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Sunday, Nov 15, 20092009 Moskowitz Prize: Harjoto expands understanding of CSR’s financial costs and benefits
Posted by dgore
RESEARCH
–Graziadio professor’s research relates corporate performance with social pressure; earns global award
The possible link between corporate bottom-lines and the actual performance by companies aspiring to be more socially responsive, as impacted by pressures on their corporate reputation, is explored in groundbreaking new research. It compares corporate social responsibility in the last term of the Clinton administration and first term of the Bush Administration.
The study earned Pepperdine University’s Marento (Augus). Harjoto, an assistant professor of finance at the Graziadio School of Business and Management, and his co-authors, the prestigious 2009 Moskowitz Prize for Socially Responsible Investing at SRI in the Rockies, the largest and longest-running sustainable and responsible investing conference in the world.
The Moskowitz Prize is awarded annually by the Center for Responsible Business at UC Berkeley’s Haas School of Business in cooperation with the Social Investment Forum. The prize is the only global award recognizing outstanding quantitative research in the field of socially responsible investing.
Working with David Baron of the Stanford Graduate School of Business and Hoje Jo of San Clara University’s Leavey School of Business, Dr. Harjoto analyzed the finances and social activities of 3,000 firms and found:
- Corporate financial performance and corporate social performance are largely unrelated, but that does not imply there is no causal relationship between the two for individual firms.
- Greater social pressure is associated with worse financial performance, which could reflect the effects of pressure on firms’reputations, brand equities, or productivity.
- Greater social pressure also results in greater corporate socialperformance.
- Consumer-facing companies tend to benefit financially from good social performance, while industrial companies do not.
- Companies facing significant social pressure from activists and NGOs tend to have sub-par financial performance.
Despite “the absence of an empirical relation between financial performance and social performance,” the research found a greater increase in social pressure and a more negative effect of social pressure on corporate finance performance (CFP) during the first four years of the Bush administration than during the final four years of the Clinton administration. In fact, according to the study, “the negative effect of social pressure on CFP is due to the Bush years.”
The winning paper was selected from among 30 entries by a panel of judges from academia and the investment industry. The authors received $5,000 in prize money and their paper will be published in the Journal of Investing.
Sources: Robert Krapp, SocialFunds.com, and the Social Investment Forum
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