The effect of corporate ethics on corporate financial performance focussing on internal stakeholders.

Abstract: This study examines the effects of corporate ethics on corporate financial performance by focusing on internal stakeholders. I hypothesize that corporate ethics positively affects corporate financial performance when focusing on internal stakeholders. In order to test four hypotheses, data from 5719 companies in varying countries and industries is retrieved from the Asset4 and Worldscope database. Contrary to our expectations, the results show that corporate ethics does not affect financial performance when focusing on internal stakeholders. These findings are combined with the results of previous studies in order to formulate practical implications. Furthermore, based on our results and prior literature we identify desirable improvements in the theoretical framework, variable measurement and sample selection.