Does Social Performance Really Lead to Financial Performance? Accounting for Endogeneity Articles uri icon

authors

  • GARCIA CASTRO, ROBERTO GUSTAVO
  • ARINO, MIGUEL ANGEL
  • CANELA, MIGUEL ANGEL

publication date

  • March 2010

start page

  • 107

end page

  • 126

issue

  • 1

volume

  • 92

International Standard Serial Number (ISSN)

  • 0167-4544

Electronic International Standard Serial Number (EISSN)

  • 1573-0697

abstract

  • The empirical relationship between a firm's social performance and its financial performance is still not well established in the literature. Despite more than 30 years of research and
    more than 100 empirical studies on the issue, the results are
    still mixed. We argue that the heterogeneous results found in
    previous studies are not due exclusively to problems related
    with the measurement instruments or the samples used. Instead,
    we posit that a more fundamental problem related with the endogeneity
    of social strategic decisions could be driving most of the
    empirical findings. We show that, using a panel data of 658 firms
    from 1991 to 2005, how some of the results found in previous
    research change, and some are even reversed when endogeneity
    is properly taken into account.