Abnormal CSR and Financial Performance

This study develops a corporate social responsibility (CSR) measure for abnormal CSR. Based on microeconomic framework, we argue and show that firm-level variables determine firm-specific, normal (expected) level of CSR performance, where the marginal costs equal its benefits. Any deviation from these equilibrium points is proxy CSR, which negatively related to firm’s short-term financial performance (i.e., profitability). Hereby, larger values result in proportionally decreases (inverted U-shape). We conduct our empirical analyses using cross-sectional data U.S. listed companies 1991 2013. Further reveal this negative effect exists both positive Our results hold alternative measures firm an instrumental variable regression, propensity score matching. model could serve as first indicator investors other stakeholders.