This paper analyses the relationship between firms’ Corporate Social Responsibility activities and their economic performance, taking into account seven macro-categories of corporate social responsibility (CSR), six marketbased and accounting-based performance indicators and by disaggregating for the firms’ sector of activity. In particular, through a representative sample of 988 US-based companies from nine different sectors (Basic Materials, Consumer Goods, Consumer Services, Financials, Health Care, Industrial, Oil & Gas, Technology and Utilities), we study the dynamics of possible endogenous and non-linear relationships through the Arellano-Bond technique in the dynamic panel. The results show some common patterns and sectorial specificities—CSR engagement in general raises firms’ total stock returns and reduces financial risks, but this depends on the area of CSR in which the firms invest. The results of an accounting-based figure analysis are less univocal, showing patterns that depend both on the specific area of CSR and the sectorial activities conducted.

Introduction

Corporate social responsibility (CSR) can be broadly defined as the positive or “responsible” attitude of a company toward all its stakeholders. The definition is itself inherently linked to the idea that firms or companies can benefit from positively engaging with their various stakeholders, both internal and external, such as employees, board members, communities, workers’ families and so on, as well as by caring for the (broadly defined) environments in which they operate. According to Sheldon (1924), CSR is voluntary engagement in social and environmental programmes. Ever since this seminal study, CSR has been considered a common practice to be promoted by governments, non-governmental organisations and consumers (Lee, 2008). However, the impact of CSR on the economic performance of companies has not always been viewed in a positive light. Milton Friedman (1972), for instance, saw CSR as an unfair and costly burden to shareholders. Benabou and Tirole (2010) discuss three different visions of CSR and the rationale for both a positive and a negative link between CSR and companies’ performances. Thus, it is of no surprise that a large body of literature has been devoted to the empirical analysis of the relationship between CSR and economic performance, without any definitive conclusion. Some scholars have shown a positive relationship between CSR and economic performance—Margolis and Walsh (2003), Orlitzky et al. (2003), Rettab et al. (2009), Lin et al. (2009) and Sun (2012) showed that companies involved in CSR take advantage of the positive environments they have created. Also, Chen and Wang (2011), Alafi and Hasoneh (2012) and Galbreath and Shum (2012) statistically assessed the positive impact that CSR has on its stakeholders. Quazi and Richardson (2012) conducted a meta-analysis of 51 prior studies included in Orlitzky et al. (2003) and showed that by increasing the sample size, the level of significance between the economic and CSR variables rises as well. However, other scholars found a negative relationship between the two. Vance (1975), Wood and Jones (2005), Brammer and Millington (2008), Anginer et al. (2008), Brammer et al. (2005) and Nejati and Ghasemi (2012) show that the market punishes companies’ efforts to improve their CSR activities.1 Ahamed et al. (2014), Aupperle et al. (1985) and McGuire et al. (1988) argue that the relationship between CSR and economic performance is unclear.