Signaling virtue: Does firm corporate social performance trajectory moderate the social performance–financial performance relationship? |
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| Institution: | 1. Smith School of Business, Queen''s University, Canada;2. School of Business Administration, University of Mississippi, United States;3. Department of Marketing, McCombs School of Business, University of Texas at Austin, United States;1. University of Auckland Business School, Auckland, New Zealand;2. University of Melbourne, Parkville, VIC, Australia;3. University of Melbourne, 198 Berkeley Street, Level 7, Parkville, VIC 3010, Australia;4. University of Sydney, Darlington, Sydney, Australia |
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| Abstract: | Over the past 40 years, scholars have demonstrated the effects of corporate social performance (CSP) on corporate financial performance (CFP), finding mixed results on the main effect of CSP on CFP. This study moves beyond the search for a universal main effect of CSP on CFP to examine factors that drive some firms to experience greater returns from their CSP efforts. Building from the signaling and stakeholder theory definitions of reputation and the trajectory literature in psychology, this study examines the following question: what is the impact of a firm's CSP reputation on the relationship between CSP actions and CFP in the current period? Findings based on a sample of 351 US firms demonstrate that firms with either a history of growth in negative CSP, a propensity toward increasing negative CSP, or a more inconsistent history of positive or negative CSP, experience decreased returns from current period investments in CSP. |
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