Evidence on social and financial performance: mapping the empirical garden of forking paths
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Citation (published version)Luca Berchicci, Andrew King. 2020. "Evidence on Social and Financial Performance: Mapping the Empirical Garden of Forking Paths." Academy of Management Proceedings, Volume 2020, Issue 1, pp. 17546 - 17546. https://doi.org/10.5465/ambpp.2020.17546abstract
Worldwide, almost 30% of professionally managed assets are invested in funds that use social performance as a screening or selection criteria. Scholars have encouraged such investment by contending that social and financial gain are linked, but reviews of empirical research on the connection between social and financial performance have been inconclusive. In fact, six of the most influential articles on the subject reach conflicting conclusions despite using the same sources of data and appearing in the same peer-reviewed journal. Some scholars opine that no synthesis of these disparate findings is feasible, but we use new ideas from epistemology and statistics to show how it can be done. We conclude that the interpretation of the evidence depends on empirical assumptions, particularly about the location of meaningful variance: differences between firms imply a positive relationship, but year-to-year differences within-firm histories imply a negative association between social and financial performance."