CSR and Firm Value: A Comparative Study on CSR Performance Measures

Despite a growing number of studies examining the effect of firms’ corporate social
responsibility (CSR) activities on various stakeholders, including shareholders, the relation
between CSR and firm value is the subject of much debate among researchers. In this study,
we examine whether the lack of a consensus on how to measure CSR performance may at
least partially play a role in the debate. Using five measures of CSR performance based on
data from the KLD database, we try to answer the following questions in this study: (1) Do
differences between CSR measures affect the relation between CSR and firm value? (2)
What role does corporate governance play in the link between CSR and firm value? (3)
Does the link between CSR and firm value vary across normal/expected and
abnormal/unexpected levels of CSR performance? (4) Which CSR categories are likely to
have the most robust connection with firm value? (5) Does the relation between CSR and
firm value vary between sample periods? Consistent with prior studies, we find a positive
relation between CSR and firm value. More importantly, we find that such a relation is not
sensitive to how the CSR performance measure is defined but is likely affected by the
choice of CSR categories and sample period. We also find that good corporate governance
moderates the link between CSR and firm value.