Public trust's duality in the CSP - reputation - financial performance relationship across countries

Gardberg, N. A., Symeou, P. C. and Zyglidopoulos, S. C. (2015) Public trust's duality in the CSP - reputation - financial performance relationship across countries. Academy of Management Proceedings, 2015, 15705. (doi: 10.5465/AMBPP.2015.190)

Abstract

Within the literature investigating relationships among Corporate Social Performance (CSP), Corporate Reputation (CR), and Corporate Financial Performance (CFP) (Orlitzky, Schmidt, & Rynes, 2003; Waddock & Graves, 1997), we identify two lines of inquiry. First, scholars have investigated the effect that CSP has on CR, “the overall estimation in which a particular company is held by its various constituents” (Fombrun, 1996: 36). Most maintain that CSP enhances CR (Fombrun & Shanley, 1990; Wang & Berens, 2014), with some exceptions (Walker & Dyck, 2014). Second, scholars concur that CR enhances CFP (Newburry, 2010; Roberts & Dowling, 2002). We argue that public trust in business (Harris, Moriarty, & Wicks, 2014) plays an important moderating role in the CSP-CR-CFP relationship, as some have implicitly suggested (Barnett, 2007; Du, Bhattacharya, & Sen, 2010). Public trust in business, or more accurately public trust in the institution (North, 1990) of business, is “the level and type of vulnerability the public is willing to assume with regard to business relations” (Bolton et al., 2009: 6). Public trust in business has been declining since the 1960s (Nye, Zelikow, & King, 1997) remaining at low levels since the 1990s (Wicks et al., 2014). Although both managers (Business Roundtable Institute for Corporate Ethics, 2004) and academics (Wicks et al., 2014) agree that low levels of public trust can harm, inadequate research has investigated its effect on firms (Harris et al., 2014; Bolton et al., 2009). We aim to partially rectify this deficiency. Here, we draw on signaling theory to investigate the role that public trust in business (Bolton et al., 2009) has in moderating the relationship among CSP, CR and CFP. We argue that levels of public trust towards business influence the CSP-CR-CFP relationship and develop hypotheses regarding this influence. Given that national context may systematically influence the CSP-CFP relationship (Gardberg & Fombrun, 2006) and that public trust in business may vary cross-nationally (e.g. Chan, Lam, & Liu, 2011), we test our hypotheses on an unbalanced panel of 462 firms from 2006-12 from 9 countries (a total of 2534 observations).

• Item Type: Articles
• Additional Information: Finalist for the Halloran Best Paper on History of CSR Award.
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Zyglidopoulos, Dr Stylianos
• Authors: Gardberg, N. A., Symeou, P. C., and Zyglidopoulos, S. C.
• College/School: College of Social Sciences > Adam Smith Business School > Management
• Journal Name: Academy of Management Proceedings
• Publisher: Academy of Management
• ISSN: 0065-0668
• ISSN (Online): 2151-6561
• Copyright Holders: Copyright © 2015 Academy of Management
• First Published: First published in Academy of Management Proceedings 2015:15705
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher.