Corporate social responsibility, corporate financial performance and the confounding effects of economic fluctuations: A meta-analysis

Due to public concerns and regulatory forces, managers are paying increasingly more attention to corporate social responsibility (CSR). Efforts to improve CSR are widely believed to be beneficial for increasing a firm's value; yet, evidence on how CSR affects corporate financial performance (CFP) has been mixed. To understand why the literature has been divided on the impact of CSR on CFP, we carry out a meta-analysis based on 437 primary studies. We discover that among various factors, much of the disagreement in the literature can be traced to the confounding influence of macro-level economic fluctuations, which were often overlooked by CSR-CFP studies. We show that if the primary studies are either unconfounded by economic fluctuations, or have addressed them econometrically, the non-consensus in the literature can be reconciled and the true positive effect of CSR on CFP can be observed. •Efforts to improve CSR are widely believed to be beneficial for increasing a firm’s value.•However, evidence on how CSR affects corporate financial performance (CFP) has been mixed.•We carry out meta-analysis based on 437 primary studies.•We find that much of the disagreement in the literature can be traced to the confounding influence of macro-level economic fluctuations.•If the confounding influence is taken care of, the non-consensus in the literature can be reconciled and the true positive effect of CSR on CFP can be observed.