The impact of ISO 26000 implementation and corporate governance on financial performance of socially responsible firms

Purpose : This study aims to test the effect of the commitment of companies to corporate social responsibility (CSR) via the implementation of the ISO 26000 framework on their financial performance and the moderating effect of corporate governance (CG). Methodology : A number of European socially-responsible listed companies were observed over the period ranging from 2014 to 2020 based on the GLS (Generalized Least Squares) method. Results : our findings indicated that the individual impacts of CSR and CG on financial performance, measured by the Return on assets and Tobin’s Q, were significant and negative. However, the combined effect of CSR and governance index on financial performance was found to be significant and positive, highlighting an important moderating effect of CG. Overall, this work addresses the discrepancy between the negative individual effect of CSR commitment and CG on the financial performance of the sampled firms despite being recognized as socially responsible and their positive combined effect. Originality : The results question the validity of CSR engagement in companies operating in European context and call for a differentiated approach to measure CSR engagement based on ISO 26000s. This study also enhances the existing literature on CSR–CFP and makes it more relevant to firms with effective CG system. JEL classification : M14, G30, L25