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

Despite a growing number of studies examining the effect of firms’ corporate social responsibility (CSR) activities to 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? and (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 relation is not sensitive to how 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.