The Virtuous Circle of Corporate Social Performance and Corporate Social Disclosure

Abstract

Previous literature in the field of corporate social responsibility investigates whether corporate social performance can be seen as a determinant of corporate social disclosure or, conversely, if corporate social disclosure is a determinant of corporate social performance. The aim of this paper is to join these two streams of research in a unique theoretical model, which can demonstrate that there is a mutual interaction between performance and disclosure. This can result, in the long run, in a virtuous circle where higher social performance generates future higher social disclosure and this determines higher future social performance and so on. An analytical model has been adopted to demonstrate the research hypothesis. Gathering data from the portfolios of the European Socially responsible funds (SRFs) listed on the Morningstar platform in 2010, the study analyzed 160 social reports published by 80 companies during 2008 and 2009. Findings, by demonstrating the non-one-way relationship between social performance and social disclosure, confirm the existence of a mutual influence between the results gained in different CSR areas and the capability to control and communicate such performance. In this way, the paper provides not only theoretical insights, but also practical implications for managers that are required to put in place responsive and effective initiatives towards the increasing pressure exerted by the internal and external environments in which they operate.