Accepted Manuscript

Exploring CSR and financial performance of full-service and low-cost

air carriers

Ann Shawing Yang , Suvd Baasandorj

PII: S1544-6123(17)30177-0
DOI: 10.1016/j.frl.2017.05.005
Reference: FRL 709

To appear in: Finance Research Letters

Received date: 5 April 2017

Accepted date: 11 May 2017

Please cite this article as: Ann Shawing Yang , Suvd Baasandorj , Exploring CSR and finan-
cial performance of full-service and low-cost air carriers, Finance Research Letters (2017), doi:
10.1016/j.frl.2017.05.005

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 ACCEPTED MANUSCRIPT

Exploring CSR and financial performance of full-service and low-cost air

carriers

Ann Shawing Yang (1st author and corresponding author)

Institute of International Management
National Cheng Kung University
1, University Road, Tainan 701, Taiwan R.O.C.
Email: annsyang@mail.ncku.edu.tw

Suvd Baasandorj (2nd author)

Institute of International Management

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National Cheng Kung University
1, University Road, Tainan 701, Taiwan R.O.C.

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Email: pearl_1232@yahoo.com

ABSTRACT

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We analyze the influence of corporate social responsibility (CSR) toward the financial
performance of low-cost (LCC) and full-service air carriers (FSC). The fixed-effect
model of panel data analysis is applied for the study period from 2006 to 2015. FSCs

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improve financial performance via environmental and social CSR activities; compared
to LCCs via increased firm size and environmental CSR activities. Firm age significant
negatively influences LCCs, whereas leverage shows mixed significant influence
toward FSCs. CSR increases current and expected financial performances for FSCs and
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LCCs, respectively. FSCs and LCCs, with further environmental participation, could
increase CSR scores and enhance financial performance.
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JEL classification: G34, L25, L93, M14

Keywords: Corporate social responsibility; financial performance; full-service air

carrier; low-cost air carrier; international aviation industry
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1. Introduction

Investors are increasingly aware of corporate social responsibilities (CSR), which

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significantly influence stock prices and financial performance (Kim et al., 2013; von
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Arx and Ziegler, 2014). Companies participating in CSR activities not only increase

shareholder values but also preemptively signal company risk (Godfrey et al., 2009;
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Kim et al., 2014). CSR activities have significant positive influence on sales growth,

market share, and profit, leading to an overall significant positive effect on corporate

performance (Menguc and Ozanne, 2005; Barneet and Salomon, 2012). In particular,

CSR activities comprising environmental activities and social activities generate

significant positive increase in firm performance resulting in greater stock returns (von

Arx and Ziegler, 2014). Firms engaging in CSR activities are conservative and make

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accounting and operation decisions to meet shareholders’ expectations (Kim et al.,

2013). Moreover, older firms (characterized by a stable cash flow and profitability),

actively participate more in CSR activities which emphasize environmental

performance (Withisuphakorn and Jiraporn, 2016). Unrelated diversification further

creates significant positive increase in CSR performance, where broader social issues

can be encountered to support long-term firm performance (Xu and Liu, 2017).

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Consequently, CSR activities not only build reputational capital but also increase

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public trust, causing positive market response toward improved financial performance

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(Fombrun et al., 2000; Robert and Dowling, 2002).

Despite the benefits of CSR activities, the aviation industry has minimal CSR

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participation (Tsai and Hsu, 2008; Seo et al., 2015). Less than 2.5% of firms in the air
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carrier industry participate in CSR activities (Waddock and Graves, 1997; El Ghoul et

al., 2011). Although CSR activity participation may decrease short-term financial
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performances of air carriers, CSR activities cause significant positive effects on the

overall financial performance of air carriers (Lee and Park, 2010; Lee et al., 2013). Air
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carriers that participate in environmental CSR activities increase their firms’

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reputations (Rayman-Bacchus et al., 2012).

Thus, full-service carriers (FSCs) mainly engage in the performance of

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environmental CSR activities (Cowper-Smith and de Grosbois, 2011). For the

transportation industry, the nature of operations frequently causes negative CSR

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performance; meanwhile, larger firms (with greater financial performance obtained

from operations and cash flows) participate more in CSR-related activities (Borghesi

et al., 2014). Low-cost carriers (LCCs) are generally perceived as firms with the least

environmental friendliness in terms of CSR, whereas FSCs display the most

environmental friendliness (Hagmann et al., 2015). The majority of industries prove

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CSR’s significant positive correlation to stock returns and returns on assets, as well its

significant negative correlation to financial leverage and sales; however, the

transportation industry is commonly observed to have below-average participation in

CSR activities (Nelling and Webb, 2009). Although greater corporate social

performance leads to higher firm value, for the transportation industry such

performance generally has a significant negative effect on firm stock prices and

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market-to-book ratios, thereby causing a decrease in corporate performance (Gregory

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et al., 2016).

