Labour reputation and financial performance: is there a causal relationship?

The purpose of this paper is to analyse if there is a circular relationship of causality between the labour dimension of corporate social performance (CSP) and corporate financial performance (CFP).

The sample is formed by the best companies to work for in Spain according to the labour reputation (LR) ranking developed by MERCO from 2006 to 2013. This study overcomes the limitations of previous studies using the panel data methodology (System generalised method of moments) and the Granger causality test.

The results suggest that the labour dimension of CSP cause CFP, but there is not causality in the opposite direction.

Studies about the relationship between dimensions of CSP and CFP demonstrated that there are divergences in the results depending on the dimension analysed. Despite managers and employees are interested in the impact of labour dimension of CSP on CFP, there are few studies about it and they have important limitations.