Corporate Social Responsibility and Firm Performance: The Role of Disclosure Strategies

In this paper we examine a channel through which corporate social responsibility affects firm performance. More specifically, we study whether different commitments and disclosure of CSR influence firm performance. Drawing on stakeholders’ theory and using a rich longitudinal dataset of Western European companies for the years 2003-2010, we find that the direct effect of investing in CSR on shareholders’ returns is negative and significant. We also document that this effect is driven by the different levels of CSR commitment and disclosure. Specifically our results show that a low level of CSR commitment and disclosure has a negative effect on ROE and ROA, whereas a high level of CSR commitment and disclosure has a positive effect on firm performance. These results suggest that shareholders benefits from a stronger commitment towards CSR.