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Effects of Corporate Social Responsibility on Firm Performance: Does Customer Satisfaction Matter?

Author

Listed:
  • An-Pin Wei

    (International School of Business and Finance, Sun Yat-sen University, Zhuhai 519082, China)

  • Chi-Lu Peng

    (Business Intelligence School, National Kaohsiung University of Science and Technology, Kaohsiung 82445, Taiwan)

  • Hao-Chen Huang

    (Department of Public Finance and Taxation, National Kaohsiung University of Science and Technology, Kaohsiung 82445, Taiwan)

  • Shang-Pao Yeh

    (Department of Hospitality and M.I.C.E. Marketing Management, National Kaohsiung University of Hospitality and Tourism, Kaohsiung 812301, Taiwan)

Abstract
Academic research has shed light on the empirical relationships among a firm’s corporate social responsibility (CSR), corporate social irresponsibility (CSiR) and firm performance and on the firm’s customer satisfaction–firm performance relationship in different markets. However, little notice has been taken of whether the coexistence of corporate social responsibility, corporate social irresponsibility and customer satisfaction has an interactive effect on firm performance. This study aims to examine the effects of their interaction on firm performance from an investment perspective. Using unbalanced panel regression to test a sample of publicly traded firms from the United States, this study finds that, in general, firms with higher customer satisfaction earn positive changes in abnormal stock returns. For firms that engage in CSR, CSR positively affects corporate performance, whereas firms’ social irresponsibility activities reduce firms’ financial performance. All else equal, a positive interactive effect of CSiR and customer satisfaction on stock return was observed. The results reveal that high customer satisfaction can alleviate the negative effect of corporate social irresponsibility on firms’ financial performance. Our findings will help management executives and investors to understand that the negative effect of a firm’s unforeseen events on firm performance can be weakened by increasing customer satisfaction.

Suggested Citation

  • An-Pin Wei & Chi-Lu Peng & Hao-Chen Huang & Shang-Pao Yeh, 2020. "Effects of Corporate Social Responsibility on Firm Performance: Does Customer Satisfaction Matter?," Sustainability, MDPI, vol. 12(18), pages 1-18, September.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:18:p:7545-:d:412932
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    References listed on IDEAS

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    7. Yi-Bin Li & Gui-Qing Zhang & Tung-Ju Wu & Chi-Lu Peng, 2020. "Employee’s Corporate Social Responsibility Perception and Sustained Innovative Behavior: Based on the Psychological Identity of Employees," Sustainability, MDPI, vol. 12(20), pages 1-15, October.
    8. Hassan, Ismaila & Hassan Alhaji, Tanko, 2023. "Corporate Social Responsibility and Financial Performance of some Listed Firms: Evidence from developed and Developing Countries," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(6), pages 1171-1175, June.
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    10. Saridakis, Charalampos & Angelidou, Sofia & Woodside, Arch G., 2023. "How historical and social aspirations reshape the relationship between corporate financial performance and corporate social responsibility," Journal of Business Research, Elsevier, vol. 157(C).
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