Corporate social responsibility governance, outcomes, and financial performance

Prior research has shown mixed results for the relationship between corporate social responsibility (CSR) and corporate financial performance. Call for investigations on mediators and moderators have been put on notice to provide further explanations of previous mixed findings. This study responds to the calls for research by investigating the mediation effect of CSR outcomes, on the relationship between CSR governance and financial performance. We extract CSR governance and outcomes data from the Bloomberg environmental, social and governance (ESG) database and financial performance data from the COMPUSTAT database. Using a sample of 1980 firm-year observations from the top 500 Green companies in the United States for the years 2009 through 2013, we find that CSR outcomes mediate the relationships between CSR governance and financial performance. The results suggest that whether companies implement CSR governance successfully to generate good CSR outcomes plays an important role influencing companies' financial performance. The results of our study contribute to the CSR literature by providing an explanation of the mediation effects of actual CSR outcomes to the previous heterogeneous findings on CSR-financial return relationships.