Employee Satisfaction as a Mediating Factor in the Relation between Corporate Social Responsibility and Corporate Financial Performance

This study analyzes employee satisfaction as a mediating factor in the relationship between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP), and it distinguishes between the effects of various dimensions (Environmental, Social, Governance, and Controversies) of CSR. Using fixed effects modeling, the analysis explores within-company differences over time to provide evidence of causal effects. I find that CSR improves CFP and increases employee satisfaction. I also find tentative evidence that employee satisfaction improves CFP and partially mediates the CSR-CFP relation. When analyzed separately, the individual dimensions of CSR rarely have significant effects on CFP or employee satisfaction. However, CSR Controversies have a positive effect on CFP, and Environmental and Social CSR have the strongest effects on employee satisfaction. These results provide insight into the effects of CSR and the mechanisms through which CSR influences business outcomes.