The Impact of Corporate Social Responsibility on Firms’ Financial Performance in South Africa

Abstract

If Corporate Social Responsibility (CSR) activities are beyond a firm's legal obligations and potentially require a sacrifice in short-term profits, why do firms promote CSR? This question motivates this investigation of the impact of CSR on a firm's Corporate Financial Performance (CFP). This relationship is examined for the period from 2004 to 2013 in South Africa. We assess the short-term impact of CSR announcements on financial returns of firms included in or excluded from the Johannesburg Securities Exchange Socially Responsible Investment Index and determine whether there is a difference in the long-term CFP between these two groups for the entire period. The event study methodology shows that investors were rewarded in 2004 and 2012, when firms entered the index, and were penalized in 2013, when firms exited the index. When using regression analysis, the various industries provide mixed results between CSR and CFP for firms over the long term. Based on these results, we find that CSR activities lead to no significant differences in financial performance.sacrifice of short-term profits compensated by improvement in firms' long-term financial per-

Finding the Link between CSR Reporting and Corporate Financial Performance: Evidence on Czech and Estonian Listed Companies

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Understanding Complexity: the Curvilinear Relationship Between Environmental Performance and Firm Performance

“…The following studies reported no evidence for a direct relationship between EP and FP: Aras et al (2010), Jaffe et al (1995), Johnson and Greening (1999), Berman et al (1999), Chetty et al (2015), McWilliams and Siegel (2000), Thornton et al (2003), Elsayed and Paton (2005), and Vogel (2005). These studies generally claim that there is either no relationship between EP and FP, or if there is one, that it is too complex to be found (Margolis and Walsh 2003;Ullmann 1985).…”

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