CSR, financial performance and risk: Does it add up for mid-caps?

Abstract

The purpose of this paper is to establish whether there is a link between Corporate Social Responsibility (CSR) scores, Corporate Financial Performance (CFP) and risk in US mid-cap firms. Whilst much previous work has been carried out on large-cap firms, the mid-cap sector has been neglected in academic literature and by the investor/analyst world. The CSR scores from a sample of 365 large-cap, 279 mid-cap and 356 small-cap firms from the US S&P stock indices were regressed against a range of market-based, accounting-based and risk-based variables to assess whether there was any correlation between them. Whilst positive findings were made for the large-cap and small-cap firms, there was little evidence of any such relationship for mid-cap firms. These findings fill a gap in the literature on a much neglected but unique market sector, which is of importance to those who work within that sector, in that they may gain a better understanding of the implications of their unique environment, but also for investors and analysts alike who have hitherto largely ignored the mid-cap sector.