The effects of stakeholder prioritization on corporate financial performance: an empirical investigation

The main contribution of this study lies in extending and testing an emerging theoretical framework that investigates the link between corporate social responsibility (CSR) and financial performance. Following the line of thinking that firms should engage with stakeholders in the way most appropriate to each firm’s strategy, this study examines how leading listed companies perform in terms of strategic CSR vs. responsive CSR. Data come from 188 companies across seven industries. We measure the relationship between stakeholders’ prioritization and financial performance controlling for size and industry. CSR data are provided by the KLD SOCRATES database in seven areas, including employee relations, product safety and diversity. Data on financial performance are collected from the Datastream database. We find that strategic and responsive CSRs impact differently on the overall financial performance of the companies analyzed. We also find that the leadership in social rating is poorly related to financial performance, while the leadership in the strategic CSR indicators records greater impact