values is measured using ETHIC6 in columns 1 and 2 and using ETHIC23 in columns 3 and 4.

Table 4. OLS Regression of Tobin's Q, and Cash Flow on Ethic Values and KLD ratings
  1. t statistics in parentheses *P < 0.10, **P < 0.05, ***P < 0.01.

Panel A—entire sample
ETHIC60.010 (0.49)0.001 (0.20)  
ETHIC23  −0.001 (−0.10)0.000 (0.26)
BUS−0.087 (−0.82)−0.003 (−0.20)−0.085 (−0.80)−0.003 (−0.21)
SEP0.034*** (3.34)0.005*** (3.84)0.036*** (3.50)0.005*** (3.87)
FIRM-SIZE0.057 (1.25)0.005 (0.96)0.064 (1.39)0.005 (0.92)
MTB0.011** (2.48)0.000 (0.56)0.011** (2.41)0.000 (0.57)
BOARDSIZE−0.392 (−1.51)−0.097*** (−3.04)−0.364 (−1.42)−0.097*** (−3.06)
LEVERAGE−0.157 (−0.60)−0.039 (−1.23)−0.175 (−0.67)−0.039 (−1.22)
CAPEXSALES−0.015 (−0.02)0.201** (2.01)−0.065 (−0.08)0.201** (2.02)
SEGMENTS−0.014 (−1.45)−0.001 (−0.68)−0.014 (−1.49)−0.001 (−0.66)
FIRM-AGE−0.004 (−1.53)−0.000 (−1.33)−0.004 (−1.46)−0.000 (−1.34)
ROA4.516*** (5.40) 4.533*** (5.41) 
ROAt-11.340** (2.09) 1.319** (2.06) 
STD-OP-CASH 0.179 (0.72) 0.181 (0.73)
Constant2.369*** (2.97)0.323*** (3.30)2.313*** (2.90)0.323*** (3.30)
Industry fixed effectsIncludedIncludedIncludedIncluded
Adjusted R20.5540.3430.5530.343
Panel B—MNCs
ETHIC60.026 (0.94)0.003 (0.92)  
ETHIC23  0.002 (0.26)0.001 (0.79)
BUS−0.070 (−0.53)−0.019 (−1.29)−0.070 (−0.53)−0.019 (−1.32)
SEP0.029** (2.29)0.005*** (3.94)0.031** (2.50)0.005*** (4.04)
FIRM-SIZE0.037 (0.61)0.011* (1.68)0.047 (0.75)0.011 (1.62)
MTB0.012** (2.27)0.000 (0.83)0.011** (2.16)0.000 (0.86)
BOARDSIZE−0.392 (−1.19)−0.099*** (−2.75)−0.332 (−1.01)−0.097*** (−2.71)
LEVERAGE−0.219 (−0.60)−0.070* (−1.85)−0.221 (−0.61)−0.070* (−1.83)
CAPEXSALES−0.142 (−0.11)0.296** (2.34)−0.213 (−0.17)0.292** (2.31)
SEGMENTS−0.015 (−1.38)−0.000 (−0.39)−0.016 (−1.42)−0.000 (−0.35)
FIRM-AGE−0.005 (−1.59)−0.000 (−0.77)−0.005 (−1.52)−0.000 (−0.79)
ROA4.983*** (5.07) 4.999*** (5.07) 
ROAt-11.529* (1.94) 1.508* (1.91) 
STD-OP-CASH 0.236 (0.86) 0.237 (0.86)
Constant2.354** (2.46)0.254** (2.39)2.237** (2.32)0.253** (2.37)
Industry fixed effectsIncludedIncludedIncludedIncluded
Adjusted R20.5380.4060.5340.404
Panel C—non-MNCs
ETHIC6−0.033 (−1.42)−0.009 (−1.53)  
ETHIC23  −0.008 (−1.21)−0.002 (−1.08)
BUS−0.099 (−0.58)0.005 (0.13)−0.110 (−0.64)0.004 (0.10)
SEP0.034 (1.64)0.004 (0.72)0.034 (1.62)0.003 (0.64)
FIRM-SIZE0.080 (1.07)0.005 (0.30)0.075 (0.99)0.003 (0.18)
MTB0.044 (1.27)−0.011 (−1.51)0.044 (1.25)−0.011 (−1.53)
BOARDSIZE−0.841** (−2.16)−0.136 (−1.56)−0.858** (−2.17)−0.140 (−1.56)
LEVERAGE0.248 (0.76)−0.106 (−1.45)0.314 (0.97)−0.089 (−1.22)
CAPEXSALES−0.916 (−0.76)−0.205 (−0.77)−0.977 (−0.79)−0.189 (−0.68)
SEGMENTS0.014 (0.42)0.001 (0.13)0.016 (0.51)0.001 (0.19)
FIRM-AGE−0.001 (−0.19)−0.001 (−0.98)0.000 (0.05)−0.001 (−0.78)
ROA3.434 (1.35) 3.984 (1.46) 
ROAt-10.577 (0.32) 0.270 (0.14) 
STD-OP-CASH −0.281 (−0.46) −0.150 (−0.24)
Constant1.760** (2.25)0.460** (2.65)1.786** (2.26)0.471** (2.62)
Industry fixed effectsIncludedIncludedIncludedIncluded
Adjusted R20.5580.3860.5460.350

