Unlocking the link between corporate social responsibility and corporate firm performance: the channel effect of employee satisfaction

Abstract

Purpose This paper aims to gain a deeper understanding of how corporate social responsibility (CSR) improves corporate financial performance (CFP). It also examines whether employee attitudes, as measured by job satisfaction, mediate the CSR–CFP relationship. Design/methodology/approach This study analyzes a sample of an unbalanced panel of 1,261 firm-year observations listed on the S&P Global 1200 Index, covering the period from 2009 to 2019. Data were sourced from the DataStream of Thomson Reuters-ASSET4. Multivariate regression analyses are used to examine the linkage between the variables. Findings The results show that CSR is positively related to employee satisfaction. Furthermore, the authors find a significant positive association between CSR and CFP, and interestingly, this positive association remains significant even after considering the effect of employee satisfaction. These findings suggest that employee satisfaction partially mediates the relationship between CSR and CFP. Practical implications The empirical results could be valuable for important managerial choices. Firms might implement internal strategies through CSR initiatives that promote efficient human resource management to boost employee satisfaction, which can enhance corporate performance and ultimately support environmental and social well-being. Originality/value This paper contributes to the ongoing debates regarding the economic consequences of CSR activities. It develops a new framework that identifies employees’ satisfaction as an important factor influencing the association between CSR and CFP, representing a novel contribution to the literature.