The Impact of Corporate Social Responsibility on Firm’s Financial Performance

Abstract

Corporate Social Responsibility (CSR) is now an integral part of business model of most of the modern organizations. Companies are making efforts to play their role in improving society in one or other ways. The scope of efforts ranges from donating money to nonprofit organizations to employing environmental-friendly policies in their workplace. As per the general global perception the corporate sector of Pakistan has been lacking behind in respect of CSR implementation. It has largely concentrated on profit minting rather than taking care of the welfare aspects of employees and other stakeholders. This attitude has affected the business and as a result industry has failed to keep pace with the modern industry. The objective of this study is to analyze the impact of CSR on firm’s financial performance. The research therefore predicates that increase in CSR activities of poor CSR firms shall have a negative effect on the company’s financial performance. Whereas, Middle CSR firms having a positive relationship with Excess Value (EV) will enhance the project performance, financial stature and future prospect of the firms. However, the firms with the best CSR will always have a positive relationship with the firm’s financial performance but its impact will not be observed significantly on the firm’s financial condition.

Long-run dynamics between CFP and CSP in the GCC banking sector: estimation of non-stationary heterogeneous panels allowing for cross-sectional dependence

“…Previous studies used different proxies of CSP: scores driven from content analysis of firm’s annual reports and other disclosure channels (Abbott and Monsen, 1979; Wolfe et al , 1991; Orlitzky et al , 2003; Ben Douissa and Azrak, 2017), social ratings such as Kinder, Lydenberg and Domini rating, which is the most used social rating in literature (Chatterji et al , 2009; Cho et al ., 2017; Erhemjamts et al , 2013), and finally reputation indexes, which are first used by Council of Economic Priorities in the early 1970s (Ahmed, 2018).…”

Role of Corporate Social Responsibility in Sustaining Earning Value: Insights from an Emerging Country

“…The role of CSR in corporate financial performance CFP (return on assets, and return on equity) has been explored by some studies, but a clear understanding has not been established due to the contradicting outcomes (Ahmed, Butt, & Majeed, 2018;Sacconi & Degli Antoni, 2011;Zulfiqar, Sadaf, Popp, Vveinhardt, & Máté, 2019). However, the relationship between CSR and Earning Value is relatively untapped or limited in developing countries, especially in Pakistan, compared with developed countries through the use of an advanced statistical technique on longitudinal data.…”

“…There is a lack of understating around the need for allocating budget to CSR activities at a corporate level. The role of corporate social responsibility in earning value, within the context of Pakistan, is a novel phenomenon, and has not been explored in depth (Ahmed et al, 2018;Javeed & Lefen, 2019;Rana & Asad, 2018).…”

“…Economic growth and energy consumption were determined as active contributors. Ahmed et al (2018) studied the level of CSR impact (highest, mid, and low CSR firms) by determining the association between CSR and CFP. It was concluded that firms with poor CSR activities reported an insignificant impact.…”

Corporate social responsibility and financial performance – a comparative analysis of listed deposit money banks in nigeria and ghana

“…Many researchers discovered a favorable association between CSR and FP, including found an adverse effect. [1,2,3,4,5,6] Furthermore, past investigations have revealed inconsistency in the literature as a source of concern. The main issue highlighted was a lack of comparison of outcomes from two developed countries, which became the focus of this paper, which analyzed the relationship between CSR and financial performance of Nigerian and Ghanaian listed money deposit banks.…”