This research aims at understanding the interrelation between Corporate Social Responsibility (CSR) and financial performance. Corporate Social Responsibility has gained increasing attention in both academic and business literature and companies find themselves under increasing pressure, both from a legal and social perspective, to take into account social and environmental issues. This is why we notice more and more initiatives to implement CSR in business strategies and to improve transparency through the publication of annual CSR reports and rankings. Our analysis on distinct industries shows differing relations between CSR and financial performance. This brings us to the conclusion that the relation depends strongly on unobservable industry- and firm-specific effects and the businesses’ internal and external environment. Furthermore, our findings suggest that CSR initiatives tend to be cyclical, depending on the efficiency of the firm, and lead to the belief that the relation between CSR and financial performance tends to take the form of a virtuous circle.