Has the CSR engagement of electrical companies had an effect on their performance? A closer look at the environment

For Peer Review Has the CSR engagement of electrical companies had an effect on their performance? A closer look at the environment Journal: Business Strategy and the Environment Manuscript ID: BSE-13-0204.R2 Wiley - Manuscript type: Research Article Keywords: CSR, financial performance, environment, electrical companies http://mc.manuscriptcentral.com/bse Business Strategy and the Environment For Peer Review Has the CSR engagement of electrical companies had an effect on their performance? A closer look at the environment ABSTRACT: Even though electrical companies attain a top ranking in the publication of CSR reports, they are often accused of “green-washing” due to their bad environmental reputation. The current economic crisis is testing their real CSR commitment more than ever, especially when this goes beyond its economic consequences. Based on a worldwide sample of electrical companies, we are going to study why companies are being socially responsible. We wish to know if it is due to the impact on the firms´ performance or whether there are other motives (legitimation, improving their reputation) that lead companies to carry out these practices. We will also consider if it changes across the kind of CSR actions considered. The results show that there is an economic justification beyond the socially responsible behaviour of the electrical companies. Additionally, most kinds of CSR actions (community, diversity, corporate governance, product responsibility) are also carried out looking for economic rewards. However, the CSR actions oriented to the environment are mainly motivated by their need to improve their image and reverse their negative impact. KEY WORDS: CSR, financial performance, environment, electrical companies. Page 1 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review 1. Introduction The evolution of Corporate Social Responsibility (CSR) in terms of importance and significance over the last decades is undeniable (Schultz and Wehmeier, 2010). It has changed from being an irrelevant or fashionable idea to one of the most widely accepted concepts in the business world (Lee, 2008). Even though carrying out CSR practices has become a requirement to be able to operate (Peloza, 2006), their widespread use makes researchers consider the reasons why companies are increasingly more engaged with CSR. That is, if this is due to pure altruism or if, in contrast, they are looking for legitimacy or an economic reward according to the arguments of the Legitimacy (Deegan, 2002) and Stakeholder Theories (Freeman, 1984). Although many researchers have tried to answer if being socially responsible has an effect on a company´s performance (Orlitzky et al., 2003; Allouche and Laroche, 2005; Wu, 2006; Fifka, 2013), the results found have not been totally conclusive. This is mainly due to the different approaches (linear vs non-linear), samples, and the CSR/performance measures used (Davidson and Worrell, 1990; Ruf et al., 2001). Notwithstanding, many researchers (Waddock and Graves, 1997; Margolis and Walsh, 2003) have shown the determinant role that the industry plays in this relationship. They argue that the use of cross-sectional samples could mean the compensation or overlapping of the results, and, therefore, explain the lack of general conclusions. These are based on two arguments. Firstly, the kind of CSR actions carried out by companies depends on their stakeholders´ pressures. This would be similar in the case of firms from the same industry (Patten, 2002). Secondly, the opportunity to get financial outcomes from their CSR actions are likely to be determined by industry-specific factors (Endrikat et al., 2014). Despite the convenience of carrying out studies in specific industries that may clarify the relationship between CSR and Financial Performance (FP) (Griffin and Mahon; 1997; Rowley and Berman, 2000), this has not been extensively investigated in the most controversial or socially/environmentally sensitive sectors. While there are few articles focused on some of the most socially sensitive sectors, such as banks (Pérez-Ruiz and Rodríguez-Bosque, 2012; Escobar and Miras, 2013), and alcohol, tobacco and weapons (Cai et al., 2012), this relationship has not been analyzsd in depth in environmentally sensitive