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Title: The link between corporate social performance and financial performance: empirical evidence from Japanese firms

Authors: Megumi Suto; Hitoshi Takehara

Addresses: Graduate School of Finance, Accounting and Law, Waseda University, 1-4-1 Nihombashi, Chuo-ku, Tokyo 103-0027, Japan ' Graduate School of Finance, Accounting and Law, Waseda University, 1-4-1 Nihombashi, Chuo-ku, Tokyo 103-0027, Japan

Abstract: Since the globalisation of business and stock ownership in the 2000s, Japanese firms' relationships with shareholders and the policies related to corporate social responsibility (CSR) have significantly changed. This study adopts a stakeholder relationship approach to examining these changes and investigates the channels that link corporate social performance (CSP) and corporate financial performance (CFP) in the Japanese context. We found that the composite measure of CSP and a large part of dimensional CSP are significantly negatively related to all risk measures employed in this study. With respect to dimensional CSP, it is remarkable that environment and social contribution showed a strong negative relationship with market-based risk measures. However, the effects of CSP on profitability are mixed, and only the employee relationship is positively associated with profitability measures. These findings suggest that risk reduction through CSR activities holds more significance in creating long-term value for Japanese firms.

Keywords: corporate social responsibility; CSR; corporate social performance; CSP; corporate financial performance; CFP; stakeholder relations; Japan; firm performance; risk measures; profitability; risk reduction; long-term value.

DOI: 10.1504/IJCSSR.2016.077544

International Journal of Corporate Strategy and Social Responsibility, 2016 Vol.1 No.1, pp.4 - 25

Received: 12 Jan 2015
Accepted: 28 Jul 2015

Published online: 05 Jul 2016 *

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