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Using CSR data for the international aviation industry consisting of FSCs and

LCCs, we analyze the causal relationship between CSR activities and financial

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performance via fixed-effect panel data analysis. In this study, the international
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aviation industry includes the U.S., the U.K., Canada, Australia, Ireland, Germany,

France, China, Taiwan, Hong Kong, Malaysia, Singapore, and Thailand for both FSCs
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and LCCs with CSR participations. Financial performance is categorized as the

current financial performance through returns on asset and expected financial

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performance via Tobin’s Q. Strategic trading development for FSCs and LCCs are
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identified via causal relationship among CSR activities, financing activities, and firm

characteristics. We found that CSR activities comprising environmental and social

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activities exert significant positive influence on the FSCs’ current financial

performance via return on assets (ROAs). Conversely, environmental CSR activities

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demonstrate a significant positive influence on LCCs’ expected financial performance

via Tobin’s Q. Moreover, with regard to FSCs, the use of leverage produces a

significant negative influence on current financial performance, but yields a

significant positive influence on expected financial performance. For both FSCs and

LCCs, CSR activities relating to environmental operations create a significant positive

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improvement on financial performance. While FSCs improve financial performance

via economic and social activities and leverage, LCCs improve financial performance

via greater firm size and economic activities. LCCs are also significantly negatively

influenced by firm age with regard to financial performance.

2. CSR theories

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Corporations frequently engage in CSR or irresponsibility via positive theory

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approach, where limiting corporate irresponsibility outweighs the importance of

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progressive development of responsible corporate actions (Windsor, 2013).

Originating from a multifaceted professional perspective, CSRs involve positive and

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negative actions exogenous to the firm, including reputation development or legal
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action for specific firms (Godfrey et al., 2008). Based on theory of the firm

perspective, an individual CSR task is carried out relevant to: 1) specific industry
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contexts or purposes, 2) market characteristics, and 3) product or industry life cycles

(McWilliams and Siegel, 2001; Godfrey et al., 2008). However, application of

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stakeholder theory is frequently contemplated for trade-offs between operational

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requirements of firms and stakeholder demands and expectations (Brown and Forster,

2013). Thus, passenger airlines and heavy industrial industries may focus more on
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environmental CSR activities relative to consumer industries with high community

CSR engagement (Godfrey et al., 2008). Therefore, CSR participation may be

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influenced by firm size, through which a firm’s financial status and ownership

structure determine corporate involvement (Blombäck and Wigren, 2009).

3. Method

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3.1. Sample selection

We collect complete statistical data from the Thomson Reuters ASSET4 ESG

(Economic, Social, and Governance) database and Thomson Reuters Datastream

database. Following Seo et al. (2015), we utilize unbalanced panel data to provide a

sample representation of the international aviation industry. We divide air carriers into

full panel, full-service carrier panel, and low-cost carrier panel. Each panel contains

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analyses related to CSR, environmental performance, and social performance

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categories. We refer to Lu et al. (2015) in selecting full-service air carriers and

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low-cost carriers. A total of 16 airlines1 (11 full-service carriers and five low-cost

carriers) are selected with 130 firm-year observations within the study period from

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2006 to 2015. (See Table 1 for the list of air carriers.)
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Insert Table 1 about here

3.2. Variables
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Accounting-based and market-based measures consisting of ROAs and Tobin’s Q

are adopted for financial performance analysis (see Alexander and Buchholz, 1978;
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Waddock and Graves, 1997; Hilman and Keim, 2001). Accounting-based measures
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indicate a firm’s current financial performance, whereas market-based measurements

indicate market expectation of future financial performance (McGuire et al., 1988). In

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accordance with Chung and Pruitt (1994), Seo et al. (2015), and Ding et al. (2016), we

adopt Tobin’s Q for the analysis of the relationship between corporate social
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performance and financial performance. Equation 1 shows the approximation of

Tobin’s Q of a firm.

