The mediating role of corporate reputation, brand equity and innovation in the link between CSR and financial performance. A meta-analysis

Abstract

Over the last 50 years, corporate social responsibility (CSR) programs have become more prominent in the business world. Corporations started investing in such programs to strengthen its’ brand and satisfy evolving customer needs. Additionally, it is believed that a CSR-oriented strategy not only creates a good corporate image but also brings value to a company in the form of financial benefits. Through meta-analytical structural equation modelling, we aggregated results from 58 studies consisting of 291 correlation coefficients to examine the robustness of the CSR-CFP relationship. Our study examines three different mechanisms explaining how CSR positively affects the firm's short- and long-term financial performance. We fill the gap in the existing literature by exploring the roles of corporate reputation, brand equity and innovation as they pertain to the link between CSR practices and financial performance. The findings of our research revealed that CSR affects positively accounting-based FP ( profitability, sales, ROA, ROI, ROS, etc.) through enhanced corporate reputation and brand equity. Moreover, we found that CSR stimulates innovation and improves the reputation of a firm contributing to increased stock returns. However, CSR does not directly lead to higher stock performance. We conclude with a theoretical contribution, managerial implications, limitations and guidance for future research.