LINKING CSR TO FIRM-SPECIFIC EARNINGS AND CASH FLOWS: INSIGHTS ON FINANCIAL IMPACT
DOI:
https://doi.org/10.33736/ijbs.12832.2026Keywords:
CSR performance, firm-specific cash flows, firm-specific earningsAbstract
Despite trillions of dollars directed toward socially responsible investment, firms and investors continue to question whether CSR creates tangible financial value. These doubts are reinforced by prior research, which provides mixed evidence on the link between CSR and firm performance. To address this gap, we focus on firm-specific performance indicators - earnings and cash flows - that directly capture a firm’s financial health and competitive position. Drawing on the resource-based view of the firm, we argue that CSR performance represents a unique resource of the firm and allows the firm to develop competitive advantages. We predict and find that CSR is positively associated with the level of both firm-specific earnings and cash flows. Our findings contribute to the debate on CSR and firm performance and provide managers and investors with clearer evidence of the financial benefits of effective CSR engagement.
References
Adhikari, B. K. (2016). Causal effect of analyst following on corporate social responsibility. Journal of Corporate Finance, 41, 201-216.
https://doi.org/10.1016/j.jcorpfin.2016.08.010
Albuquerque, R., Koskinen, Y., & Zhang, C. (2019). Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 65(10), 4451-4469.
https://doi.org/10.1287/mnsc.2018.3043
Amit, R., & Schoemaker, P. J. H. (1993). Strategic assets and organizational rent. Strategic Management Journal, 14(1), 33-46.
https://doi.org/10.1002/smj.4250140105
Attig, N. (2024). Relaxed financial constraints and corporate social responsibility. Journal of Business Ethics, 189(1), 111-131.
https://doi.org/10.1007/s10551-023-05353-9
Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97(1), 71-86.
https://doi.org/10.1007/s10551-010-0496-z
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-121.
https://doi.org/10.1177/014920639101700108
Benlemlih, M., & Bitar, M. (2018). Corporate social responsibility and investment efficiency. Journal of Business Ethics, 148(3), 647-671.
https://doi.org/10.1007/s10551-016-3020-2
Bhandari, A., & Javakhadze, D. (2017). Corporate social responsibility and capital allocation efficiency. Journal of Corporate Finance, 43(1), 354-377.
https://doi.org/10.1016/j.jcorpfin.2017.01.012
Bifulco, G. M., Savio, R., Paolone, F., & Tiscini, R. (2023). The CSR committee as moderator for the ESG score and market value. Corporate Social Responsibility and Environmental Management, 30(6), 3231-3241.
https://doi.org/10.1002/csr.2549
Bocquet, R., Le Bas, C., Mothe, C., & Poussing, N. (2017). CSR, innovation, and firm performance in sluggish growth contexts: A firm-level empirical analysis. Journal of Business Ethics, 146(1), 241-254.
https://doi.org/10.1007/s10551-015-2959-8
Bose, S., & Yu, C. (2023). Does earnings quality influence corporate social responsibility performance? Empirical evidence of the causal link. Abacus, 59(2), 493-540.
https://doi.org/10.1111/abac.12286
Brown, N. C., & Kimbrough, M. D. (2011). Intangible investment and the importance of firm-specific factors in the determination of earnings. Review of Accounting Studies, 16(3), 539-573.
https://doi.org/10.1007/s11142-011-9151-x
Burke, Q. L., Chen, P. C., & Lobo, G. J. (2020). Is corporate social responsibility performance related to conditional accounting conservatism? Accounting Horizons, 34(2), 19-40.
https://doi.org/10.2308/horizons-18-111
Chakravarthy, J., deHaan, E., & Rajgopal, S. (2013). Reputation repair after a serious restatement. The Accounting Review, 89(4), 1329-1363.
https://doi.org/10.2308/accr-50716
Chen, Y. C., Hung, M., & Wang, Y. (2018). The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China. Journal of Accounting and Economics, 65(1), 169-190.
https://doi.org/10.1016/j.jacceco.2017.11.009
Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), 1-23.
https://doi.org/10.1002/smj.2131
Clarkson, P., Li, Y., Richardson, G., & Vasvari, F. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy, 30(2), 122-144.
https://doi.org/10.1016/j.jaccpubpol.2010.09.013
Cooper, E. W., & Uzun, H. (2015). Corporate social responsibility and the cost of debt. Journal of Accounting & Finance, 15(8), 2158-3625.
