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

Adegbite, Emmanuel; Guney, Yilmaz; Kwabi, Frank; Tahir, Suleiman


Emmanuel Adegbite

Yilmaz Guney

Frank Kwabi

Suleiman Tahir


Using environmental, social and governance scores compiled by Reuters Datas-tream 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.


Adegbite, E., Guney, Y., Kwabi, F., & Tahir, S. (2019). Financial and corporate social performance in the UK listed firms: the relevance of non-linearity and lag effects. Review of Quantitative Finance and Accounting, 52(1), 105-158.

Journal Article Type Article
Acceptance Date Feb 2, 2018
Online Publication Date Feb 19, 2018
Publication Date 2019-01
Deposit Date Apr 30, 2018
Publicly Available Date Oct 27, 2022
Journal Review of Quantitative Finance and Accounting
Print ISSN 0924-865X
Electronic ISSN 1573-7179
Publisher Springer Verlag
Peer Reviewed Peer Reviewed
Volume 52
Issue 1
Pages 105-158
Keywords Accounting; General Business, Management and Accounting; Finance
Public URL
Publisher URL


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