Speaker: Jon Jungbien Moon

THE BREN SCHOOL OF Environmental Science & Management
at the University of California, Santa Barbara


Jon Jungbien Moon
Ph.D. Candidate,

Wharton School,

University of Pennsylvania

Friday, April 27, 2007

4:00 – 5:30 p.m.

Bren Hall 1424

"In Good Companies? A Critical Evaluation
of the Corporate Social Performance - Corporate Financial
Performance Link"

Part of a seminar series in Environmental Economics

presented by the Economics and Environmental Science PhD training program


The following is the abstract of Moon's paper titled "In Good Companies? A Critical Evaluation of the Corporate Social Performance - Corporate Financial Performance Link:

How does corporate social performance affect corporate financial performance? In this paper, I
revisit this question using a different identification strategy and more extensive data. I claim that
the positive association between corporate social performance and corporate financial
performance found in recent studies such as Waddock & Graves (1997a) and Berman et al.
(1999) may be due to the existence of unobserved firm-level heterogeneity. After controlling for
this firm-level heterogeneity, I find no positive association between social performance and
financial performance. I do, however, find some relationship between corporate social
performance and financial performance. In particular, I find asymmetry in how negative social
performance and positive social performance affect the financial performance of the firm. After
controlling for firm-level heterogeneity, positive social performance does affect the firm’s
financial performance negatively, whereas negative social performance does not have any
negative effect on financial performance.

The study’s contributions are threefold: first, it provides empirical evidence that challenges the
majority view on the topic. Second, it raises a methodological issue that individual firm fixed
effects must be factored into these empirical studies, and that ignoring these effects may lead a
researcher to a very different conclusion, even to an opposite one. Finally, it points out the need
to investigate the positive and negative sides of corporate social performance separately in
studying the corporate social performance-corporate financial performance link, by providing the
evidence that positive and negative social performances affect corporate financial performance in
an asymmetric way.


The author is interested in the following research areas:

• empirical industrial organization

• economics of strategy

• corporate social responsibility and governance




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