Results in Columns 1 and 3 show that TOBIN'S Q, our overall measure for firm value, is not significantly associated with any of the ethics variables. This implies that since CSR statements do not require implementation or investment in ethics or social responsibility programs, it has no actual association with firm value. In contrast, results indicate that SEP, a measure for actions that relate to social responsibility, is significantly associated with higher firm value (P < 0.01). Columns 2 and 4 show that operating cash, a measure of current financial performance that is traditionally less subjective to accrual manipulation, is also not associated with any of the ethics measures but is positively associated with SEP (P < 0.01). It is interesting to note that BUS, the rating for the controversial business issues, is not significant in any of our models. These results may indicate that it is the company's actions that relate to social performance and not the company's area of business that is associated with firm value and financial performance. Other results show that these models are well specified, with adj-R2 of 0.55 and 0.34 for TOBIN'S Q and OP-CASH respectively.

In Panels B and C we repeat the analysis for MNC and non-MNC firms. These results show that in these well specified models, SEP is significantly associated with TOBIN'S Q and OP-CASH only among MNC firms, but not among non-MNC firms.

Overall, these results are consistent with the univariate analysis, suggesting that although companies’ use of ethical values in the CSR statements is positively correlated with their KLD ratings, it seems to have no effect on their value or financial performance. The only factor that seems to affect firms’ value and financial performance is their social and environmental behavior as measured by the SEP rating. Therefore, what companies do is paramount; not what they say.

Conclusion: Sustaining the Financial Value of Global CSR

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

The search for the sometimes elusive link between CSR and profits has continued for the past forty years. Such a link could justify doing good in economic terms—thereby meeting obligations to shareholders and other stakeholders. “It would license companies to pursue the good—even incurring additional costs—in order to enhance their bottom line and at the same time contribute more broadly to the well-being of society” (Margolis et al. 2007, pp. 4, 5). Such a relationship may be CSR's most vibrant and sustainable force for both stockholders and society. After all, the desire to do good is often linked to reward—whether economic, ethical or altruistic. We propose that corporate acts that seek profits with societal benefits are the key to sustaining the financial value of global CSR and that stakeholders should evaluate CSR statements by examining underlying corporate acts. Therefore, this article has continued the search for a link between corporate profits and CSR. We do so through a triangular study of what companies say, what they do, and firm financial performance.

We analyze firms that appear on the Fortune 250 list and find a positive association between what they do according to KLD ratings, and what they say about ethics in their various CSR statements. We further find that company actions of social responsibility are associated with their overall financial performance and firm value but that ethical statements of social responsibility are not similarly associated with these financial outcomes. Thus, corporate good acts enhance firm profitability. Perhaps this association will help to reconcile the perceived conflict between profit maximization and stakeholder interests and further the financial sustainability of global CSR. It may be beneficial for future research to concentrate on the origins of the differences that we find between MNCs and non-MNCs and whether these differences emanate from the business environment, in particular its level of regulation.

  1. 1

    We cannot rule out the possibility that the lack of results for the non-MNCs sample here and in subsequent analysis is due to lack of power because of the smaller sample size.


