Equilibrium among corporate social performance, financial performance, and social pressures

What is it about?

This study finds that CFP is uncorrelated with CSP and negatively correlated with social pressure. CSP is decreasing in CFP and increasing in social pressure. Social pressure is increasing in CSP and decreasing in CFP, which is consistent with social pressure being directed to soft targets. Disaggregating the panel indicates that CFP is positively correlated with CSP for firms in consumer markets and negatively correlated for industrial markets. For consumer markets CSP is increasing in CFP, which is consistent with a perquisites hypothesis that managers spend on CSR when they can afford it. For industrial markets CSP is decreasing in CFP, which is consistent with a moral management hypothesis. For both consumer and industrial markets CSP is responsive to social pressure.

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Why is it important?

The relations among CFP, CSP, and social pressure can differ across markets and can differ over time due to changes in the social and political sentiment in the country.