Exploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms

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dc.contributor.advisorChamisa, Edward
dc.contributor.authorVan Niekerk, Michael-John
dc.date.accessioned2024-11-06T09:47:27Z
dc.date.available2024-11-06T09:47:27Z
dc.date.issued2024
dc.date.updated2024-07-09T13:13:15Z
dc.description.abstractIn the past, there has been a wealth of research into the relationship between corporate social performance (CSP) and corporate financial performance (CFP). However, this relationship has not been thoroughly researched in developing markets, particularly in South Africa. Compelling theoretical arguments and empirical evidence have been presented both for and against the financial benefits associated with CSR. Recently, there has been an increasing number of studies attempting to reconcile these seemingly opposing views by suggesting that the CSP-CFP relationship may in fact be non-linear. This study aims to contribute to this perspective and address the research gap in South Africa by exploring the shape of the CSP-CFP relationship in a South African context. This is achieved through the use of panel regression models with fixed and random effects, on an overall CSP and component CSP level for 130 Johannesburg Stock Exchange (JSE) listed firms from 2012 to 2019 (1 040 firm-year observations). Bloomberg ESG disclosure scores are used as a proxy for CSP and its components (environmental performance, social performance, and governance performance). CFP is proxied through a measure of market-based performance, annual shareholder return (ASR), and a measure of accounting-based performance, return on assets (ROA). A significant U-shaped relationship is found between overall CSP and CFP. This same relationship is also found between environmental performance and CFP, and between social performance and CFP. Contrary to the findings of prior South African studies, a negative linear relationship is found between governance performance and CFP. The findings of this study have implications for managers facing increasing pressure to engage in environmental, social, and governance (ESG) initiatives from investors and the broader public, and for researchers in emerging markets to explore the CSP-CFP relationship from a novel perspective.
dc.identifier.apacitationVan Niekerk, M. (2024). <i>Exploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms</i>. (). ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/40685en_ZA
dc.identifier.chicagocitationVan Niekerk, Michael-John. <i>"Exploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms."</i> ., ,Faculty of Commerce ,Department of Finance and Tax, 2024. http://hdl.handle.net/11427/40685en_ZA
dc.identifier.citationVan Niekerk, M. 2024. Exploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms. . ,Faculty of Commerce ,Department of Finance and Tax. http://hdl.handle.net/11427/40685en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Van Niekerk, Michael-John AB - In the past, there has been a wealth of research into the relationship between corporate social performance (CSP) and corporate financial performance (CFP). However, this relationship has not been thoroughly researched in developing markets, particularly in South Africa. Compelling theoretical arguments and empirical evidence have been presented both for and against the financial benefits associated with CSR. Recently, there has been an increasing number of studies attempting to reconcile these seemingly opposing views by suggesting that the CSP-CFP relationship may in fact be non-linear. This study aims to contribute to this perspective and address the research gap in South Africa by exploring the shape of the CSP-CFP relationship in a South African context. This is achieved through the use of panel regression models with fixed and random effects, on an overall CSP and component CSP level for 130 Johannesburg Stock Exchange (JSE) listed firms from 2012 to 2019 (1 040 firm-year observations). Bloomberg ESG disclosure scores are used as a proxy for CSP and its components (environmental performance, social performance, and governance performance). CFP is proxied through a measure of market-based performance, annual shareholder return (ASR), and a measure of accounting-based performance, return on assets (ROA). A significant U-shaped relationship is found between overall CSP and CFP. This same relationship is also found between environmental performance and CFP, and between social performance and CFP. Contrary to the findings of prior South African studies, a negative linear relationship is found between governance performance and CFP. The findings of this study have implications for managers facing increasing pressure to engage in environmental, social, and governance (ESG) initiatives from investors and the broader public, and for researchers in emerging markets to explore the CSP-CFP relationship from a novel perspective. DA - 2024 DB - OpenUCT DP - University of Cape Town KW - Finance and Tax KW - corporate social responsibility (CSR) KW - corporate social performance (CSP) KW - environmental, social and governance (ESG) disclosure KW - financial performance (FP) KW - curvilinear KW - U-shape KW - South Africa LK - https://open.uct.ac.za PY - 2024 T1 - Exploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms TI - Exploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms UR - http://hdl.handle.net/11427/40685 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/40685
dc.identifier.vancouvercitationVan Niekerk M. Exploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms. []. ,Faculty of Commerce ,Department of Finance and Tax, 2024 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/40685en_ZA
dc.language.rfc3066Eng
dc.publisher.departmentDepartment of Finance and Tax
dc.publisher.facultyFaculty of Commerce
dc.subjectFinance and Tax
dc.subjectcorporate social responsibility (CSR)
dc.subjectcorporate social performance (CSP)
dc.subjectenvironmental, social and governance (ESG) disclosure
dc.subjectfinancial performance (FP)
dc.subjectcurvilinear
dc.subjectU-shape
dc.subjectSouth Africa
dc.titleExploring the curvilinear relationship between corporate social performance and financial performance: Evidence from South African listed firms
dc.typeThesis / Dissertation
dc.type.qualificationlevelMasters
dc.type.qualificationlevelMCom
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