sectors. The electric utilities have a high environmental impact derived from the generation of electricity energy (Hackston and Milne, 1996; Deegan and Gordon, 1996; Pätäri et al., 2012). This makes them be considered as “a dirty sector” (Mio, 2010; Kerckhoffs and Wilde-Ramsing, 2010). Likewise, they have a strategic and determinant role in the evolution of developed and developing economies all over the world (Sutton, 2007). Hence, we consider it interesting to Page 2 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review study how this relationship between CSR and FP is in one of the most environmentally-concerned sectors. Moreover, electrical companies have to face the dilemma of disclosing information about CSR, since it could be seen such as an attempt at “windowdressing” or “green-washing” (Vries et al., 2013), legitimising (Deegan, 2002) or improving their reputation (Melo and Garrido-Morgado, 2012), instead of being a reflection of a real engagement (altruistic) with these issues. Consecuently, it is crucial for researchers and society at large to know what the motivations of the CSR engagement of the electricity companies are. In this sense, we could study if there are economic motivations beyond their socially responsible behaviour or not. Within the general debate about causality in the CSR-FP relationship (Salzmann et al., 2005), we are going to consider the curvilinear approach (Marom, 2006; Barnett and Salomon, 2012). This is because considering the high level of CSR commitment in the electrical sector (Alonso-Almeida et al., 2013) could be a better attempt at understanding whether there is an impact of CSR actions on the performance of the companies (Simpson and Kohers, 2002). Nevertheless, several researchers are calling into question the suitability of using a single construct to measure CSR (Marom, 2006; Peloza, 2009), since it is the result of the agreggation of several unrelated aspects (Rowley and Berman, 2000), such as the environment, the community, diversity, employment, product responsibility, human rights and corporate governance (CSR dimensions according to KLD 1 ). In this sense, companies from the same sector are going to focus their CSR efforts on the same aspects or dimensions according to their activity and their stakeholders´ pressures (Patten, 2002). Hence, they are pointing out the need to also study socially responsible actions considering each different aspect or dimension involved. Therefore, it is important as well to analyse whether each different CSR dimension has a relationship with corporate performance in order to understand if the motivations for its being carried out are the same. This is especially the case for environmental actions, due to the peculiarities of the electrical industry already outlined. Regarding the effect of environmentally-responsible actions on corporate performance, traditionally it had been negatively supported by the Trade-Off hypothesis (Friedman, 1970). However, from a revisionist point of view, a positive and a curvilinear relationship have been suggested (Fujii et al., 2013), in consideration of the Win-Win Hypothesis (Porter and Van der Linde, 1995). This defends that environmentally responsible actions can produce cost savings through improving the efficiency and reducing waste and risks (Lankoski, 2008). 1 KLD (Kinder, Lyderberg and Domini Stats Database). This is one of the most accepted databases for CSR measures. Page 3 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Therefore, this paper has a double aim. On the one hand, we would like to know if the CSR actions carried out by electrical companies are looking for an economic reward. On the other hand, we want to analyse whether the CSR-FP relationship changes if we study each CSR dimension, in particular that which is related to the environment. We use an international sample (26 countries) which is composed of 89 electrical companies indexed in the stock markets of each country. We have chosen the period between 2008 and 2011 because the current financial crisis provides a very good opportunity to test real CSR motivations, due to there being less resources available (Ducassy, 2013). Our data are provided by the ASSET4 and Datastream databases. According to the results, we find that CSR actions have an influence on the FP of the electrical companies. This is explained by a U-shaped curve. So, there