Looking for evidence of the relationship between corporate social responsibility and corporate financial performance in an emerging market

Abstract

PurposeThe purpose of this paper is to examine the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) of Malaysian public listed companies (PLCs) as an emerging market setting.Design/methodology/approachA longitudinal data analysis with a large‐sample testing was carried out from 200 Malaysian PLCs by using panel data analysis during a seven‐years period. The statistical power with fixed effect and random effect model was utilized.FindingsResults of earlier estimations indicate that there are positive and significant related of the CSR on CFP. Two of the CSR dimensions, namely employee relations and community involvement, were found to be positively related to financial performance. This proves that CSR practices can be considered as effort to enhance the financial performance of PLCs in Malaysia. The results also reveal that there is limited evidence of the relationship between CSR and CFP in the longterm.Practical implicationsThese findings suggest that Malaysian PLCs should be involved consistently in their CSR practices because CSR has a significant impact on improving financial performance in Malaysian PLCs.Originality/valueThe majority of studies on CSR in Malaysia pertain to the analysis of such reporting and motivations of managers toward CSR practices. This study conducts a comprehensive empirical research on the relationship between CSR and CFP in Malaysian PLCs.

The Effects of Environmental, Social and Governance on the Corporate Performance of Malaysian Government-Linked Companies

“…In this regard, we assume that disclosure, to a large extent, equates the actual practice. Thirdly, the use of secondary data is consistent with the previous studies in this area (Amran, Ooi, Nejati, Zulkafli, & Lim, 2012;Esa & Anum Mohd Ghazali, 2012;Hawani Wan Abd Rahman et al, 2011;Ponnu & Ramthandin, 2008;Saleh et al, 2011).…”

“…Thus, the inconsistent findings offered by the previous studies warrant another separate research to be conducted. Theories that have been applied to support this proportion "by engaging in ESG initiatives, companies can improve their financial performance" include good management theory (Fauzi, 2009), porter hypothesis (Wagner, Schaltegger, & Wehrmeyer, 2001), stakeholder theory (Saleh, Zulkifli, & Muhamad, 2011), and stewardship theory (Koe Hwee Nga, 2009). Therefore, we develop the following alternate hypothesis: Hypothesis: Environmental, Social and Governance have impacts on corporate performance.…”

Does Corporate Social Responsibility Lead to Improve in Firm Financial Performance? Evidence from Malaysia

“…For example, Aras, Aybars and Kutlu (2010) Malaysian Public Listed Companies (PLC's) have to consider and implement CSR activities in their business operations for awareness and public demands on good CSR initiatives (Saleh, Zulkifli, & Muhamad, 2011). It also supports the government aspiration to attract the foreign direct investment to invest in the capital market by promoting good CSR practices among the PLC's in Malaysia.…”

“…Example of this content analysis is by counting number of lines or words dedicated to themes CSR in the annual report of the company (Aras, Aybars, & Kutlu, 2009;Mwangi & Jerotich, 2013;Ngwakwe, 2009;Ramasamy, Ting, & Yeung, 2007;Saleh, Zulkifli, & Muhamad, 2011;Uadiale & Fagbemi, 2012;Karagiorgos, 2010).…”

“…Most of the financial measures are obtain from company financial statement inside company annual report. Most researchers typically used accounting-based measures (Aras, Aybars, & Kutlu, 2010;Saleh, Zulkifli, & Muhamad, 2011;Sun, 2012;Bayoud, Kavanagh, & Slaughter, 2012;Iqbal et al, 2012) and market or stock based measure (Boesso, Kumar, & Michelon, 2013) as CFP measurement. The accounting measures provide most positive correlation result from analysis on relation between CSR and CFP (Dkhili & Ansi, 2012).…”