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Abstract
This quantitative study examines a major concern among investors, stakeholders, and business organizations, which is the lack of understanding of the relationship between social responsibility and financial performance. Many investors once perceived social responsibility as the nemesis to financial performance. The purpose of the study was to understand the relationship between social responsibility and financial performance, which could be used to assist in investment decision-making processes. The research questions were designed to answer whether correlational relationships exist among the social rating scores and market capitalization scores of 359 U.S.-based companies classified as socially responsible in 2009. The modern portfolio and stakeholder theories were the theoretical frameworks in the study. Data were collected via the global Socrates database and the Yahoo finance database. Statistical analyses were conducted to test the hypotheses, which included Pearson's product–moment correlation coefficient. The statistical analyses showed a significant positive relationship between social rating scores and market capitalization scores for the companies across multiple industries and market capitalization groups (small, mid, large). Investors and managers could use the results of the study to improve their investment decision making and improve the perception that socially responsible behavior hinders financial performance. The implications for social change are greater financial support of socially responsible companies from the investor and a greater consideration of social responsibility in the strategic initiatives of non-socially responsible companies, thereby benefitting stakeholder groups (i.e., community, suppliers, employees), through an increased social awareness within the organization.