is an economic justification behind the highly-extraordinary behaviours although standard actions are not as well rewarded. This could be because companies in the electrical industry are highly committed to CSR and, consequently, they are only rewarded when their behaviour is exceptional. When we study the relationship between the CSR dimensions and FP, we realise that each of them shows a different impact or even no influence. In this sense, the results report that actions oriented towards the environment do not show any relationship with corporate performance. This indicates that the motivations for their being carried out by the electrical companies are more related to their need to legitimise, to altruism or to be able to compete, although the high cost of being committed to the environment cannot be forgotten. Regarding the other CSR dimensions, the Community, Diversity, Corporate Governance and Product Responsibility are motivated by their financial rewards. However, the Employment dimension presents a lack of a relationship with the FP, therefore the motives behind them are more related to their concern with the current situation. The paper is organised as follows. In Section 2, we focus on the debate about the different approaches that try to explain the CSR-FP relationship. In Section 3, we look more closely at the sample and variables used as well as the methodologies employed. Section 4 presents the results of our study and the discussion. Finally, in Section 5 we show the conclusions, the limitations of the study and some of the lines of investigation which remain open. 2. Theoretical framework Although the idea that firms have some responsibilities towards society beyond that of making profits for their owners has been around for hundreds of years (Carroll and Shabana, 2010), only at the end of the last century did CSR become a reality in business and one of the determinant factors which have been taken into account in decision-making (Garriga and Melé, 2004). Page 4 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Given its current relevance, many researchers (Brammer and Millington, 2005, Fernandez and Luna, 2007; Beurden and Gössling, 2008; Fifka, 2013) have wondered whether socially responsible behaviour involves some extra benefits apart from being able to compete in the current business environment (Martínez-Ferrero et al., 2013). Empirical research about the relationship between CSR and FP started at the beginning of the 1970s (Moskowitz, 1972). Even though almost forty years have passed and there have been a large number of articles written about it, the results continue being heterogeneous (Orlitzky et al., 2003; Allouche and Laroche, 2005; Wu, 2006). This does not allow a conclusion about the direction of the causality (Salzmann et al., 2005) or about the mathematical sign of the relationship (Preston and O´Bannon, 1997). Therefore, there has been much discussion in the literature (Davidson and Worrell, 1990; Ruf et al., 2001; Godfrey and Hatch, 2007) concerning what the possible causes for those empirical differences are. Most researchers highlight that there is not a unique theoretical framework to explain the relationship between CSR and FP. Since the aim of this article is to study whether their CSR actions have an influence on the performance of the electrical companies, we focus on the Hypotheses or Theories which try to explain them. The traditional group of theories which defend the linear influence of CSR on FP (Preston and O´Bannon, 1996) are: the Social Impact Hypothesis and the Trade-off Hypothesis (Figure 1). On the one hand, the Social Impact Hypothesis (Freeman, 1984) assumed that the coincidence between the expectations of stakeholders and what the company gives them involved an increase in the performance of firms. However, the Trade-off Hypothesis (Friedman, 1970) stated that the costs of carrying out CSR actions are higher than the profits produced. This is putting them at a disadvantage when compared to other firms. However, according to Simpson and Kohers (2002), the linear approach fails in its aim to give a complete explanation of the CSR-FP relationship, because in some cases an explanation could be the Social Impact Hypothesis and the Trade-off Hypothesis at the same time. This is why they revealed the need for a theoretical framework which allows us to have a better understanding