Shareholder value, stakeholder management, and social issues: What's the bottom line?

We test the relationship between shareholder value, stakeholder management, and social issue participation. Building better relations with primary sta keholders like employees, customers, suppliers, and communities could lead to increased shareholder wealth by helping firms develop intangible, valuab le assets which can be sources of competitive advantage. On the other hand, using corporate resources for social issues not related to primary stakeho lders may not create value far shareholders. We test these propositions wit h data from S&P 500 firms and find evidence that stakeholder management lea ds to improved shareholder value, while social issue participation is negat ively associated with shareholder value. Copyright (C) 2001 John Wiley & So ns, Ltd.