Approximation of Tobin’s Qi = (MktValuei + PrefStocki + Debti)/TAti, (1)

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In this study, the 11 FSCs include: Delta Air Lines (USA), American Air Lines (USA), Quanta
Airways (Australia), Singapore Airlines (Singapore), Thai Airways International (Thailand), EVA Air
Corp. (Taiwan), China Airlines (Taiwan), Cathay Pacific (Hong Kong), Deutsche Lufthansa (Germany),
Air France – KLM (France), and China Southern Airlines (China). The five LCCs include SouthWest
Airlines (USA), Air Asia Berhad (Malaysia), Easy Jet (UK), Ryan Air (Ireland), and West Jet (Canada).

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where, MktValuei represents share price multiplied by common outstanding stock

shares of firm i; PrefStocki indicates the liquidating value of outstanding preferred

stock of firm i; Debti denotes short-term liabilities and net of short-term assets, plus

the value of the long-term debts of firm i; and TAi signifies the total assets of firm i.

We also refer to Guenster et al. (2011) and Roberts and Dowling (2002) in

selecting ROA as an accounting-based measurement to indicate a firm’s financial

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performance and profitability toward corporate social performance. Equation 2

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presents the ROA calculation formula, where net profit is divided by total assets:

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ROA = . (2)

3.2.1. CSR
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In accordance with Ding et al. (2016), Seo et al. (2015), Kim et al. (2014), and

Tsai and Hsu (2008) we select CSR scores to identify the causal effect toward
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financial performance. The CSR score includes the overall scores on CSR,
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environment performance, and social performance. Despite the limited CSR

participation from airlines, China Airlines is regarded as the top Taiwanese company
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on corporate governance with its consistent engagement in social responsibilities (Tsai

and Hsu, 2008). China Southern Airlines is also one of the best performing airlines in
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China in relation to CSR activities as a state-controlled local airline with large size,
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good financial performance, and economic strength (Wang et al., 2015).

3.2.2. Firm size

Following Kim et al. (2014), Chen and Gavious (2015), Seo et al. (2015), and

Ding et al. (2016), we select firm size to identify the causal effect toward financial

performance. Despite the significant positive influence of firm size toward CSR

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participation (Kim et al., 2014), LCCs may observe significant negative influence of

firm size toward financial performance (Seo et al., 2015). For the majority of firms,

however, firm size causes a significant positive increase in corporate profit (Roberts

and Dowling, 2002).

3.2.3. Leverage

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In line with Kim et al. (2014), Seo et al. (2015), Chen and Gavious (2015), and

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Ding et al. (2016), we use debt ratio to represent a firm’s financial leverage. Leverage

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is defined as the ratio of total liabilities over total assets. While leverage generates an

insignificant negative influence on expected financial performance of FSCs and LCCs

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(Seo et al., 2015), it produces a significant negative influence on financial
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performance at the industry level (Kim et al., 2014).

3.2.4. Profitability
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Following Roberts and Dowling (2002), Kim and Li (2014), Seo et al. (2015),

and Ding et al. (2016), we choose ROA measurement as the proxy for profitability.
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ROA is used as a control variable to identify the association between CSR and the

market-based tool, Tobin’s Q. The ROA ratio underlines a firm’s degree of

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profitability relative to its total assets.

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3.2.5. Firm Age

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In accordance with Saeidi et al. (2015), we utilize a firm’s age to identify the

relationship between CSR and financial performance. However, a younger firm

participates more in activities related to financial performance over CSR-related

undertakings (Peloza, 2006).

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3.3. Panel data analysis

We refer to Seo et al. (2015) and Lee et al. (2013) in applying panel data analysis

via variance component model to determine the fixed- or random-effect models for

analysis. We analyze the relationship between CSR and current financial performance

for an accounting-based measure via ROA using Equation 3 below.

, (3)

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where represents corporate financial performance of firm i at time t;

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signifies CSR measured by the sum of environmental and social scores of firm i at

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time t (the sub-panel variable for CSR also includes Envit, which denotes the overall

environmental performance score of firm i at time t; and Socit means the overall social

performance score of firm i at time t); US represents market capitalization of firm

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i at time t; indicates the ratio of total liabilities over the total asset of firm i at

time t; represents the age of the firm i at time t; and signify error
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terms of firm i at time t.

