Are you in or are you out?: How the relevance of an organization’s social initiatives to its day-to-day operations impacts financial performance

Abstract

For-profit firms in society today are becoming increasingly expected to “give back” to the community through some sort of social initiative. In the past, it was hotly debated whether these societal expectations resulted in any sort of fiscal benefit. Now it is commonly agreed that there is financial benefit to conducting social initiatives, but there is no clarity around how the relationship of an organization’s social initiatives to its day-to-day operations impacts financial performance. This study examines the effect of social initiatives that are core to an organization’s everyday functions, and those that are peripheral to everyday functions, on financial performance. Additionally, this study examines the relationship between concerning core and peripheral social behavior on financial performance. Through two-sample t-tests and panel regression analysis, I determined that within a firm, peripheral social initiatives have a negative relationship with financial performance, while core initiatives and both types of concerning social behavior have no relationship. Between firms, core initiatives have a positive relationship with financial performance while concerning peripheral behavior has a negative correlation. This indicates that it may be fiscally beneficial to partake in social initiatives core to the everyday functioning of an organization and focus on reducing concerning peripheral behavior.