The Impact of Social Responsibility on Corporate Performance: Evidence from Taiwan

Abstract

Prior studies show a mixed relation between corporate social responsibility (CSR) and corporate financial performance (CFP). This paper attempts to address the issue by using listing companies from Taiwan during 2007-2010. Contrary to prior studies that use qualitative approaches to construct a CSR index, in order to examine the relation between CSR and CFP this study directly adopts the CSR score with a scale from zero to 100 points from the CSRHub database of companies’ social, environmental, and governance performance.  We find that (1) there is a positive and significant interaction between CSR and CFP, (2) high score CSR firms tend to outperform low score CSR firms and (3) the governance dimension of CSR has a more significant and positive association with stock price returns than other dimensions (community, employees, and environment) of CSR. Our results, therefore, provide additional information regarding the relation between CSR and CFP within the context of emerging markets.