Similarly, we develop a market-based measure via Tobin’s q to analyze the

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relationship between CSR and expected financial performance in Equation 4 as

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follows:

, (4)
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where denotes corporate financial performance of firm i at time t;

represents CSR measured by the sum of environmental and social scores of firm i at
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time t (a sub-panel variable for CSR also includes Envit signifying the overall

environmental performance score of firm i at time t, while Socit represents the overall

social performance score of firm i at time t); indicates market capitalization of

firm i at time t; represents the ratio of total liabilities over the total asset of firm

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i at time t means net income to total assets of firm i at time t; signifies

the age of the firm i at time t; and represent error terms of firm i at time t.

4. Results

4.1. Descriptive statistics

Table 2 presents the descriptive statistical result of full-panel, full-service carrier

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panel (FSC), and low-cost carrier panel (LCC). The ROA for LCCs is triple of that for

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FSCs, and they also possess greater Tobin’s Q than FSCs. However, FSCs participate

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more in CSR, environmental, and social activities than either LCCs or the entire

aviation industry. While all panels indicate similar firm sizes, FSCs utilize more

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leverages than LCCs. LCCs are also younger in firm age than FSCs.
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Insert Table 2 about here

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Table 3 shows the correlation matrix of variables for the ROA panel (Part 1) and

Tobin’s Q panels (Part 2). All absolute values of correlations for both panels are under
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0.5, indicating an absence of significant relationships among the variables. Table 4

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presents the variance inflation factors (VIF) of variables. All the VIF values are lower

than 10, signifying an absence of multicollinearity.

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Insert Table 3 and Table 4 about here

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4.2. Panel data regression analysis - ROA

Table 5 shows the panel data regression for ROA including the full panel, and the

FSC and LCC panels for these categories: CSR, environment performance, and social

performance. The Hausman test indicates significant results for all sub-panels.

Moreover, a fixed-effect model is conducted. From the CSR category, results show

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that CSR has a significant positive influence on ROA in the full panel and the FSC

panel. In particular, the FSC panel indicates double the significant positive influence

of CSR than in the full panel, as their coefficient values are at 10.343 and 5.308,

respectively. However, the LCC panel suggests that CSR has insignificant influence

toward ROA. In contrast, SIZE has a significant positive influence on ROA, where

LCCs indicate twice the influence of SIZE than in FSCs (coefficient values are at

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4.416 and 2.598, respectively). In full panel, SIZE also has significant positive

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influence on ROA. LEV has a significant negative influence on ROA for the full and

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FSC panels with coefficient values at -18.642 and -17.980, respectively. However,

AGE shows insignificant negative influence on ROA across all three panels. For both

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environmental performance and social performance categories, FSCs have a
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significant positive influence on ROA. Moreover, LCCs indicate greater significant

positive influence toward ROA than FSCs. In contrast, FSCs have a significant
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negative influence on ROA in both environmental performance and social

performance categories; whereas LCCs show insignificant negative influence on both.

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From full-service and low-cost carriers, AGE exerts insignificant negative influence
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toward ROA. Overall, full panel and FSCs cause a significant positive increase in

ROA via CSR activities, environmental performance, social performance, and size.
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However, leverage causes a significant negative decrease in ROA for full panel and

FSCs. In contrast, LCCs generate a significant positive increase in ROA via size. Age
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is insignificantly negatively related to either FSC or LCC for ROA.

Insert Table 5 about here

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4.3. Panel data regression results - Tobin’s Q panel

Table 6 shows panel data regression for Tobin’s q panel consisting of full panel,

FSC panel, and LCC panel for these categories: CSR, environmental performance, and

social performance. The Hausman test indicates significant results for all sub-panels.

A fixed-effect model is also conducted. In the CSR category, CSR activities from

full-service and low-cost carriers have an insignificant negative influence on Tobin’s

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Q. In contrast, SIZE, LEV, and ROA have significant positive influence on Tobin’s Q.

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In particular, FSCs show significant positive influences of size, leverage, and ROA

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toward Tobin’s Q. LCCs indicate significant positive influence of size toward Tobin’s

Q. However, AGE has a significant negative influence on Tobin’s Q for FSCs and

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LCCs. From both environmental performance and social performance categories,
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FSCs indicate significant positive influence toward Tobin’s Q via environmental and

social activity participations. Both FSCs and LCCs have significant positive and
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significant negative influence on Tobin’s Q via size and leverage, respectively. Age

shows insignificant negative influence toward Tobin’s Q. Overall, the full-panel and
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FSCs cause a significant positive increase in Tobin’s Q via size, leverage, and ROA.
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In contrast, LCCs cause a significant positive increase in Tobin’s Q via environment

performance and size. However, age causes a significant negative decrease in Tobin’s
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Q for FSCs and LCCs in all categories. LCCs suffer greater negative influences than

FSCs for age.