Di Giuli, A., & Kostovetsky, L. (2014). Are red or blue companies more likely to go green? Politics and corporate social responsibility. Journal of Financial Economics, 111(1), 158-180.
https://doi.org/10.1016/j.jfineco.2013.10.002
Dodds, W. B., Monroe, K. B., & Grewal, D. (1991). Effects of price, brand, and store information on buyers' product evaluations. Journal of Marketing Research, 28(3), 307-319.Dowell, G., Hart, S., & Yeung, B. (2000). Do corporate global environmental standards create or destroy market value? Management Science, 46(8), 1059-1074.
https://doi.org/10.1287/mnsc.46.8.1059.12030
Du, S., Bhattacharya, C. B., & Sen, S. (2011). Corporate social responsibility and competitive advantage: Overcoming the trust barrier. Management Science, 57(9), 1528-1545.
https://doi.org/10.1287/mnsc.1110.1403
Durnev, A., Morck, R., & Yeung, B. (2004). Value-enhancing capital budgeting and firm-specific stock return variation. Journal of Finance, 59(1), 65-105.
https://doi.org/10.1111/j.1540-6261.2004.00627.x
El Ghoul, S., Guedhami, O., Kwok, C. C. Y., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35(9), 2388-2406.
https://doi.org/10.1016/j.jbankfin.2011.02.007
Fahad, P., & Busru, S. A. (2021). CSR disclosure and firm performance: evidence from an emerging market. Corporate Governance, 21(4), 553-568.
https://doi.org/10.1108/CG-05-2020-0201
Friedman, M. (1970). The social responsibility of business is to maximize its profits. The New York Times Magazine. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html (accessed 28 March 2025)
Graham, J., Harvey, C., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1-3), 3-73.
https://doi.org/10.1016/j.jacceco.2005.01.002
GSIA. (2022). Global Sustainable Investment Review 2022. https://www.ussif.org/files/Publications/2019USSIFAnnualReport_online.pdf (accessed 20 September 2025)
Hall, B. H. (2002). The financing of research and development. Oxford Review of Economic Policy, 18(1), 35-51.
https://doi.org/10.1093/oxrep/18.1.35
Hall, R. (1993). A framework linking intangible resources and capabilities to sustainable competitive advantage. Strategic Management Journal, 14(8), 607-618.
https://doi.org/10.1002/smj.4250140804
Hamrouni, A., Bouattour, M., Ben Farhat Toumi, N., & Boussaada, R. (2022). Corporate social responsibility disclosure and information asymmetry: does boardroom attributes matter? Journal of Applied Accounting Research, 23(5), 897-920.
https://doi.org/10.1108/JAAR-03-2021-0056
Harley-Davidson. (2019). 2019 Harley-Davidson annual sustainability report. https://investor.harley-davidson.com/static-files/651eaa8c-28f3-43cc-a1ff-3e1e913c85ce (accessed 28 March 2025)
Hart, S. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986-1014.
https://doi.org/10.2307/258963
Henri, J. F., & Journeault, M. (2010). Eco-control: The influence of management control systems on environmental and economic performance. Accounting, Organizations and Society, 35(1), 63-80.
https://doi.org/10.1016/j.aos.2009.02.001
Hmiden, O. B., Rjiba, H., & Saadi, S. (2022). Competition through environmental CSR engagement and cost of equity capital. Finance Research Letters, 47, 102773.
https://doi.org/10.1016/j.frl.2022.102773
Hong, H. G., Kubik, J. D., & Scheinkman, J. A. (2012). Financial constraints on corporate goodness. National Bureau of Economic Research. https://www.nber.org/papers/w18476 (accessed 28 March 2025)
https://doi.org/10.3386/w18476
Huang K, Sim N,, & Zhao H. (2020), Corporate social responsibility, corporate financial performance and the confounding effects of economic fluctuations: a meta-analysis. International Review of Financial Analysis 70 (July), 101504.
https://doi.org/10.1016/j.irfa.2020.101504
Huang, X. B., & Watson, L. (2015). Corporate social responsibility research in accounting. Journal of Accounting Literature, 34(1), 1-16.
https://doi.org/10.1016/j.acclit.2015.03.001
Hui, K. W., Nelson, K. K., & Yeung, P. E. (2016). On the persistence and pricing of industry-wide and firm-specific earnings, cash flows, and accruals. Journal of Accounting and Economics, 61(1), 185-202.
https://doi.org/10.1016/j.jacceco.2015.06.003
Hui, K. W., & Yeung, P. E. (2013). Underreaction to industry-wide earnings and the post-forecastrevision drift. Journal of Accounting Research, 51(4), 701-737.
https://doi.org/10.1111/1475-679X.12006
Jia, J., & Li, Z. (2022). Corporate sustainability, earnings persistence and the association between earnings and future cash flows. Accounting & Finance, 62(1), 299-336.
https://doi.org/10.1111/acfi.12791
Kader, M. A. R. A., Mohezar, S., Yunus, N. K. M., Ali, R., & Nazri, M. (2021). Investigating the moderating effect of marketing capability on the relationship between corporate social responsibility (CSR) practice and corporate reputation in small medium enterprises food operators. International Journal of Business and Society, 22(3), 1469-1486.
https://doi.org/10.33736/ijbs.4315.2021
Kemper, J., Schilke, O., Reimann, M., Wang, X., & Brettel, M. (2013). Competition-motivated corporate social responsibility. Journal of Business Research, 66(10), 1954-1963.
https://doi.org/10.1016/j.jbusres.2013.02.018
Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697-1724.
https://doi.org/10.2308/accr-51383
Khurana, I. K., Pereira, R., & Zhang, E. (2018). Is real earnings smoothing harmful? Evidence from firm-specific stock price crash risk. Contemporary Accounting Research, 35(1), 558-587.
