The relationship between CSR and Corporate Financial Performance: A survey (original) (raw)
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The Impact of CSR on Financial Performance: Controversial Empirical Evidence and Reasons Behind It
Vìsnik Nacìonalʹnogo tehnìčnogo unìversitetu «Harkìvsʹkij polìtehnìčnij ìnstitut», 2023
Business case for corporate social responsibility (CSR) is becoming increasingly relevant today because it allows companies to align interests of different groups of stakeholders through creating a shared value. To integrate CSR in a company's business model effectively, it is important to understand the relationship between CSR and financial performance. However, a large number of studies on the impact of CSR on a company's bottom line have yielded controversial results. The goal of this article is to provide an overview of discrepancies in the results of empirical studies on the relationship between CSR and financial performance reported in the literature and summarize the reasons and methodological issues underlying the lack of consensus regarding this relationship. We show that most authors observed a positive impact of CSR on financial performance, however some authors reported a negative, U-shaped, inverted U-shaped, and S-shaped relationships, as well as the absence of any impact of CSR on financial performance. The discrepancy in the results can be related to a multidimensional and heterogeneous nature of CSR, and hence, to the lack of uniformity in measuring it. Similarly, financial performance can also be measured through a variety of indicators, both accounting-and market-based. The differences in the measurement methodology make the results of different studies less comparable. The relationship between CSR and financial performance can also depend on the approach to CSR used by companies. If CSR serves as an instrument for wealth creation, its impact on financial performance should be positive by definition. If CSR is based on purely ethical considerations, it may be merely a cost-center with no economic benefits. The relationship between CSR and financial performance can be weakened or strengthened by a large number of external and internal situational factors, such as the institutional environment, industry dynamism, company size, form of ownership and many others that can have a moderating effect on the relationship. The causality within this relationship can be bidirectional and result in a virtuous cycle, but it can also be reversed and asymmetrical. The ambiguity of the results reported in the literature can be connected with a delayed effect of CSR on financial performance, when it takes some time for investments in CSR to pay off in terms of financial benefits.
IMPACT OF CSR ON FINANCIAL PERFORMANCE
– The field of corporate social responsibility (CSR) has grown exponentially in the last decade. Nevertheless, there remains a protracted debate about the legitimacy and value of corporate responses to CSR concerns. There are different views of the role of the firm in society and disagreement as to whether wealth maximization should be the sole goal of a corporation. Using extensive data over a period of five years, this study explores and tests the sign of the relationship between corporate social responsibility and financial performance. The dataset includes most of the S&P 500 firms and covers the years 1996-2000. The relationship is tested by using empirical methods. The results indicate that the sign of the relationship is positive and statistically significant; supporting the view that socially responsible corporate performance can be associated with a series of bottom-line benefits.
The Impact of CSR on Firms' Financial Performance - A Literature Review
American Journal of Business, Economics and Management, 2016
This paper observes the various related literature in India and abroad along with the findings and suggestions made by diverse researchers regarding how financial performances are affected by the corporate social responsibility. In India, corporate social responsibility has been made mandatory by the Companies Act, 2013 and as a result, the Indian companies have started spending for this purpose. Central public sector enterprises of India have played a key role regarding corporate social responsibility for the development of the nation, in which, they have published a set of separate guidelines for central public sector undertakings on 12 April, 2013 that was later superseded by another set of guidelines dated 21 October, 2014. It has been observed that the findings have been divided into three groups across the globe, that is, corporate social responsibility has either a positive impact or a negative impact or no impact on firms’ financial performance.
