Conceptualizing Peer Effects of Corporate Social Performance on Corporate Financial Performance

Abstract

Purpose: Existing approaches to explaining the dynamics of corporate social responsibility (CSR) and corporate financial performance (CFP) through peer effect are incomplete as they do not conceptualize the complexity of the phenomenon. Building on the extant literature the paper aims to critically document parameters to understand the connectivity between peer effect-CSR and CSR-CFP. Design/Methodology/Approach: The paper is based on a proposed conceptual framework identifying key parameters to understand the connectivity between peer effect-CSR and CSR-CFP. Relevant extant literature published during 1993-2017 in high-quality journals is synthesized. This review reveals different approaches and measurement techniques as the basis of inconclusive empirical evidence on the relationship between corporate social and financial performance. Findings: The paper implies that firms mimic their peers’ CSR strategies for different reasons such as reputation or learning in the hope of devising better strategies for growth and sustainable development. To state, there are different motives behind and channels through which peers influence CSR-CFP association. Implications/Originality/Value: The paper establishes a link between corporate social and financial performance through the lens of peer effect, especially in the context of developing economies. This paper has implications in enhancing overall understanding of social responsibility and financial performance connection by providing clarity on underlying themes, theoretical underpinnings and measurement approaches.