Corporate Social Responsibility (CSR) and Firm Performance

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The discourse of corporate social responsibility (CSR) has grown rapidly over the last decade. There are different
views of the role of the firm in a society and disagreements as to whether wealth maximization should be the sole
goal of a corporation. There is also a debate on whether CSR practices are beneficial for firms. Studies examining
the performance of firms that have adopted a CSR policy within a range of sectors in various countries provide
inconsistent results. Some studies show excess returns among companies adopting a CSR policy relative to the
companies that do not adopt such a policy, while others do not find differences in returns. To further dispel the
ambiguity on this issue, the authors explore the relationship between CSR adoption and financial performance of
firms’ shares in Israeli market, with a US market benchmark as a test of specificity. The findings reveal that no
significant difference exists between the performance of firms adopting a CSR policy and firms that do not. Thus,
the inclusion of investments in socially-responsible firms in an investor’s portfolio does not appear to significantly
impact the portfolio’s performance. Managers and investors interested in investing in CSR may do so without any
concern of the lower returns or performance. This study provides an additional support for the CSR School in that
its findings indicate that, on the one hand, investments in firms that integrate social and environmental
responsibility are just “as good as” investments in firms that do not. On the other hand, such investments can be
seen as superior, since in addition to the financial returns, investors contribute to changing the face of the global
environment and are creating a system for support and enforcement that ensures the existence of a better world for
the children in the present and future.
Original languageEnglish
Pages (from-to)1691-1703
Number of pages13
JournalJournal of Modern Accounting and Auditing
Issue number11
StatePublished - 2012


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