Index of Paper Presentations for the Parallel Sessions - Academy of ...

University of Toledo2801 West Bancroft StToledo OH 43606, USAPhone: (419)-530-2258Fax: (419)-530-2290Email: sachin.modi@utoledo.eduExtended AbstractThere is a growing recognition among managers and scholars that firms need to balance their own growth with thebroader interests of the society to chart a sustainable path forward (Varadarajan and Menon 1988). Since developingcountries already lag behind in important indices of quality of life for their citizens, the societal implications ofcorporate actions become even more accentuated in these economies (Chapple and Moon 2005). However, firms areoften wary of investing in socially responsible initiatives as they remain unconvinced about the financial returns oftheir Corporate Social Performance (CSP) (Luo and Bhattacharya 2009). As such, many developing countriesstruggle with ensuring that firms act in a socially responsible manner. Indeed, a classic example of this is the currentdebate going over in India on whether the Indian government should legally mandate CSR actions by firms in itsupcoming Companies Bill (IndiaKnowledge@Wharton).Much of this debate among policy makers and managers stems from the rather equivocal view on CSR in extantresearch. On the one hand, the neoclassical economists led by Milton Friedman argue that the only job of managersis to maximize shareholder wealth and CSR initiatives distract them from this objective (Friedman 1970). On theother hand, scholars taking the stakeholder theory perspective argue that CSR helps improve relationship of firmswith their key stakeholders and thus generate value for them (Maignan et al. 2005). In line with these opposingperspectives, the evidence from past research linking CSR to financial performance has been unclear, with studiesreporting positive (e.g., Luo and Bhattacharya 2009), neutral (e.g., McWilliams and Siegel 2000) and negative (e.g.,Wright and Ferris 1997) findings.Although researchers have investigated the CSR–financial performance link, the focus has primarily been atassessing the impact of individual socially responsible actions of firms a not on a corporate level view embodied in afirm‘s overall CSP. Further, scholars have often overlooked mediating factors that may explain this key relationship(McWilliams and Siegel 2000). Indeed, research in marketing has shown that CSP may influence financialperformance through mediating variables such as consumer satisfaction (Luo and Bhattacharya 2006); however,insights on consumer-related factors have been quite limited to date. Especially, scholars have overlooked therelationship between CSP, brand equity, and shareholder value.In this research, we take a step towards addressing this gap by evaluating the central question: what is therelationship between CSP, brand equity, and stock returns and risks of firms over time? We follow Luo andBhattacharya (2009) to focus on Corporate Social Performance (CSP) rather than CSR. Moreover, we evaluate bothstock returns and risks as our measures of shareholder value. The financial economics literature suggests thatinvestors and managers are equally concerned with both the expected stock returns of their firms (i.e., the level,timing, and duration of cash flows) and with the associated stock risks (Fama and French, 1993; Srinivasan andHanssens 2009). However, extant research linking CSP to financial performance has paid relatively little attention toboth stock returns and risk metrics under a common framework. Our conceptual framework is presented in figure 1.Following, we briefly discuss our hypotheses.