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Insert Table 6 about here

5. Conclusion

The study examined the influence of CSR activities on financial performance of

full-service and low-cost air carriers via three categories: CSR, environmental

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performance, and social performance. The fixed-effect model is applied to conduct

panel data analysis with ROA and Tobin’s Q indicating firm performance. We

investigated the influence of CSR activity participation toward current operating

performance (via ROA) and market future expectation (via Tobin’s Q). We identified

the causal relationship between CSR activities and financial performance. Strategic

financial performance management strategies are identified for FSCs and LCCs,

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accordingly.

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FSCs have a significant positive influence on ROA via CSR, environmental

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performance, and social performance activities. In particular, CSR activities indicate

the most significant positive influence toward ROA, followed by environmental

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performance and social performance. This finding corresponds to Kim et al. (2014),
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Seo et al. (2015), and Tsai and Hsu (2008) with regard to CSR performance increasing

financial performance. In contrast, LCCs indicate greater significant positive influence

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toward ROA via firm size than FSCs, as well as insignificant influence arising from

CSR-related activities. This result differs from Seo et al. (2015) for LCCs on firm size
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exerting a significant negative influence on financial performance. Moreover, leverage

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has a significant negative influence on FSCs and full panel for firm performance via

ROA. This finding corresponds to Kim et al. (2014) regarding leverage creating a
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significant negative influence on financial performance at the industry level.

In terms of expected future financial performance, LCCs cause a significant

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positive increase in Tobin’s Q via environmental performance. This outcome differs

from Tsai and Hsu (2008) and Wang et al. (2015) which suggest that FSCs increase

financial performance via CSR-related activities. However, FSCs insignificantly

increase and decrease Tobin’s Q via CSR, environmental performance, and social

performance. Firm size also has greater significant positive influence toward Tobin’s

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Q for LCCs than FSCs in the CSR, environmental performance, and social

performance categories. This result corresponds to Kim et al. (2014) and Robert and

Dowling (2002) on firm size increasing financial performance. Moreover, leverage

causes a significant positive increase in Tobin’s Q for FSCs, followed by ROA. This

outcome differs from Kim et al. (2014) and Seo et al. (2015) on the significant

negative influence of leverage toward financial performance. Age has a significant

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negative influence on LCCs more than on FSCs for expected firm performance via

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Tobin’s Q.

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Thus, for current firm performance via ROA, FSCs generally outperform LCCs

in participating on CSR-related activities. However, LCCs outperform FSCs via ROA

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by focusing on firm size. For expected firm performance via Tobin’s Q, the
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environmental performance and firm size of LCCs outperform those of FSCs. FSCs

outperform LCCs on leverage for firm future performance in terms of Tobin’s Q.

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Younger LCCs hinder future firm performance via age.

Our academic contribution lies in applying the fixed-effect model for panel data
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analysis of both FSCs and LCCs. With the investigation of CSR-related activities, we
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proved the influences of CSR activities, environmental performance, and social

performance toward current firm performance and future expected performance. We

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also incorporated the influences of firm size, leverage, and age toward firm

performance. In practice, we identified financial management strategies for both FSCs

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and LCCs in terms of CSR-related activities and corporate financial activities. We

demonstrated that CSR-related activities significantly improve FSCs with regard to

current financial performance, whereas firm size significantly improves LCCs in

relation to current and future expected financial performance (Barneet and Salomon,

2012). However, the use of leverage and firm age exert significantly negative

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influence on FSCs and LCCs, respectively. Moreover, LCCs can significantly improve

expected future performance by participating in environmental performance activities

(von Arx and Ziegler, 2014; Withisuphakorn and Jiraporn, 2016).

With increasing number of air carriers engaging in CSR activities, the

environmental performance of the air carrier industry can be evaluated by future

research with regard to improvements on financial performance. In particular, other

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in-depth analysis on LCCs can be performed and compared with FSCs. Extended

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research can provide further insights on achieving financial performance via CSR

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activities.