https://doi.org/10.1111/1911-3846.12353
Kothari, S., Leone, A., & Wasley, C. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197.
https://doi.org/10.1016/j.jacceco.2004.11.002
Krüger, P. (2015). Corporate goodness and shareholder wealth. Journal of Financial Economics, 115(2), 304-329.
https://doi.org/10.1016/j.jfineco.2014.09.008
Larcker, D. F., Pomorski, L., Tayan, B., & Watts, E. M. (2022). ESG ratings: A compass without direction. Stanford Closer Look Series. https://www.hoover.org/sites/default/files/research/docs/cgri-closer-look-97-esg-ratings_0.pdf?utm_source=chatgpt.com (accessed 21 September 2025).
Lattanzio, G., & Litov, L. P. (2020). Does competing through corporate social responsibility engagements lead to superior financial performance? Working Paper. https://ssrn.com/abstract=3449259 (accessed 28 March 2025)
https://doi.org/10.2139/ssrn.3449259
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. Journal of Finance, 72(4), 1785-1824.
https://doi.org/10.1111/jofi.12505
Lippman, S. A., & Rumelt, R. P. (1982). Uncertain imitability: An analysis of interfirm differences in efficiency under competition. The Bell Journal of Economics, 13(2), 418-438.
https://doi.org/10.2307/3003464
Long, M. S., & Malitz, I. B. (1985). Investment patterns and financial leverage. In Corporate capital structures in the United States (pp. 325-352).
Lu, H., Oh, W. Y., Kleffner, A., & Chang, Y. K. (2021). How do investors value corporate social responsibility? Market valuation and the firm specific contexts. Journal of Business Research, 125, 14-25.
https://doi.org/10.1016/j.jbusres.2020.11.063
McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43(1), 1-18.
https://doi.org/10.1111/j.1467-6486.2006.00580.x
Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance, and the theory of investment. The American Economic Review, 48(3), 261-297.
Morck, R., Yeung, B., & Yu, W. (2000). The information content of stock markets: Why do emerging markets have synchronous stock price movements? Journal of Financial Economics, 58(1-2), 215-260.
https://doi.org/10.1016/S0304-405X(00)00071-4
Palepu, K., Bernard, V., Healy, P., & Peek, E. (2007). Business analysis and valuation: Text and cases. Cengage Learning EMEA.
Palmon, D., Chen, Y., & Chen, B. (2024). Corporate social responsibility and information asymmetry: Do earnings conference calls play a role?. Journal of Business Ethics, 194(1), 77-101.Piotroski, J. D., & Roulstone, D. T. (2004). The influence of analysts, institutional investors, and insiders on the incorporation of market, industry, and firm-specific information into stock prices. The Accounting Review, 79(4), 1119-1151.
https://doi.org/10.1007/s10551-023-05605-8
Segal, M. (2024a). Over half of CFOs fear greenwashing risk as sustainability data problems persist: EY Survey. ESGtoday. https://www.esgtoday.com/over-half-of-cfos-fear-greenwashing-risk-as-sustainability-data-problems-persist-ey-survey/?utm_source=chatgpt.com (accessed 21 September 2025)
Segal, M. (2024b). 85% of Investors say greenwashing is a growing problem: EY Survey. ESGtoday. https://www.esgtoday.com/85-of-investors-say-greenwashing-is-a-growing-problem-ey-survey/ (accessed 21 September 2025)
Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science, 59(5), 1045-1061.
https://doi.org/10.1287/mnsc.1120.1630
Siegel, D. S., & Vitaliano, D. F. (2007). An empirical analysis of the strategic use of corporate social responsibility. Journal of Economics & Management Strategy, 16(3), 773-792.
https://doi.org/10.1111/j.1530-9134.2007.00157.x
United Nations. (2025) The Sustainable Development Goals Report 2025. https://unstats.un.org/sdgs/report/2025/The-Sustainable-Development-Goals-Report-2025.pdf (accessed 20 September 2025)
Velte, P. (2022). Meta-analyses on corporate social responsibility (CSR): A literature review. Management Review Quarterly, 72(3), 627-675.
https://doi.org/10.1007/s11301-021-00211-2
Wang, O., Wu, H., & Li, C. (2025). Corporate social responsibility performance and litigation risk. Finance Research Letters, 72, 106584.
https://doi.org/10.1016/j.frl.2024.106584
Wong, T. A., & Reevany, B. M. (2019). Understanding corporate social responsibility (CSR) among micro businesses using social capital theory. International Journal of Business and Society, 20(2), 675-690.
Xu, H., Wu, J., & Dao, M. (2020). Corporate social responsibility and trade credit. Review of Quantitative Finance and Accounting, 54(1), 1389-1416.
https://doi.org/10.1007/s11156-019-00829-0
Yahya, W. K., & Ha, N. C. (2013). The Relationship between Environmental Issues and Organizational Performance. International Journal of Business and Society, 14(1). 111-134.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 UNIMAS Publisher
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
