Corporate Social Responsibility and Shareholder Wealth: The Role of Marketing Capability

Abstract

Despite the positive societal implications of corporate social responsibility (CSR), there remains an extensive debate regarding its consequences for firm shareholders. This study posits that marketing capability plays a complementary role in the CSR–shareholder wealth relationship. It further argues that the influence of marketing capability will be higher for CSR types with verifiable benefits to firm stakeholders (i.e., consumers, employees, channel partners, and regulators). An analysis utilizing secondary information for a large sample of 1,725 firms for the years 2000–2009 indicates that the effects of overall CSR efforts on stock returns and idiosyncratic risk are not significant on their own but only become so in the presence of marketing capability. Furthermore, the results reveal that although marketing capability has positive interaction effects with verifiable CSR efforts—environment (e.g., using clean energy), products (e.g., providing to economically disadvantaged), diversity (e.g., pursuing diversity in top management), corporate governance (e.g., limiting board compensation), and employees (e.g., supporting unions)—on stock returns (and negative interaction effects with these CSR efforts on idiosyncratic risk), it has no significant interaction effect with community-based efforts (e.g., charitable giving).