How Does Corporate Ethics Affect Firm Performance?

financial_performance
401(K) 2013 (cc)

Jinseok S. Chun of Seoul National University, Yuhyung Shin of Hanyang University, Jin Nam Choi of Seoul National University, and Min Soo Kim of Hanyang University published “How Does Corporate Ethics Contribute to Firm Financial Performance? The Mediating Role of Collective Organizational Commitment and Organizational Citizenship Behavior” in the Journal of Management May 2013 issue. The abstract:

Despite the increasing significance of corporate ethics, few studies have explored the intermediate mechanisms that explain the relationship between corporate ethics and firm financial performance. Drawing on institutional theory and strategic human resource management literature, the authors hypothesize that the internal collective processes based on employees’ collective organizational commitment and organizational citizenship behavior (OCB) mediate the ethics–performance relationship at the organizational level. The authors’ hypotheses are tested using data collected from 3,821 employees from 130 Korean companies and the respective companies’ financial performance data. The resultJOM_v38_72ppiRGB_150pixWs indicate that collective organizational commitment and interpersonal OCB are meaningful intervening processes that connect corporate ethics to firm financial performance. To complement prior studies that identify a firm’s reputation and external relations as mediators between corporate ethics and performance, the present study highlights the need to examine microprocesses occurring within the organization to account for the ethics–firm performance relationship. Moreover, the present demonstration of collective organizational commitment and OCB as meaningful predictors of a firm’s objective performance indicates the significance of these employee processes in explaining organizational-level outcomes.

Click here to read the paper, and find additional articles on ethics, organizational citizenship behavior, and other topics in the Journal of Management Editor’s Choice Collections.

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