  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B
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Appendix A

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

Definitions and Examples of Global Ethics Values in MNCs’ CSR

The Six Universal Ethics values:

Care is defined as regard coming from desire or esteem; a person or thing that is an object of attention, anxiety, or solicitude. Caring is defined as to give care; to feel interest or concern; to be concerned about. For example:

It is our Culture to take care of our People and our Planet, and our goal to produce a favorable Performance. (Southwest Airlines)

Employees focus on teaching young children and other community members the importance of caring for the environment. (Avon Products)

At the heart of CBS’ public service commitment is the CBS Cares campaign, consisting of PSAs created by CBS and featuring talent from a wide array of programming. (CBS)

Citizenship is defined as the status of being a citizen; membership in a community; the quality of an individual's response to membership in a community. For example:

If citizenship is defined as how one treats others, then our goal is to always demonstrate exemplary corporate citizenship. (Office Depot)

We are committed to meeting the highest standards of corporate citizenship by protecting the health and safety of our employees, safeguarding the environment and making a positive impact on the communities in which we do business. (Hess)

Fair, Fairly, Fairness is defined as marked by impartiality and honesty; free from self-interest, prejudice, or favoritism; conforming with the established rules; allowed. For example:

Ford Credit continuously utilizes and works to develop robust processes to produce a superior service experience that ensures customers are always treated fairly and respectfully. (Ford Motor)

By doing our part and acting with care today, we're helping to build a better world for tomorrow: A world where ethics and profit are not mutually exclusive. And where everyone is treated fairly. (Kraft Foods)

Our success depends on selling competitive products and services that meet the needs of consumers and clients, treating them fairly at all times and providing support when needed. (Citigroup)

Respect is defined as high or special regard; the quality or state of being esteemed. For example:

To maintain good relations with our employees, we respect freedom of association, provide for regular consultation on matters of mutual concern and carefully examine grievances communicated by our employees, as appropriate. (Constellation Energy)

We recognize that sustainable growth comes from operating with absolute integrity and in a way that respects our shareholders, clients, employees, and communities and the environment. (State Street)

Responsible, Responsibleness, Responsibly is defined as liable to be called on to answer; liable to be called to account as the primary cause, motive, or agent; liable to legal review or in case of fault to penalties; able to answer for one's conduct and obligations: trustworthy; able to choose for oneself between right and wrong; marked by or involving responsibility or accountability. For example:

We want each of our 95 000 Merck employees to feel like they own and are responsible for the business. (Merck)

Merck scientists are applying their expertise in green chemistry principles to manage our expanded research activities and manufacturing processes in an environmentally responsible manner. (Merck)

GE believes it is even more important to sustain and demonstrate our commitment to operating responsibly in challenging economic times. Our commitments are not conditional—rather, they are entrenched in our core values and our commitment to GE's culture of integrity, ethics and compliance. (General Electric)

Trust, Trusted, Trustworthiness is defined as assured reliance on the character, ability, strength, or truth of someone or something; one in which confidence is placed; a charge or duty imposed in faith or confidence or as a condition of some relationship, something committed or entrusted to one to be used or cared for in the interest of another; care, custody. For example:

We talk to parents frequently at our parks, at focus groups and screenings and via multiple online platforms. These interactions are fundamental to our relationship with parents, and critical to sustaining the trust we've built up over our 85-year history. (Walt Disney)

Being a good corporate citizen means operating with a steadfast dedication to the highest standards of ethics, integrity and accountability. AT&T is committed to operating in this way. Along with a dedication to strict adherence to the laws and regulations that govern our business, this commitment has helped AT&T retain the public's trust and confidence. (AT&T)

The Other Seventeen Values:

Accountable, accountability is defined as subject to giving an account: answerable; capable of being accounted for: explainable. For example:

External engagement is a critical aspect of our business as the focus on energy-related issues, transparency, and accountability has grown among an increasingly diverse range of stakeholders. (Exxon Mobil)

Throughout our history, we've chosen to weave our enduring values into the very fabric of our company. These values—authentic, accountable, innovative and caring—describe how we work with, and will be judged by, our business partners, investors, consumers, customers and each other as employees. (Kimberly Clark)

Commit, Committed, committing, commitable, commitment is defined as to put into charge or trust: entrust; obligate, bind; to pledge or assign to some particular course or use; to obligate or pledge oneself. For example:

Our uncompromising commitment to high quality, ethical performance, and integrity enables us to consistently exceed our customers’ expectations. (SAIC)

We are committed to providing the tools, resources and opportunities to build leadership capacity and enhance leadership effectiveness. (Marriott)

Devote, devoted, devoting is defined as to commit by a solemn act; to give over or direct to a cause, enterprise, or activity. For example:

Whether it's time, talents or financial assistance, Unum and its employees devote a lot to help students of all ages prepare for a better future. (Unum)

Gap has expanded on Gap Inc.'s commitment to people in developing countries through our (PRODUCT) RED TM program. This program is devoted to helping eliminate AIDS in Africa. (Gap, Inc.)

