Corporate Reputation and Social Performance: The Importance of Fit

abstract    Utilizing data on a sample of large firms, we estimate a model of corporate reputation. We find reputation, derived from the assessments of managers and market analysts, to be determined by a firm's social performance, financial performance, market risk, the extent of long-term institutional ownership, and the nature of its business activities. Furthermore, the reputational effect of social performance is found to vary both across sectors, and within sectors across the various types of social performance. Specifically, our results demonstrate the need to achieve a 'fit' among the types of corporate social performance undertaken and the firm's stakeholder environment. For example, a strong record of environmental performance may enhance or damage reputation depending on whether the firm's activities 'fit' with environmental concerns in the eyes of stakeholders.     

The Impact of Corporate Social Performance on Financial Risk and Utility: A Longitudinal Analysis

This study focuses on the wealth‐protective effects of socially responsible firm behavior by examining the association between corporate social performance (CSP) and financial risk for an extensive panel data sample of S&P 500 companies between the years 1992 and 2009. In addition, the link between CSP and investor utility is investigated. The main findings are that corporate social responsibility is negatively but weakly related to systematic firm risk and that corporate social irresponsibility is positively and strongly related to financial risk. The fact that both conventional and downside risk measures lead to the same conclusions adds convergent validity to the analysis. However, the risk‐return trade‐off appears to be such that no clear utility gain or loss can be realized by investing in firms characterized by different levels of social and environmental performance. Overall volatility conditions of the financial markets are shown to play a moderating role in the nature and strength of the CSP‐risk relationship.     

Factors influencing the quality of corporate environmental disclosure

Many firms choose to communicate their environmental strategies through voluntary environmental disclosures. This paper examines patterns in the quality of voluntary environmental disclosures made by a sample of around 450 large UK companies drawn from a diverse range of industrial sectors. The analysis distinguishes between five facets of quality, including the disclosure of group‐wide environmental policies, environmental impact targets and an environmental audit. We examine how the decisions firms face regarding each facet of quality are determined by firm and industry characteristics, and find the quality of disclosure to be determined by a firm's size and the nature of its business activities. Specifically, we find high quality disclosure to be primarily associated with larger firms and those in sectors most closely related to environmental concerns. In contrast to several recent contributions, we find that the media exposure of companies plays no role in stimulating voluntary disclosures. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.     

Playing away to win at home

This paper presents a model of the interaction between two rival firms based in the same country. Each firm must decide how to serve a foreign market (export or foreign production) and how much to invest in a corporate-wide asset that reduces production costs and/or augments the willingness-to-pay for their product. In this scenario, the firms’ foreign direct investment decisions are interdependent. Furthermore, strategic motives for FDI relate to a firm's domestic, as well as foreign, market profits. One possibility is that a firm sets up overseas production even though its foreign market profits would be higher by exporting.     

Corporate Community Contributions in the United Kingdom and the United States

We address the issue of UK firms relatively poor record of corporate community contributions (CCCs) by subjecting them to formal comparison with those of US firms. To this end, we employ data on the top 100 UK, and top 100 US, contributors in 2001. Cross-country differences are described and discussed with reference to a stakeholder perspective on corporate social responsibility, and CCCs in particular. In this connection, we evaluate the role played by the sectoral composition of activities, as well as national, cultural and institutional factors. Our findings highlight a number of significant cross-country differences in the pattern of CCCs and suggest that UK and US firms operate within significantly different stakeholder environments.JEL Classification: M14Stephen Brammer is a Lecturer in Business Economics at University of Bath, with research interests in the area of corporate social responsibility. Much of his recent research has examined the stimuli for corporate socially responsive behaviour, the management of business social responsibilities, and the relationships between firm social performance and other dimensions of corporate performance. Recent publications include articles in the Journal of Management Studies, the European Management Journal and Business Ethics: A European Review.Stephen Pavelin is a Lecturer in Economics at the University of Reading, with research interests in foreign direct investment and corporate social responsibility. His current research agenda seeks to address: the effect of corporate social performance on the reputations and financial performance of firms; the incidence and quality of social and environmental reporting; demographic diversity (regarding gender and ethnicity) among corporate boards; and the effect of firms geographical diversification on their social performance. Recent publications include articles in the International Journal of Industrial Organisation, the Open Economies Review, the European Management Journal and Business Ethics: A European Review.     

Voluntary Environmental Disclosures by Large UK Companies

Abstract:  This paper examines the patterns in voluntary environmental disclosures made by a sample of large UK companies. The analysis distinguishes between the decision to make a voluntary environmental disclosure and decisions concerning the quality of such disclosures and examines how each type of decision is determined by firm and industry characteristics. We find that larger, less indebted companies with dispersed ownership characteristics are significantly more likely to make voluntary environmental disclosures, and that the quality of disclosures is positively associated with firm size and corporate environmental impact. We find significant cross-sector variation in the determinants of both the participation and quality decisions. Furthermore, the manner of this variation differs between the two.     

Corporate Charitable Giving, Multinational Companies and Countries of Concern

This paper investigates the degree to which corporate charitable giving is influenced by a firm's internationalization and/or whether it has operations in one or more countries of concern. For a sample of large UK firms, we find evidence of a positive effect not for internationalization per se, but only for a presence in particular countries. In this connection, the salient country characteristic is a lack of political rights and/or civil liberties, and the positive impact on charitable giving is restricted to a presence in only those countries that are, according to Freedom House indicators, most lacking in this respect. Furthermore, our study highlights a mode of corporate response to stakeholder concerns and pressures – offsetting – that is qualitatively different from those suggested in earlier conceptual literatures.     

Divide and Rule: Geographical Diversification and the Multinational Firm

We develop a model to illustrate a motive for FDI that derives from a firm's overall locational strategy. A firm, that initially has a plant in its home country, may choose to also have a foreign plant in order to improve its bargaining position versus local labour unions. This permits the firm to reduce wages. Furthermore, the existence of a second foreign plant acts to discipline the demands of foreign workers. Thus, the firm is faced with a link between the wage and its degree of geographical diversification. This drives up the number of plants the firm has in equilibrium.