Corporate social responsibility and financial performance: Evidence from the financial sector

Abstract

Does corporate social responsibility (CSR) entail economic and financial loss or does it guarantee competitive advantage? To answer this question, many studies have aimed to establish, largely in samples from multiple industries, the relationship between corporate social performance (CSP) and corporate financial performance (CFP). These studies have produced conflicting results and any attempt to give a generalised and coherent conclusion has proved inadequate. This paper investigates the possible connection between CSP (measured by ethical rating) and CFP (measured by price-to-book-value) in a sample of international financial intermediaries. Although most previous contributions seem to confirm the hypothesis of the existence of a positive relationship between the two variables, the paper finds no clear evidence of a significant relationship between CSP and CFP in the financial sector.