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Legitimacy, Visibility and the Antecedents of Corporate Social Performance

Legitimacy, Visibility and the Antecedents of Corporate Social Performance. Mark Sharfman The University of Oklahoma & Shih-Chi Chiu University of Missouri-Columbia Advancing theory in CSR: An intercontinental dialogue Université du Québec à Montréal 14 October 2006. Research Questions.

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Legitimacy, Visibility and the Antecedents of Corporate Social Performance

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  1. Legitimacy, Visibility and the Antecedents ofCorporate Social Performance Mark Sharfman The University of Oklahoma & Shih-Chi Chiu University of Missouri-Columbia Advancing theory in CSR: An intercontinental dialogue Université du Québec à Montréal 14 October 2006

  2. Research Questions • What effect do legitimacy pressure and legitimacy seeking behavior have on firms’ levels of corporate social performance (CSP)? • Can CSP be conceptualized as an instrumental response to legitimacy pressures based in part on firm visibility?

  3. H5 (+) Stakeholders H2 (+) Accounting Returns H7a (+) Market Returns H7b (+) H6 (+) Corporate Social Performance H3 (+) H4 (+) H1 (+) Firm Slack Firm Size Industry Visibility Research Model

  4. Data and Methods CSP:Factor score of Fortune Social Responsibility Reputation (FSRR) score plus the KLD strength indicators in diversity, environment and community. Industry Visibility:Average counts of the four-digit Standard Industrial Classification (SIC) codes in the FirstSearch and Business & Company Resource Center news databases. Visibility to Stakeholders: Factorscore of firm news mentions, number of public affairs personnel, number institutional shareholders, common shareholders and CSP oriented shareholder resolutions. Firm Size: Factor score of total assets, total sales, and total equity. Economic Performance: 2000 ROA and Total Return

  5. Data and Methods continued Firm Slack: 2002 Weighted Average Cost of Capital ((average cost of all debt * the weight of debt) + (cost of equity * weight of equity)*firm’s corporate tax rate) Sample: From an initial sample of 159 firms from the S&P 500 who were evaluated both by Fortune and KLD, the analysis was done on a final sample of 105. Analysis: Hierarchical regression

  6. Results-cont.

  7. Results continued.

  8. Conclusions • There is a strong relationship between the level of visibility to stakeholders and CSP. • Organizational slack enables firms to perform a higher level of CSP supporting the virtuous cycle argument. • Economic performance moderates the visibility to stakeholders and CSP relationship. • Industry visibility predicts the firm’s the level of visibility to stakeholders

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