Review of Quantitative Finance and Accounting

, Volume 52, Issue 1, pp 105–158 | Cite as

Financial and corporate social performance in the UK listed firms: the relevance of non-linearity and lag effects

  • Emmanuel Adegbite
  • Yilmaz Guney
  • Frank KwabiEmail author
  • Suleiman Tahir
Original Research


Using environmental, social and governance scores compiled by Reuters Datastream for each company’s corporate social performance (CSP), we examine the relationship between CSP and corporate financial performance (CFP) of 314 UK listed companies over the period 2002–2015. We further evaluate the relationship between prior and subsequent CFP and prior and subsequent CSP. Based on the system-GMM estimation method, we provide direct evidence that suggests that while CFP and CSP can be linked linearly; however, when we examine the impact of CSP on CFP, the association is more non-linear (cubic) than linear. Our results suggest that firms periodically adjust their level of commitment to society, in order to meet their target CSP. The primary contributions of this paper are testing (1) the non-monotonous relationship between CSP and CFP, (2) the lagged relationship between the two and the optimality of CSP levels, and (3) the presence of a virtuous circle. Our results further suggest that CSP contributes to CFP better during post-crisis years. Our findings are robust to year-on-year changes in CFP and CSP, financial versus non-financial firms, and the intensity of corporate social responsibility (CSR) engagement across industries.


Corporate social responsibility Corporate financial performance Corporate social performance Slack resources theory UK firms 

JEL Classification

G34 M14 


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Emmanuel Adegbite
    • 1
  • Yilmaz Guney
    • 2
  • Frank Kwabi
    • 1
    Email author
  • Suleiman Tahir
    • 3
  1. 1.Department of Accounting and FinanceDe Montfort UniversityLeicesterUK
  2. 2.Business SchoolUniversity of HullHullUK
  3. 3.Department of EconomicsUsumanu Danfodiyo UniversitySokotoNigeria

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