The Influence of Firm Size and Sensitive Industry on the Relationship between Corporate Social Responsibility and Corporate Financial Performance

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The paper is to examine whether there are significant differences in corporate financial performance between the firms implementing corporate social responsibility (hereafter: CSR) and those without CSR. Previous empirical evidence provides mixed results on the relationship between corporate social performance (hereafter: CSP) and corporate financial performance (hereafter: CFP) and shows that some factors influence this relationship. This paper is to gain insight of CSR and to discover how the factors influence the relationship between CSR and CFP. Moreover, this thesis focuses on the firm size and sensitive industry as moderators and tests whether firm size as a confounding variable that influences the CSP-CFP relationship. This research investigates 69 listed companies in Euronext Amsterdam from the period of 2005 to 2015 in the Netherlands since it intends to find a long-term effect of CSR on financial performance. Using a random effect approach, it is found that CSR negatively leads to changes in CFP. Size does not moderate the CSP-CFP relationship, but size as a confounder influences the CSP-CFP relationship. The sensitive industry does negatively moderate the CSP-CFP relationship. That is, there are more negative effects of CSR on CFP in the “more sensitive” industries than in the “less sensitive” industries. In addition, firm size and financial performance are positively related. Keywords: corporate social responsibility (CSR), corporate social performance (CSP), corporate financial performance (CFP), sustainability, CSP-CFP relationship, sustainability report, CSR report, CSR index, firm size, industry, sensitive industry
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