Corporate Social Performance, Financialization, and Real Investment in US Manufacturing Firms

Abstract

In recent years, the global financial and economic crisis are rewriting the relationship between business and society, focusing, among other things, on the role of the process of financialization, not only in the economy as a whole but also within non-financial companies. Shareholder value maximization, together with the commoditization of business, has led to a general short-term approach at the expense of capital accumulation and core business activity, to the detriment of not only firms’ competitiveness and productivity but also of human capital, strategic innovation, business ethics, and long-term growth. Within this framework, this study investigates the role of corporate sustainability, analyzing the nexus between financialization, accumulation of real capital, and corporate social performance, an issue that has been neglected so far. Using a sample of US manufacturing firms from 2002 to 2017, we found that, while financialization was negatively correlated with corporate real investment, the environmental and social firm performance positively impacted corporate capital accumulation. Our results support the belief that a focus on environmental, social, and governance standards, fostering real investments, may enhance a firm’s long-term growth with a positive effect on its long-term value.