Operational Productivity, Corporate Social Performance, Financial Performance, and Risk in Manufacturing Firms

Operational Productivity, Corporate Social Performance, Financial Performance, and Risk in Manufacturing Firms

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Article ID: iaor20165075
Volume: 25
Issue: 12
Start Page Number: 2065
End Page Number: 2085
Publication Date: Dec 2016
Journal: Production and Operations Management
Authors: , ,
Keywords: performance, financial, risk
Abstract:

We examine the relationship between Operational Productivity (OP), Corporate Social Performance (CSP), Financial Performance (FP), and risk. Our sample frame comprises 476 firms in nine US manufacturing industries during the period 1999–2009. We employ DEA‐based measures for OP and CSP, two operationalizations for FP to reflect current profitability and market value, and two operationalizations for risk to reflect bankruptcy risk and stock price volatility. We confirm that OP is essential for good financial performance and reduced risk (as expected), but the main effects of CSP are mixed. Importantly, we find that OP moderates the CSP–FP and CSP–risk relationships. Specifically, if OP is poor, CSP is of limited benefit to FP or risk. However, at or above a threshold level of OP, firms can use CSP to build upon it to yield further improvements in FP and reductions in risk. We discuss the implications of our findings for theory and practice.

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