Disclose is defined as to expose to view; to make known or public. For example:

U.S. Steel was founded and built on principles of ethical business practice that foreshadowed the code of conduct which our directors and employees follow today. These include honesty and integrity, compliance with the law, fair dealing, protection and proper use of company assets, and full and accurate disclosure. (United States Steel)

To ensure compliance with our Code of Business Conduct, employees must disclose conflicts of interest and other Code-related situations or concerns. (Marathon Oil)

Environment, Environmental, environmentally is defined as the circumstances, objects, or conditions by which one is surrounded; the complex of physical, chemical, and biotic factors (as climate, soil, and living things) that act upon an organism or an ecological community and ultimately determine its form and survival; the aggregate of social and cultural conditions that influence the life of an individual or community. For example:

From reducing greenhouse gas (GHG) emissions and energy consumption to cutting solid waste and water consumption, Heinz is making a positive difference as a global food company that cares about the environment. (H.J. Heinz)

While many companies work hard to protect the environment from their business, at Waste Management, protecting the environment is our business. (Waste Management)

Global, Globally, Globalization is defined as of, relating to, or involving the entire world: worldwide. For example:

The ever increasing demand for energy makes conservation one of the most pressing issues facing our global society today. (Whirpool)

Whether through volunteerism, scientific exploration, or working with clients to help transform the systems by which our planet works, they [IBMers] exemplify what it means to be a global citizen. (IBM)

Governance, Government is defined as the act or process of governing; authoritative direction or control; the body of persons that constitutes the governing authority of a political unit or organization: the officials comprising the governing body of a political unit and constituting the organization as an active agency. For example:

For Chevron, good corporate governance means being transparent with and responsive to its stockholders while managing the company for long-term success. (Chevron)

We manage our business for growth over the moderate to long term, and we are committed to meeting the highest ethical standards in the governance of our company. (American Express)

Honest, Honesty is defined as free from fraud or deception: legitimate, truthful; genuine, real; reputable, respectable; credible, praiseworthy; marked by integrity; marked by free, forthright, and sincere expression: frank. For example:

Our conviction with respect to responsible, honest and ethical behavior informs our Code of Conduct, and the character of our company is defined by the personal integrity and honesty of our employees. (JP Morgan Chase)

We value an open and honest dialogue with our stakeholders, and we are continually advancing the information we share with our stakeholders. (Coca Cola)

Human Rights is defined as: rights (as freedom from unlawful imprisonment, torture, and execution) regarded as belonging fundamentally to all persons. For example:

Because our supply chain varies by country and seed crop, we conducted a global risk assessment with the help of outside experts to prioritize our human rights work. This assessment looked at the areas covered by the human rights policy and ranked our country operations in terms of potential for risk of specific human rights concerns. (Monsanto)

In the area of human rights, the challenges are many, as the violations around the world are egregious and widespread. The topic itself is overwhelming, even to a multi-billion dollar company like Dell. Labor challenges such as working conditions, wages, and health and safety are cross-industry and not region-specific. (Dell)

Integrity is defined as firm adherence to a code of especially moral or artistic values: incorruptibility; an unimpaired condition: soundness; the quality or state of being complete or undivided: completeness. For example:

As Textron employees, we are expected to carry out the company's business with fairness, honesty, integrity and high ethical standards, and in compliance with the laws and regulations of the countries in which we conduct business. (Textron)

To help us deliver on our promise of business integrity, Best Buy goes beyond what is required, or even expected, to assure that our relationships with employees, consumers, vendors and communities are not merely a series of transactions, but instead an ongoing partnership. (Best Buy)

Quality is defined as a degree of excellence: grade; superiority in kind. For example:

The US Airways Corporate Giving Program invests in IRS 501(C)(3) nonprofit arts and culture, human services and education organizations that enhance the quality of life in the airline's hub and focus cities. (US Airways Group)

High quality financial reporting is our responsibility— one we execute with integrity and within both the letter and spirit of the law. (Proctor and Gamble)

Reputation, Reputational is defined as overall quality or character as seen or judged by people in general; recognition by other people of some characteristic or ability; place in public esteem or regard: good name. For example:

Goodyear associates work together around the world to earn the trust of customers and maintain our stellar reputation. (Goodyear)