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Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P., Saaeidi, S.A., 2015. How does

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Xu, S., Liu, D., 2017. Corporate social responsibility (CSR) and corporate

diversification: do diversified production firms invest more in CSR? Appl. Econ.

Lett. 24, 254-257.

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Table 1
Full service carriers and low-cost carriers – international aviation industry.
Business Model Company Country Years of Data

SouthWest Airlines U.S.A 2006-2015

Air Asia Berhad Malaysia 2010-2015
Low cost
air carrier Easy Jet UK 2006-2015
Ryan Air Ireland 2006-2015
West Jet Canada 2008-2014
Delta Air Lines USA 2008-2014

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American Air Lines USA 2008-2015
Qantas Airways Australia 2006-2015

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Singapore Airlines Singapore 2006-2015
Thai Airways International Thailand 2010-2015
Full service

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air carrier EVA Air Corp Taiwan 2010-2014
China Airlines Taiwan 2010-2015
Cathay Pacific Hong Kong 2006-2014
Deutsche Lufthansa
Air France - KLM
China Southern Airlines
US Germany
France
China
2006-2015
2006-2015
2010-2015
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Table 2
Descriptive statistics.
Full panel ROA TOBQ CSR ENV SOC SIZE LEV AGE
Mean 3.559 1.187 4.067 4.053 4.049 15.436 0.708 3.033
Median 3.645 1.123 4.217 4.257 4.235 15.684 0.701 2.944
Maximum 24.17 2.138 4.551 4.549 4.566 17.519 1.339 4.330
Minimum -21.86 0.813 2.901 2.484 2.728 11.672 0.388 1.791
Std. Dev. 5.456 0.274 0.425 0.492 0.465 0.926 0.173 0.674
Skewness -0.443 1.492 -0.945 -1.382 -0.926 -0.721 0.966 0.388
Kurtosis 7.748 5.126 2.811 4.149 2.811 4.607 4.861 2.211
Jarque-Bera 126.420*** 72.797*** 19.570*** 48.535*** 18.807*** 25.269*** 39.022*** 6.646**

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Probability 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.036

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Full-service
ROA TOBQ CSR ENV SOC SIZE LEV AGE
carrier
Mean 2.134 1.100 4.201 4.219 4.151 15.433 0.751 3.203

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Median 1.94 1.069 4.297 4.313 4.314 15.701 0.725 3.091
Maximum 24.17 1.808 4.551 4.549 4.566 17.519 1.339 4.330
Minimum -21.86 0.813 3.162 2.541 2.728 11.672 0.388 1.945
Std. Dev.
Skewness
Kurtosis
5.698
-0.238
8.473
0.184
1.209
5.206
0.319
-1.244
3.776
US
0.321
-2.040
9.828
0.442
-1.488
4.381
0.972
-0.939
5.091
0.194
0.451
3.871
0.644
0.355
2.145
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Jarque-Bera 109.416*** 38.875*** 24.640*** 229.415*** 39.036*** 28.663*** 5.705** 4.474
Probability 0.000 0.000 0.000 0.000 0.000 0.000 0.057 0.106
Low-cost
ROA TOBQ CSR ENV SOC SIZE LEV AGE
carrier
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Mean 6.441 1.365 3.797 3.717 3.843 15.444 0.621 2.689

Median 6 1.269 3.848 3.855 3.891 15.668 0.619 2.564
Maximum 15.63 2.138 4.479 4.470 4.510 17.185 0.782 3.784
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Minimum -0.61 0.950 2.901 2.484 2.942 13.644 0.515 1.791

Std. Dev. 3.500 0.336 0.485 0.601 0.446 0.836 0.058 0.604
Skewness 0.684 0.865 -0.159 -0.370 -0.180 0.018 0.601 0.668
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Kurtosis 3.466 2.622 1.744 1.749 2.011 2.292 3.797 2.231

Jarque-Bera 3.749 5.625* 3.006 3.782 1.985 0.898 3.732 4.263
Probability 0.153 0.060 0.222 0.150 0.370 0.637 0.154 0.118
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Table 3
Correlation coefficients matrix – ROA panel and Tobin’s Q panel.
Part 1 ROA CSR ENV SOC SIZE LEV AGE
1
ROA

-0.166* 1
CSR
(0.060)
-0.119
ENV 1
(0.177)
-0.168* 1
SOC
(0.056)

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0.400*** 0.039 -0.004 0.075 1
SIZE
(0.000) (0.659) (0.963) (0.399)

