Does CSR Improve Financial Performance?

Abstract: This study examines the relationship between corporate social performance (CSP) and corporate financial performance (CFP) in a Swedish context, by using data on firms listed on Nasdaq Stockholm between 2009 and 2014. Overall, our study mainly suggests a neutral relationship between CSP and CFP on an aggregated level. By analyzing the link on a disaggregated level, a weak positive relationship is found between social performance and market-based CFP. Furthermore, we expand our study by examining whether risky industries, in terms of exposure to environmental and social issues, show a more positive relationship between CSP and CFP compared to other industries. Our results indicate that there is a stronger positive relationship between social performance and market-based CFP for socially risky industries compared to other industries. This finding suggests that firms operating in these types of industries have more to gain financially from adopting CSR practices aimed to address social issues.