C2 20 Ullmann1985
C2 20 Ullmann1985
C2 20 Ullmann1985
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Although by no means a new issue (Heald, years have focused on the relationships among
1957), the social responsibilities of the corpora- corporate social performance, social disclosure,
tion have received increased attention for the last and economic performance. The studies are re-
10 years. The growth of the idea of social respon- ported primarily in the accounting and manage-
sibility is closely linked to society's heightened ment literature. Not surprisingly, these studies
sensitivity to the externalities of business activi- approach the subject with a variety of methods,
ties-a topic with an equally long traditionin eco- using varying samples and concentrating on dif-
nomics (Kapp, 1950; Pigou, 1960). The accep- ferent time periods.
tance of social responsibilities by the business
community is documented by the number of Models and Research Orientations
Fortune 500 firms disclosing social responsibil-
ity information in their annual reports to share- A crucial problem with significant impacts on
holders (Ernst& Ernst, 1978). subsequent research stages concerns the concep-
Many aspects of the social responsibility issue tualization and operationalization of key terms.
have been studied, including its ideological foun- The central position of "performance"and the
dations (Bower,1981;Walters,1977), its purposes emphasis on differentdimensions of performance
(Epstein, Flamholtz, & McDonough, 1976), its in the problem under study indicate an affinity
management (Arlow & Gannon, 1982), and the with "organizational effectiveness," an equally
development of valid measures and standards of difficult and complex concept (Connolly,Conlon,
social performancefor internal managementpur- & Deutsch, 1980; Daft, 1983). Yet, with a few
poses and external disclosure. A sizable number exceptions (Abbott & Monsen, 1979; Aldag &
of empirical studies published during the last 10 Bartol,1978) the literaturereviewed in this paper
addresses neither the variety of the underlying
Special thanks to Martin Freedman and Susan Harrigan
who made helpful suggestions on earlier drafts of the paper.
organizationalmodels nor the validity of the mea-
Requests for reprints should be sent to Arieh A. Ullmann, surement procedures used. A closer look at the
School of Management, State University of New York at criteria used for assessing economic and social
Binghamton, Binghamton, NY 13901. performance as well as social disclosure in the
540
541
Table 1
MajorResults by Data Basis
_~~~~~
Qata base
Relationship | Moskowitz BSRI surveys CEP Ernst & Ernst Other
Social Disclosure Bowman & Haire, Abbott & Monsen, Freedman & Jaggi, Abbott & Monsen, Fry & Hock,
1975: + 1979: + 1982a: 0 1979: + 1976:
Preston, 1978: 0 Ingram & Frazier, Preston, 1978: 0
1980: 0
Social Performance Wiseman, 1982: 0
Cochran & Wood, Alexander & Buch- Bowman & Haire, Kedia & Kuntz,
Social Performance 1984: + holz, 1978: 0 1975: + 1981: 0
Moskowitz, Vance, 1975: - Bragdon & Marlin, Parket & Eilbirt,
1972: + 1972: + 1975: +
Sturdivant & Ginter, Chen & Metcalf,
1977: + 1980: 0
Economic Vance, 1975: - Fogler & Nutt,
Performance 1975: 0
Spicer, 1978a: +
Spicer, 1978b: +
542
543
544
Table 2
Social Disclosure and Social Performance
545
546
Variables Controlfor
Study Social performance Economic performance other variables Sample Result
547
11. Spicer, CEPpollution Total risk, beta 1968- None Negative correlation
1978b performance index 1973 pollution perfor-
mance-risk;
(1) Earnings pollution perfor-
variability, mance increases
(2) Firm size, explained variance
(3) Leverage, of total risk after
(4) Currentratio (1), (2) and (3), and
of beta after (1), (2)
and (4)
12. Sturdivant& Moskowitz's (1972, EPS growth 1964-1974 Industry 28 firms of Positive correlation;
Winter,1977 1975) reputational Moskowitz's list positive correlation
scale between managers'
social values and
economic perfor-
mance
13. Vance, Moskowitz's (1972) Stock price change None 14 firms of Negative correlation
1975 reputational scale 1972-1975 Moskowitz's list
Reputationalscales Price per share change None 45 (50) firms from Negative correlation
from Business and 1974-1975 surveys
Society Review ("How
Business Students Rate
Corporations,"1972;
"IndustryRates Itself,"
1972)
in measuring economic performance. He found or not larger firms display better pollution con-
that better pollution performance was associated trol performanceis a controversial issue. On the
with higher profitability, lower risk, and larger one hand, larger companies are subject to more
firm size. These findings, however, conflicted public scrutiny and are more likely to have the
with those reported by Fogler and Nutt (1975) necessary financial, managerial, and technical
and Chen and Metcalf (1980), all of which were know-how for abating emissions than are their
based on the same firm sample of the pulp and smaller counterparts.Also, economies of scale in
paper industry surveyed by the CEP. pollution abatement would seem to favor large
The Spicer-Chen/Metcalf controversy is of par- emitters. On the other hand, because of their bar-
ticular interest. In their replication of the Spicer gaining power as significant taxpayers and em-
study, Chen and Metcalf found firm size to explain ployers, large companies are in a better position
both pollution and financial performance. Judg- to obtain concessions from legislators and
ing from their critique of Spicer's study they were enforcementagencies that may result in different
unaware of Spicer's other paper (1978b) pub- compliance standards for large and small pollut-
lished in the same year, in which Spicer himself ers (Downing &Hanf, 1983). In his reply to Chen
found size to be of explanatory value: and Metcalf, Spicer (1980) did not mention that
When the pollution control variable is forced into he was aware of the importance of firm size.