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-0.438*** 0.281*** 0.209* 0.308*** -0.395*** 1
LEV
(0.000) (0.001) (0.017) (0.000) (0.000)

CR
-0.205** 0.424*** 0.380*** 0.392*** 0.299*** 0.431*** 1
AGE
(0.019) (0.000) (0.000) (0.000) (0.001) (0.000)
Part 2 TOBQ CSR ENV SOC SIZE LEV ROA AGE
TOBQ

CSR
1

-0.326*** 1
US
AN
(0.000)
-0.310***
ENV 1
(0.000)
-0.287*** 1
SOC
(0.000)
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SIZE 0.400*** 0.039 -0.004 0.075 1

(0.000) (0.659) (0.963) (0.399)
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LEV -0.059 0.281*** 0.209* 0.308*** -0.395*** 1

(0.507) (0.001) (0.017) (0.000) (0.000)
0.432*** -0.166* -0.119 -0.168* 0.400*** -0.438*** 1
ROA
(0.000) (0.060) (0.177) (0.056) (0.000) (0.000)
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0.039 0.424*** 0.380*** 0.392*** 0.299*** 0.431*** 1

-0.205*
AGE (0.659) (0.000) (0.000) (0.000) (0.001) (0.000)
(0.019)
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Table 4
Variance inflation factors of variables.
Tobin’s Q
ROA Panel CSR SIZE LEV AGE CSR SIZE LEV ROA AGE
Panel
CSR Category 1.239 1.714 1.963 2.001 CSR Category 1.240 1.985 2.000 1.409 2.088
Envir.Category 1.191 1.773 1.955 2.045 Envir.Category 1.192 2.015 1.992 1.408 2.114
Social Category 1.221 1.753 2.013 1.900 Social Category 1.413 1.226 1.998 1.982 2.045

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Table 5
ROA results – CSR, environment, and social performance categories.
Panel I - Full Panel II-FSC Panel III-LCC
CSR category
coefficient t-statistics coefficient t-statistics coefficient t-statistics
Intercept -41.695*** -2.620 -46.576** -2.003 -55.241** -3.054
(0.010) (0.048) (0.004)
CSR 5.308*** 3.434 10.343*** 3.962 1.626 1.155
(0.000) (0.000) (0.256)
SIZE 2.996*** 3.788 2.598** 2.565 4.416*** 4.208
(0.000) (0.012) (0.000)
LEV -18.642** -2.312 -17.980* -1.766 -11.0850 -0.881
(0.022) (0.081) (0.384)
AGE -3.097 -1.196 -6.660 -1.555 -2.165 -0.886

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(0.234) (0.124) (0.381)
Obs. 130 87 43

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Adj.R2 0.464 0.411 0.434
F-Stats. 6.896*** 5.298*** 5.026***

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Durbin Watson 1.859 1.807 2.353
Hausman Test 0.000 (fixed effect) 0.000(fixed effects) 0.003 (fixed effect)
Environmental Panel I - Full Panel II-FSC Panel III-LCC
category coefficient t-statistics coefficient t-statistics coefficient t-statistics
Intercept

ENV
-39.025**
(0.011)
5.177***
(0.000)
-2.570

4.384 US
-41.154*
(0.060)
9.436***
(0.000)
-1.907

4.931
-53.856**
(0.004)
1.775
(0.113)
-3.046

1.625
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SIZE 2.832*** 3.684 2.356** 2.439 4.326*** 4.195
(0.000) (0.017) (0.000)
LEV -19.887** -2.539 -19.932** -2.062 -12.263 -0.995
(0.012) (0.042) (0.326)
AGE -2.652 -1.086 -5.594 -1.416 -2.049 -0.874
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(0.279) (0.161) (0.387)

Obs. 130 87 43
Adj. R2 0.495 0.464 0.454
ED

F-Statistic 7.670*** 6.323*** 5.370***

Durbin Watson 1.878 1.868 2.347
Hausman Test 0.000(fixed effects) 0.000(fixed effect) 0.002 (fixed effects)
Panel I - Full Panel II-FSC Panel III-LCC
Social Category
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coefficient t-statistics coefficient t-statistics coefficient t-statistics

Intercept -36.140** -2.186 -30.086 -1.217 -54.574* -2.953
(0.030) (0.227) (0.005)
SOC 2.732* 1.829 4.463* 1.898 0.770 0.523
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(0.070) (0.061) (0.604)

