Ioannis Oikonomou is a Lecturer in Finance at the ICMA Centre at the University of Reading in Whiteknights Reading, UK. Chris Brooks is a Professor of Finance at the ICMA Centre at the University of Reading in Whiteknights Reading, UK. Stephen Pavelin is a Professor in Business and Society at the School of Management at the University of Bath in Bath, UK.
The Impact of Corporate Social Performance on Financial Risk and Utility: A Longitudinal Analysis
Article first published online: 18 APR 2012
© 2012 Financial Management Association International.
Volume 41, Issue 2, pages 483–515, Summer 2012
How to Cite
Oikonomou, I., Brooks, C. and Pavelin, S. (2012), The Impact of Corporate Social Performance on Financial Risk and Utility: A Longitudinal Analysis. Financial Management, 41: 483–515. doi: 10.1111/j.1755-053X.2012.01190.x
The authors thank an anonymous referee for useful comments that substantially improved this article. The usual disclaimer applies.
- Issue published online: 6 JUN 2012
- Article first published online: 18 APR 2012
This study focuses on the wealth-protective effects of socially responsible firm behavior by examining the association between corporate social performance (CSP) and financial risk for an extensive panel data sample of S&P 500 companies between the years 1992 and 2009. In addition, the link between CSP and investor utility is investigated. The main findings are that corporate social responsibility is negatively but weakly related to systematic firm risk and that corporate social irresponsibility is positively and strongly related to financial risk. The fact that both conventional and downside risk measures lead to the same conclusions adds convergent validity to the analysis. However, the risk-return trade-off appears to be such that no clear utility gain or loss can be realized by investing in firms characterized by different levels of social and environmental performance. Overall volatility conditions of the financial markets are shown to play a moderating role in the nature and strength of the CSP-risk relationship.