The relationship between social performance and financial performance, literature review

Abstract

The aim of this article is to study the relationship between social performance and financial performance in the light of various theoretical works and the results of empirical studies dealing with this issue.

Indeed, since the appearance of the concept of Corporate Social Responsibility (CSR) and even before elucidating this notion and agreeing on the appropriate measures to evaluate social performance, debates have emerged on the link between it and financial performance, and have continued to multiply, in response to controversial theoretical work and inconclusive empirical results.

Thus, if a good number of researchers advocate the social commitment of the company and associate it with innumerable advantages including translated in particular by the improvement of financial performance, it is not the same for other researchers who do not share this point of view. The latter formally reject any possible positive link between social performance and financial performance and instead defend the opposite hypothesis that suggests a negative relationship, taking into account the additional costs borne by the entity. A third category of theoretical work which rejects the two previous hypotheses is also highlighted in the literature. These works estimate that between social performance and financial performance, there can be no significant connection, hence a neutral effect.

The meta-analyses examining a significant number of empirical studies on this subject, although they generally tend towards the confirmation of a positive relationship between social performance and financial performance, do not hesitate, for some, to show reluctance to results of these empirical validations due to certain methodological inconsistencies.

Keywords: Corporate Social Responsibility, Social Performance, Financial Performance

JEL Classification: M14

Paper type: Theoretical Research