the regressionthere is a sharp decline in the coeffi-
cient and significance of the size variable in the Other Measures of Social Performance
regression equation. Statistically, this is due to
the fact that these two variables are highly corre- Parketand Eilbirt(1975) reporteda strongposi-
lated (Spicer, 1978b, p.80). tive correlation between social and economic
Spicer, however, provided another interpreta- performance. However, serious doubts can be
tion of his findings-size-related ability to pur- raised regardingthe validity of their social perfor-
chase pollution abatement equipment. Whether mance measure. That some Fortune 500 compa-
548
549
Variables Controlfor
Study Social disclosure Economic performance other variables Sample Result
1. Abbott & Overall disclosure ROE1964-1974 Size 450 of 1974 None, for largest
Monsen, 1979 score based on Fortune 500 firms slightly
Ernst & Ernst firms positive correla-
tion
2. Bowman, 1978 Percent of prose in ROE1972-1974 None 46 firms from Positive correlation
annual reports electronic com-
puting industry
3. Bowman & Percent of prose in ROE1969-1973 None 82 firms of food U-shapedcorrelation
Haire, 1975 annual reports processing highest ROEfor
industry middle disclosers
4. Freedman& Quality & quantity ROA, ROE,Cash Flow/A, None 109 firms of No correlation
Jaggi,1982a of pollution Cash Flow/E, pollution
disclosure in annual EBIT/A,EBIT/E Size intensive Negative correlation
reports 10K 1973-1974 industries
5. Fry & Hock, Quantity of Earnings(?) Size, industry 135 firms from Weak positive
1976 disclosure in image 15 industries
annual reports
6. Ingram& Computerized Factor analysis of 48 Firm size, 79 firms from Weak negative
Frazier,1983 content analysis of accounting ratios stock owner- metals, oil, correlation
annual reports ship distri- chemical
bution industry
7. Preston, 1978 Quantity of 1975 ROE None Fortune 500 firms Weak positive
disclosure in 2 correlation
years between 1971
and 1975
Table 5
Social Disclosure and Economic Performance:MarketVariables
Variables Controlfor
Study Social disclosure Economic performance other variables Sample Result
1. Anderson & Overall disclosure Monthly return diffe- Beta (iso-beta 314 of 1972 Positive correlation
Frankle,1980 and types of rences 7/1972-6/1973 portfolios) Fortune 500 firms for certain months
disclosure based on for disclosers vs.
Ernst & Ernst nondisclosers;
Beta (iso-beta financial vs.
portfolios) qualitative
EPS disclosers;
continuous vs.
new disclosers
2. Belkaoui, 1976 Pollution disclosure Monthly average None 50 firms with & Positive, yet
in annual reports residuals, 12 months without disclosure temporary
prior & after disclosure in 1976 correlation
3. Ingram,1978 Various types of Monthly portfolio Earnings,year, 287 of 1970-1976 No correlation
disclosures in returns 9 months prior industry, beta Fortune 500 firms between portfolio
annual reports and 3 months after time means; positive
fiscal year end correlationwhen
marketsegments
are considered
4. Jaggi& Pollution disclosure Monthly average Other dis- 109 firms from 4 No correlation
Freedman in annual reports residuals 8 months closure, beta pollution intensive between disclosers
(forthcoming) and 10K prior/afterdisclosure industries and nondisclosers;
significant in-
vestor reaction to
disclosed informa-
tion; investors do
not differentiate
between types of
disclosure
5. Shane & CEPpollution Standardizedabnormal Cross-sectional 72 of 103 firms Significant net price
Spicer, 1983 performanceindex mean-adjusteddaily correlations from CEPsample decrease1 & 2 days
return for 6 days around prior to release,
release date of Council largestdecreasefor
on Economic Priorities worst polluters
study
551
552
Table 6
Contingency Framework
553
554
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