Fashion or future: does creating shared value pay?

Porter and Kramer's () concept of ‘creating shared value’ (CSV) has attracted considerable attention from business and academics. According to Porter and Kramer, CSV is about creating economic value in a way that also generates value for society by addressing its basic needs and challenges. One of the key assumptions of the CSV concept is that companies will benefit economically through engaging in CSV activity. We test this empirically by developing a proxy measure of CSV based on 26 sustainability performance indicators drawn from a customised database. Based on a sample of ASX 300 companies taken over a 5‐year period (2008–2012), we find a strong statistical association between the CSV proxies and a range of financial performance indicators. These companies also tend to be larger and have higher growth opportunities. However, statistical tests of causality indicate that superior financial performance leads to greater CSV activity, rather than CSV activity driving financial outcomes. This finding suggests that successful companies may well be adopting CSV‐type practices more as an outcome of management fashion than because of their tangible contribution to the financial performance of the firm.

[1]  Jennifer Gippel visiting Fellow,et al.  Endogeneity in Accounting and Finance Research: Natural Experiments as a State-of-the-Art Solution , 2015 .

[2]  Tom Smith,et al.  A review of accounting research in the Asia Pacific region , 2015 .

[3]  Tom Smith,et al.  Endogeneity in Accounting and Finance Research: Natural Experiments as a State‐of‐the‐Art Solution , 2014 .

[4]  Laura J. Spence,et al.  Contesting the Value of “Creating Shared Value” , 2014 .

[5]  Philipp Schreck.  Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure , 2013 .

[6]  Laura Michelini,et al.  New business models for creating shared value , 2012 .

[7]  H. Chesbrough.  GE's Ecomagination Challenge: An Experiment in Open Innovation , 2012 .

[8]  Donald V. Moser,et al.  A Broader Perspective on Corporate Social Responsibility Research in Accounting , 2012 .

[9]  Benson Wier,et al.  Is Earnings Quality Associated with Corporate Social Responsibility? , 2011, Sustainability.

[10]  S. Cowan,et al.  Corporate Disclosure Reactions to Australia’s First National Emission Reporting Scheme , 2011 .

[11]  José F. Molina-Azorín,et al.  Green management and financial performance: a literature review , 2009 .

[12]  Stewart Jones,et al.  An Empirical Examination of the Market Returns and Financial Performance of Entities Engaged in Sustainability Reporting , 2007 .

[13]  Abagail McWilliams,et al.  Corporate Social Responsibility: Strategic Implications , 2006 .

[14]  Yuhong Yang.  Can the Strengths of AIC and BIC Be Shared , 2005 .

[15]  J. D. Margolis,et al.  Misery Loves Companies: Rethinking Social Initiatives by Business , 2003 .

[16]  Sulaiman A. Al-Tuwaijri,et al.  The Relations Among Environmental Disclosure, Environmental Performance, and Economic Performance: A Simultaneous Equations Approach , 2003 .

[17]  F. Schmidt,et al.  Corporate Social and Financial Performance: A Meta-Analysis , 2003 .

[18]  Dennis M. Patten.  The relation between environmental performance and environmental disclosure: a research note , 2002 .

[19]  Charles E. Wasley,et al.  Performance Matched Discretionary Accrual Measures , 2002 .

[20]  M. C. Jensen.  Value Maximization, Stakeholder Theory, and the Corporate Objective Function* , 2001, Business Ethics Quarterly.

[21]  Sarah Golden,et al.  Corporate environmental disclosures: are they useful in determining environmental performance? , 2001 .

[22]  C. Deegan,et al.  The public disclosure of environmental performance information—a dual test of media agenda setting theory and legitimacy theory , 1998 .

[23]  D. Scharfstein,et al.  Anatomy of Financial Distress: An Examination of Junk-Bond Issuers , 1991 .

[24]  C. Granger.  Investigating causal relations by econometric models and cross-spectral methods , 1969 .

[25]  Matt Eyring,et al.  Nuevos modelos de negocios en los mercados emergentes , 2011 .

[26]  Howard H. Stevenson.  Cómo cambiar el mundo , 2008 .

[27]  M. Friedman.  The Social Responsibility of Business Is to Increase Its Profits , 2007 .

[28]  Peter M. Clarkson,et al.  An examination of environmental reporting and its relation to corporate environmental performance , 2007 .