Title
Ethical Corporate Citizenship: Does it Pay?
Department/School
Accounting
Date of this version
2011
Document Type
Book Chapter
Keywords
Accounting ethics, corporate citizenship, corporate social responsibility
DOI
https://doi.org/10.1108/S1574-0765(2011)0000015008
Abstract
Ethical corporate citizenship and good corporate governance have received increased attention since the financial scandals prevalent at the beginning of the new millennium. This study first explores the relationship of ethical corporate citizenship to financial performance (i.e., greater profitability and efficiency, and lower cost of capital). Second, the study examines whether ethical corporate behavior is associated with a market-value premium. Results of prior studies are mixed. The results of our study contribute directly to the recent accounting literature in which specific aspects of ethical corporate behavior have been explored (Fukami et al. 1997; Ittner and Larker, 1998; Ballou et al., 2003; Clarkson et al., 2004). We use firms listed by Business Ethics as “The 100 Best Corporate Citizens” as our sample of ethical firms. The univariate results of our study indicate a significant relationship between ethical corporate behavior and financial performance (i.e., greater profitability and efficiency, and lower cost of capital). The results of multivariate tests, controlling for prior year market value of equity, yield results which indicate a marginally significant association between being recognized as ethical in that year and market value of equity, but no association between being recognized as ethical at least one time and market value of equity. Nevertheless, given our study’s findings of better financial performance and lower risk, we conclude that ethical corporate citizenship does indeed benefit a firm.
Published in
Research on Professional Responsibility and Ethics in Accounting
Citation/Other Information
Blazovich, J. L., & Smith, L. M. (2011). Ethical Corporate Citizenship: Does it Pay? In Research on Professional Responsibility and Ethics in Accounting, Volume 15 (pp. 127-163). https://doi.org/10.1108/S1574-0765(2011)0000015008