of this behaviour. In response to that demand, some researchers have focused on demonstrating that there is not a linear relationship but rather one which is curvilinear (Figure 2). Nevertheless, there is no agreement about if it is an inverted U-shaped relationship (Marom, 2006) or a U-shaped relationship (Barnett and Salomon, 2012). Marom (2006) and Lankoski (2008) put together the two previous hypotheses and stated that, at the beginning, the satisfaction of the stakeholders´ needs means an increase in the performance of the organisations (Social Impact Hypothesis). Later, however the costs of the social output are emphasised and reduce the performance (Trade-Off Hypothesis). This means that the more Page 5 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review socially responsible the company is, the more profitable it is up to a peak from which the increases in CSR are followed by decreases of performance. In contrast, Barnett and Salomon (2012) defended that the first part of the curve should have a downward slope, due to the high cost of starting to carry out CSR practices. Nevertheless, this slope goes upwards when the different stakeholders realise and value them (at that point the incomes exceed the costs). So, according to them, this is a U-shaped relationship. Companies in the electrical industry are widely recognised as being top-ranking in publishing CSR or sustainability reports (Alonso-Almeida, 2013). This is a reflection of their high engagement with the CSR approach. This brings about being committed to CSR having become a requirement in the sector if companies do not want to have major negative effects on their performance (Margolis and Walsh, 2003). Considering this evidence, we predict that: H1: The impact that CSR actions have on the FP of the electrical companies is explained by a U-shaped curve. Additionally, it has been pointed out that a company’s CSR policy is composed of several social outputs - each having diverse implications for the different stakeholders- and the great importance of the stakeholder management policies (Marom, 2006). In this sense, both approaches emphasise that each firm should identify those more economically worthwhile stakeholders and focus its CSR activity on them. Therefore, we are going to test the relationship, considering the different CSR dimensions in order to know if each of them has financial returns. In accordance with Barnett and Salomon’s (2012) and Michelon et al.’s (2013) articles, the most used CSR disaggregate measures are the seven dimensions identified by KLD: (1) community, (2) diversity, (3) employment, (4) product responsibility, (5) environment, (6) corporate governance and (7) human rights. In this regard, empirical evidence cannot be found in the literature about what is the best approach which explains the effect that each CSR dimension has on the firm´s performance for multi-sectorial samples. Regarding the environmental variable, its relationship with corporate performance has been extensively studied, supported by traditional (Trade-Off Hypothesis-Friedman, 1970) and revisionist theoretical framework (Fujii et al., 2013). This revisionist point of view defends that the profits may exceed the costs based on the Win-Win hypothesis (Porter and Van der Linde, 1995) since actions oriented to the environment can produce cost savings through improving the efficiency and reducing waste and risks (Lankoski, 2008). This involves both the positive linear and the curvilinear approaches (U-shaped and inverted U-shaped). The previous evidence shows an effect of this kind of actions on the performance. Some of them present a linear impact (Molina-Azorín et al., 2009; Pérez-Calderón et al., 2011; Guenster et al. 2011) and others a curvilinear Page 6 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review relationship (Wagner et al., 2002; Schaltegger and Synnestvedt, 2002; Dawkings and Fras, 2011; Fujii et al., 2013). However, due to the singularity of this industry (Deegan and Gordon, 1996; Mio, 2010; Pätäri et al., 2012) and the accusations of carrying out environmental friendly actions to improve their reputation (Vries et al., 2013), we expect that: H2a: The environmental actions do not have an influence on the financial performance of the company. Concerning to the other CSR dimensions (Community, Diversity, Employment and Corporate Governance), we can find in