The curvilinear relationship between corporate social performance and corporate financial performance: Evidence from the international construction industry

The intellectual debate concerning the nexus between corporate social performance (CSP) and corporate financial performance (CFP) is incessant. In recent years, the debate has explored more dynamic links, one of which is the curvilinear relationship between the two constructs. It argues that the relationship between CSP and CFP can be better captured by a U-Shape: at a low level of CSP, companies are not able to cultivate social activities to achieve tangible financial benefits but, after passing an inflection point, CSP will gradually turn into financial benefits that can offset the costs involved. This research empirically tests the curvilinear relationship between CSP and CFP in the context of the international construction industry. Using a panel data set of 30 international construction companies and 210 firm-year observations over the sample period from 2007 to 2013, the curvilinear relationship of CSP on return on assets and earnings per share, as specific CFP measures, is strongly supported. This empirical finding demonstrates an opportunity for executives of international construction companies to capitalize on their social responsibility efforts and create a win-win situation between CSP and CFP.