SIZE 3.090*** 3.760 2.653** 2.423 4.441*** 4.157
(0.000) (0.017) (0.000)
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LEV -18.012** -2.151 -19.497* -1.768 -8.922 -0.703

(0.033) (0.081) (0.486)
AGE -2.080 -0.760 -3.935 -0.845 -1.859 -0.729
(0.448) (0.400) (0.470)
Obs. 130 87 43
Adjusted R2 0.424 0.317 0.416
F-Statistic 6.016*** 3.857*** 4.748***
Durbin Watson 1.889 1.664 2.406
Hausman Test 0.002 (fixed effects) 0.005 (fixed effects) 0.004 (fixed effect)
Note: ***, **, and * indicate statistical significance at 1%, 5%, and 10%, respectively.

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Table 6
Tobin’s Q results – CSR, environment, and social performance categories.
CSR category Panel I - Full Panel II-FSC Panel III-LCC
coefficient t-statistics coefficient t-statistics coefficient t-statistics
Intercept -3.779*** -5.649 -1.741** -3.070 -8.270*** -8.418
(0.000) (0.003) (0.000)
CSR -0.054 -0.825 -0.052 -0.769 0.086 1.253
(0.410) (0.443) (0.218)
SIZE 0.266*** 7.771 0.166*** 6.614 0.640*** 10.285
(0.000) (0.000) (0.000)
LEV 1.772*** 5.262 1.428*** 5.783 0.553 0.904
(0.000) (0.000) (0.372)
ROA 0.010** 2.633 0.008** 2.910 0.006 0.748
(0.009) (0.004) (0.459)

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AGE -0.072 -0.679 -0.184* -1.788 -0.360** -3.027
(0.498) (0.078) (0.004)

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Obs. 130 87 43
Adj.R2 0.647 0.684 0.858
F-Stats. 12.872*** 13.427*** 29.287***

CR
Durbin Watson 1.171 1.990 1.566
Hausman Test 0.000(fixed effect) 0.002 (fixed effect) 0.003 (fixed effect)
Envir.Category coefficient t-statistics coefficient t-statistics coefficient t-statistics
Intercept -3.927*** -5.959 -1.799** -3.266 -8.338*** -8.876

ENV
SIZE
(0.000)
-0.005
(0.918)
0.269***
-0.102
7.840
US
(0.001)
0.036
(0.512)
0.167***
-0.657
6.674
(0.000)
0.112**
(0.043)
0.646***
2.098
10.796
AN
(0.000) (0.000) (0.000)
LEV 1.761*** 5.184 1.442*** 5.824 0.424 0.720
(0.000) (0.000) (0.476)
ROA 0.009** 2.339 0.008** 2.794 0.003 0.450
(0.021) (0.006) (0.655)
M

AGE -0.099 -0.962 -0.196* -1.969 -0.364** -3.262

(0.337) (0.052) (0.002)
Obs. 130 87 43
Adj. R2 0.645 0.683 0.869
ED

F-Statistic 12.760*** 13.386*** 31.987***

Durbin Watson 1.184 1.975 1.715
Hausman Test 0.000 (fixed effects) 0.000 (fixed effect) 0.002 (fixed effect)
Social Category coefficient t-statistics coefficient t-statistics coefficient t-statistics
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Intercept -3.681*** -5.574 -1.760** -3.202 -8.091*** -8.061

(0.000) (0.002) (0.000)
SOC -0.085 -1.443 -0.047 -0.887 0.016 0.231
(0.151) (0.377) (0.818)
CE

SIZE 0.264*** 7.732 0.165*** 6.615 0.632*** 9.945

(0.000) (0.000) (0.000)
LEV 1.745*** 5.219 1.408*** 5.680 0.728 1.176
(0.000) (0.000) (0.247)
AC

ROA 0.010** 2.727 0.007** 2.981 0.008 0.964

(0.007) (0.003) (0.341)
AGE -0.043 -0.406 -0.180* -1.755 -0.326** 2.620
(0.685) (0.083) (0.013)
Obs. 130 87 43
Adjusted R2 0.652 0.685 0.851
F-Statistic 13.106*** 12.476*** 27.841***
Durbin Watson 1.192 1.993 1.482
Hausman Test 0.001 (fixed effect) 0.032 (fixed effect) 0.027 (fixed effect)
Note: ***, **, and * indicate statistical significance at 1%, 5%, and 10%, respectively.

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