the literature those who also support the linear - diversity (Francoeur et al., 2008; Adams and Ferreira, 2009), employment (Deniz-Deniz and De Saa-Perez, 2003), community (Brammer and Millington, 2005; Cabeza-Garcia et al., 2010) and corporate governance (Core et al., 1999)- and the curvilinear approach -diversity (U- shaped- Capar and Kataba, 2003), employment (U-shaped- Sturman, 2003), corporate governance (inverted U-shaped- Andrés and Vallelado, 2008) and community (inverted u-shaped-Wang et al., 2008). Most empirical evidence found in multi-sectional samples shows a relationship between these dimensions and corporate performance. Moreover, no evidence has been found in the literature about that these relationships having to differ if the focus is on the electrical industry. Therefore, as we can predict that all these dimensions show an impact on the performance, we state the following hypotheses: H2b: The diversity actions have an influence on the financial performance of the company. H2c: The employment actions have an influence on the financial performance of the company. H2d: The corporate governance actions have an influence on the financial performance of the company. H2e: The community actions have an influence on the financial performance of the company. 3. Methodology. 3.1. Sample. The sample is composed of companies from the electrical industry which operate worldwide and are listed in the stock markets of 26 different countries. Finally, we found 89 firms 2 for the period studied 2008-2011. 2 The full list of companies is available in Appendix 1 Page 7 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review The Social Responsibility data were provided by the ASSET4 database. This has already been used for this purpose by Ioannou and Serafeim (2012), due to their being much employed by investors to build their sustainability reports. It provides a collection of indicators 3 (valued from 0 to 100) organised into four pillars: Social Scores, Environmental Scores, Corporate Governance Scores and, finally, Economic Scores. Additionally, the financial data were provided by the DataStream database, one of the largest databases of companies´ financial and non-financial data. Dependent variable According to the evidence found by Orliztky et al., (2003) and Wu (2006), the accounting measures are those which better reflect the performance-return of the CSR actions, and, especially, the Return on Assets ratio (ROA). We are going to use the current ROA since the attempts to demonstrate that there is a time lag have not been successful (Orliztky et al., 2003). Independent variable Most articles use an aggregated CSR measure or index based on some of the seven areas of stakeholder management ranked by KLD. While Waddock and Graves (1997) proposed giving different weights to the dimensions in accordance with importance (subjective academic opinions - CSR_nw below) 4 , others suggested assigning equal importance to all the dimensions (Hillman and Keim, 2001; Waldman et al, 2006; Ioannou and Serafeim, 2012). However, different equal-weights indices could be found in the literature, depending on the number of dimensions included. Thereby, we can see indices which include only two dimensions - social and environment issues, CSR_2 below- (Ioannou and Serafeim, 2012); others (Bird et al., 2007), which consider the five dimensions related to primary stakeholders according to Clarkson (1995) -community, diversity, employment, product responsibility, environment; CSR_5 below- or, finally, Kang et al. (2010) , among others, which take into account the seven areas identified by KLD -community, diversity, employment, product responsibility, environment, human rights and corporate governance; CSR_7. Therefore, we are going to consider these four aggregated CSR measures: CSR_nw: 0.142* Environment + 0.148* Community + 0.089* Diversity + 0.168*Employee + 0.154* Product_Responsibility. CSR_2: 0.5*Social Score + 0.5* Environmental Score. CSR_5: (Environment+Community+Diversity+Employee+Product_Responsibility)/5 3 The full list of the social indicators provided by the database is in Appendix 2. 