Relationship between corporate social responsibility in corporate annual reports and financial performance of the US companies

Abstract

Achieving competitive advantage is becoming increasingly difficult in today's rapidly changing environment, and it is increasingly related to differentiation among competing companies. This concerns not only quality of products and economic results but also company’s visibility as such. One way to present a responsible approach to entrepreneurship is via corporate social responsibility (CSR) – presenting this not only to company owners but also to other stakeholders, especially external ones. Potential investors can also be approached in this way. The total of 1380 listed US companies have been assessed as part of this research in 2014, both in terms of selected financial indicators and information they have published concerning their CSR activities. The aim was to find out which areas of CSR are presented by companies in their annual reports and whether a greater incidence of CSR information correlates with the selected financial indicators, which include company’s market value and bankruptcy risk. For this purpose, a CSR dictionary was used. Four areas were evaluated: the environment, social community, human rights, and employee welfare. We demonstrate that companies with favorable financial performance show an emphasis on these areas. This finding has important implications for all stakeholders. © Foundation of International Studies, 2017.