Industry importance of CSR impact on Financial Performance

Abstract: This study examines whether the relationship between Corporate Social Responsibility (CSR) and Financial Performance (FP) is dependent on industry belonging. Our accounting-based measurement of FP (Return On Assets) displayed an overall negative correlation with ESG scores, while our market based measurement of FP (Tobin Q) displayed an overall insignificant relationship. We separated the studied firms into the industries Basic Materials, Consumer Cyclicals, Consumer non-Cyclicals, Energy, Financials, Healthcare, Industrials, Real estate, Technology, and Utilities. When separating the studied firms into their respective industries we found that both our accounting-based and market-based measurements of FP was significantly correlated with CSR in 7/10 industries and 3/10 industries respectively. The industries different CSR and FP relationships suggests that firms in different industries have different implications of their CSR practices, and that more extensive industry considerations are necessary to further understand the relationship between CSR and FP.