Investigating the Relationship between the Social and Economic-financial Performance

Abstract

Hundreds of studies have explored and measured financial returns related to social performance (Margolis and Walsh, 2003), with controversial results. In addition to these studies’ outcomes, we found, in this body of literature, a lot of innovation in the integration and adaptation of financial analysis tools and models to the study of statistical relationships.

In this paper, we investigate the relationship between corporate social performance and corporate financial (and economic) performance, using multiple measures of financial and social performance and by looking statistically at the movement of actual financial and social performance over time. We emphasize the worth of statistical analysis in traditional financial representations.

Our findings show how ratio analysis and statistical cause-and-effect validation are not alternatives for developing the financial analysis of sustainability and reporting. We show, through constant testing and a double learning process, the critical relationship between the key factors of financial, economic and social performance.