4 According to Waddock and Graves (1997) the weights should be: Employees (0.168), Product (0.154), Community (0.148), Environment (0.142), Treatment of women and minorities (0.136), Nuclear power (0.0089), Military contracts (0.086), South Africa (0.076). Page 8 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review As a limitation of the paper, we should not forget that it has been based on the information disclosed by companies, and it would be a challenge in the future to study whether this agrees with the real actions carried out by them. 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Page 20 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Table 1: Descriptive statistics N Mean Standard deviation CSR_nw 356 40.57 3.967 CSR_2 356 60.67 26.330 CSR_5 355 54.28 5.448 CSR_7 356 54.09 6.656 Environmental 356 62.82 24.535 Community 356 51.56 0.232 Diversity 356 52.01 0.989 Employment 356 54.07 7.363 Product_responsibility 356 51.07 0.524 Human_rights 356 52.68 0.336 Corporate_governance 356 54.43 30.791 Sales 353 5.65e+08 4.02e+09 Leverage 353 138.64 104.062 Report 356 0.27 0.444 Special_regulation 356 0.11 0.316 Monopoly 356 0.29 0.455 ROA 340 47.53 13.521 Page 21 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Table 2: Bivariate correlations (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (1) CSR_nw 1 (2) CSR_2 0,91** 1 (3) CSR_5 0,99** 0,91** 1 (4) CSR_7 0,77** 0,73** 0,77** 1 (5) Environmental 0,95** 0,92** 0,96** 0,77** 1 (6) Community 0,27** 0,24** 0,26** 0,11* 0,17** 1 (7) Diversity 0,15** 0,08 0,14** -0,01 0,05 0,38** 1 (8) Employment 0,51** 0,32** 0,48** 0,29** 0,22** 0,31** 0,20** 1 (9) Product_responsibility -0,04 -0,06 -0,04 -0,16** -0,07 0,21** 0,06 -0,01 1 (10) Human_rights -0,38** -0,36** -0,37** -0,17** -0,27** -0,55** -0,35** -0,36** -0,41** 1 (11)Corporate_governance 0,28** 0,29** 0,29** 0,83** 0,32** -0,06 -0,13* 0,02 -0,20** 0,05 1 (12) Sales 0,08 0,10 0,08 -0,07 0,09 0,13* -0,07 -0,01 -0,06 -0,08 -0,17** 1 (13) Leverage -0,09 -0,11* -0,09 -0,03 -0,09 -0,02 0,06 -0,04 0,06 0,01 0,03 -0,06 1 (14) Report -0,03 0,02 -0,04 -0,35** -0,08 0,08 0,14** 0,09 0,11* -0,11* -0,49** 0,22** -0,34** 1 (15) Special_regulation -0,00 -0,03 -0,01 -0,23** -0,07 0,13* 0,32** 0,14** 0,09 -0,10 -0,33** -0,05 0,07 0,19** 1 (16) Monopoly 0,11* 0,14** 0,12* 0,14** 0,14** 0,02 0,00 -0,03 -0,04 -0,11* 0,12* 0,13* 0,01 0,06 0,01 1 (17) ROA 0,16** 0,11* 0,15** -0,02 0,03 0,39** 0,36** 0,33** ,28** -0,39** -0,15** 0,03 -0,11 0,39** 0,25** -0,04 1 Significant test ** < 0.01 * < 0.05 Page 22 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Table 3: CSR aggregated models Independent Variables Dependent Variable ROA Constant 18.155 ** 150.316 * 30.624 *** 34.460 *** 18.816** 147.869 * 19.298** 98.055 ** CSR_nw 0.397 * -6.339 * (CSR_nw) 2 0.084 * CSR_2 0.051 * -0.189 (CSR_2) 2 0.002 † CSR_5 0.283 * -4.644 * (CSR_5) 2 0.046 * CSR_7 0.236 * -2.779 * (CSR_7) 2 0.028 * Ln Sales -0.570 † -0.467 -0.557 -0.423 -0.569 † -0.469 -0.479 -0.446 Leverage -0.004 -0.004 -0.004 -0.003 -0.004 -0.004 -0.005 -0.004 Report 7.869 *** 8.117 *** 7.487 *** 7.768 *** 7.854*** 8.139 *** 8.325 *** 8.579 *** Special regulation 5.533 * 5.428 * 5.658 * 5.788 * 5.559 * 5.478 * 6.319 *** 6.542 *** Monopoly -0.418 -0.617 -0.391 -0.747 -0.422 -0.632 -0.219 -0.239 ROA t - 1 0.424 *** 0.415 *** 0.431 *** 0.416 *** 0.426 *** 0.416 *** 0.433 *** 0.428 *** Wald Test 201.63 *** 208.00 *** 197.94 *** 202.84 *** 201.13 *** 207.75 *** 200.12 *** 207.74 *** Page 23 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Table 4: CSR disaggregated models Independent Variables Dependent Variable ROA Constant -815.646*** 33.615*** -81.487 719.201 0.707 8050.779* 30.196*** Environmental -0.017 -0.132 (Environmental) 2 0.016 Community 8.273*** -10.363 (Community) 2 0.245* Diversity 1.635** -28.943 (Diversity) 2 0.303 Employment 0.112 0.927 (Employment) 2 -0.007 Product Responsibility 6.488*** -320.634* (Product Responsibility) 2 3.202* Corporate Governance 0.046* -0.071 (Corporate Governance) 2 0.001 Ln Sales -0.246 -0.476 -0.463 -0.399 -0.318 -0.155 -0.391 Leverage -0.011 -0.004 -0.006 -0.009 -0.007 -0.008 -0.007 Report 7.667 *** 7.833*** 7.895*** 6.349*** 6.784*** 5.543*** 7.609*** Special regulation 5.333* 5.994 ** 5.841** 2.615 5.113* 6.195*** 6.609*** Monopoly -0.036 -0.698 -1.063 0.235 -0.681 -1.128 0.012 ROA t-1 0.338*** 0.432*** 0.346*** 0.411*** 0.426*** 0.437*** 0.450*** Wald Test 283.41 *** 197.91*** 235.80*** 219.64*** 202.04*** 272.58*** 196.14*** *** < 0.005, **<0.01,*<0.05, †<0.1 Page 24 of 30 http://mc.manuscriptcentral.com/bse Business Strategy and the Environment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60