Corporate social responsibility and financial performance: Correlation or misspecification?

Abagail McWilliams, Donald Siegel

Research output: Contribution to journalArticlepeer-review

2311 Scopus citations


Researchers have reported a positive, negative, and neutral impact of corporate social responsibility (CSR) on financial performance. This inconsistency may be due to flawed empirical analysis. In this paper, we demonstrate a particular flaw in existing econometric studies of the relationship between social and financial performance. These studies estimate the effect of CSR by regressing firm performance on corporate social performance, and several control variables. This model is misspecified because it does not control for investment in R&D, which has been shown to be an important determinant of firm performance. This misspecification results in upwardly biased estimates of the financial impact of CSR. When the model is properly specified, we find that CSR has a neutral impact on financial performance.

Original languageEnglish (US)
Pages (from-to)603-609
Number of pages7
JournalStrategic Management Journal
Issue number5
StatePublished - May 2000
Externally publishedYes


  • Corporate social responsibility
  • Firm performance
  • Product differentiation
  • R&D
  • Specification error

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management


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