Throughout 3M's more than 100 years, we have worked hard to earn our reputation of trust, integrity and ethical business practices. (3M)

Safe, Safely, Safeness is defined as free from harm or risk: unhurt; secure from threat of danger, harm, or loss; affording safety or security from danger, risk, or difficulty; trustworthy, reliable. For example:

Our management approach to social responsibility in the workplace is to compensate our employees well, train them thoroughly, keep them safe, provide them with abundant opportunities for personal and career development, and encourage them to become shareowners. (UPS)

Among these goals, PepsiCo has committed to improve water use efficiency by 20 percent per unit of production by 2015, strive for positive water balance in our operations in water-distressed areas and provide access to safe water to 3 million people in developing countries by the end of 2015. (PepsiCo)

Secure, Securely, Secureness is defined as free from danger; free from risk of loss; affording safety; trustworthy, dependable; to relieve from exposure to danger: act to make safe against adverse contingencies; to put beyond hazard of losing or of not receiving: guarantee. For example:

Creating a sustainable and environmentally secure future calls for an active approach to preserving and improving the world around us. (KBR)

As the global population continues to grow, there is little doubt that food security will rank among the world's highest priorities. Today at Mosaic, it already does. (Mosaic)

Steward is defined as one who actively directs affairs: manager; to act as a steward for: manager. For example:

By promoting environmental stewardship, workplace health and safety, employee development, and philanthropy, we help our customers provide the food, fuel, fiber, and infrastructure needed by a rapidly growing and developing world. (John Deere)

We define good water stewardship as borrowing water responsibly and returning it clean to communities. (Nike)

Transparent, Transparently, Transparency is defined as free from pretense or deceit: frank; easily detected or seen through: obvious; readily understood; characterized by visibility or accessibility of information especially concerning business practices. For example:

In addition to our general ethical business conduct policy applicable to all Omnicom employees, senior financial officers of Omnicom and its subsidiaries are also subject to our Code of Ethics for Senior Financial Officers, designed to aid in assuring that Omnicom's financial reporting is proper and transparent. (Omnicom Group)

We aim to be open about our business operations, transparent in our dealings with stakeholders, and compliant with the laws and regulations that apply to our business. (Microsoft)

Appendix B

  1. Top of page
  2. Abstract
  3. Introduction
  4. Literature Review and Research Question Development
  5. Methodology
  6. Sample
  7. Results
  8. Conclusion: Sustaining the Financial Value of Global CSR
  9. References
  10. Appendix A
  11. Appendix B

Variable Definitions and Descriptive Statistics

Variable NameVariable Definition [source]
ETHIC6Variable counting the appearance of the 6 universal ethical values in the companies’ CSR statement [CSR statements]
ETHIC23Variable counting the appearance of the 23 ethical values in the companies’ CSR statement [CSR statements]
BUSVariable counting the strengths minus weaknesses reported by KLD for the company in the area of controversial business issues [KLD database]
SEPVariable counting the strengths minus weaknesses reported by KLD for the company in the area of social and environmental performance [KLD database]
KLDOverall KLD rating constructed by adding BUS and SEP [KLD database]
TOBIN'S Q(Book value of assets − (book value of equity plus the market value of equity)/ book value of assets) [Compustat AT − (CEQ + PRCC_F × CSHO)/AT]
OP-CASHCash flow from operations divided by total assets [Compustat data OANCF]
FIRM-SIZEThe natural logarithm of total assets [Compustat data AT].
MTBMarket value of equity divided by book value of common equity. [Compustat CEQ divided by (CSHO*PRCC_F)]
BOARDSIZEThe natural log of the number of members serving on the board of directors [BoardEx]
ROAThe ratio of net operating income before depreciation divided by total assets [Compustat: OIBDP/AT]
ROAt-1The ratio of net operating income before depreciation divided by total assets in the preceding year [Compustat: OIBDP/AT]
LEVERAGERatio of total liabilities to total assets [Compustat (data DLC+data DLTT)/data AT)]
CAPEXSALESthe ratio of capital expenditures to sales [Compustat CAPX/SALE]
SEGMENTSThe number of reported geographic and business segments [Compustat Segment file]
FIRM-AGEThe natural log of the number of years the firm has Compustat data [Compustat]
STD-OP-CASHThe standard deviation of cash flow from operations calculated over a period of no less than three years and no more than ten years [Compustat]