Corporate Social Responsibility and Financial Performance of Product and Service-Based Firms Listed on London Stock Exchange

This paper examines the impact of corporate social responsibility (CSR) on the financial performance of firms listed on the London stock exchange (LSE). Using data for 50 firms spanning 2008-2017, our study reports that the environmental performance has positively influenced the stock price of both the product and service-based firms listed on LSE. Similarly, it enhanced the return on capital for product-based firms while reducing them for service-based firms. In contrast, social activities have a significant negative impact on the stock price of the product and service-based listed firms. Likewise, social performance has a significant negative impact on the return on capital of service-based firms listed on LSE. However, we find an insignificant relationship between governance disclosure and the stock price and the return on capital for product and service-based firms. This study has implications for policymakers of stock markets to issue rigid regulations to enforce all listed firms to disclose their environmental activities to stakeholders.