THE ASSOCIATION BETWEEN CSR AND CORPORATE PERFORMANCE
Association between CSR and corporate performance, 2013
We studied the various theories on Corporate Social Responsibility with the view to ascertaining their applicability in Nigerian oil & gas sector. We also tested for association between corporate social responsibility and oil & gas corporate performance. To achieve these, we concentrated on quoted oil &gas companies mainly because, the Oil & Gas sector is perceived by Nigerians to be more liable to corporate social responsibility. This study was originally designed to apply the census method in collecting data (i.e, Population = Sample); but due to lack of data, we restricted the study samples to the number of oil companies which have their annual reports for the periods of interest in the Nigerian Stock Exchange (i.e 2007 to 2012). Eight (8) out of the ten (10) oil and gas companies that are listed on the Nigerian Stock Exchange were studied. The methods of analysis used in this study are the descriptive statistics, correlation and regression analysis. The regression analysis was used to test the research hypothesis in order to determine the performance factors that affect CSR positively. We found that, there are evidences of ethical and developmental theories but less of regulatory requirements. Also, we found that the higher the earnings quality, operating cash flow and turnover the lesser the corporate social responsibility by oil & gas companies. We conclude therefore that, oil companies are socially responsible. Oil and gas sector focuses more on donations, sponsorships, social development, and education; therefore, recommending that oil & gas companies should endeavour to monitor their cash flow in line with their spending on CSR.
International Journal of Economic Policy in Emerging Economies, 2018
Corporate social responsibility (CSR) is gaining more popularity and becoming realistic strategies for corporate value creation and play increasing roles for sustainable socioeconomic development. If the rule is right, we can painlessly create the condition for win-win social lead business model globally. There are two key areas in this study: first, the relationship between internal factors and CSR implementation and second, the relationship between CSR and potential revenue in the future. Result from the first area of study indicates that the bigger firm size and higher capital investment per total asset have a positive impact leading to increases in the CSR rating. On second area of study, I have found that higher CSR ratings or CSR implementation associate with higher revenues in the future. Thus, CSR is proved to be a valuable investment option (not perishable expenses) for smart and sustainable firms.
CSR and Corporate Financial Performance: An Inter-Sectorial Analysis
International Journal of Business and Management
This study examines the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP), shedding new light on the lack of academic consensus and prevailing failure to deal with endogeneity in data. To this purpose, the authors recalculate ESG performance starting from the four pillars (economic, environmental, governance and social) provided by Thomson Reuters’ Asset4 database, able to determine a firm’s CSP. We adjust each ESG pillar score accounting for the firm’s sector, size and headquarter geographic area. We empirically test the relationship with a Generalized Method of Moments approach (GMM) in order to tackle the widely disputed endogeneity issues arising in this type of datasets. Results highlight a positive relationship between CSR, as measured in a tailored manner in this study, and corporate financial performance.
Study on the Relationship between CSR and Financial Performance
Sustainability, 2019
This study analyzed whether a systematic relationship exists between corporate social responsibility (CSR) performance and corporate financial performance using 191 sample firms listed on the Korea Exchange. The Korea Economic Justice Institute (KEJI) index of 2015 was used to measure CSR performance; profitability and firm value were used to measure corporate financial performance. Return on assets was used as a proxy for profitability, and Tobin’s Q was used as a proxy for firm value. The correlation between these variables and CSR performance was examined through correlation and regression analysis. The results confirm that CSR performance has a partial positive correlation with profitability and firm value. These results are partly consistent with those of previous studies reporting a positive relationship between CSR and Korean firms’ financial performance using the KEJI index before 2011. In the relationship between CSR performance and profitability, only social contribution y...
Attitude, Strategy and Practices of CSR: The key to Business Performance
Corporate Social Responsibility (CSR) has become a common practice and a useful tool for many organizations. Although previous research on CSR has explored the determinants that influence a company"s strategy, there is still a lack of consensus regarding the attitude, strategy and practices of CSR as key indicators of business performance. In survey context, results from 39 managers suggest a model of relating Attitudes toward CSR, CSR"s Internal and External Strategies, CSR practices and Business Performance. The results showed positive relationship among the dimensions, except for External Strategy to CSR. The paper ends outlining implications, limitations and directions for future research.
Strategic use of CSR as a signal for good management
Available at SSRN 1134505, 2008
Abstract: More than thirty years of research exploring the link between corporate social responsibility (CSR) and corporate financial performance (CFP) could not provide a satisfying resolution to the tension exists between economic and social objectives. In this paper, we have contributed to the existing CSR literature both theoretically and empirically. On the theoretical side, we challenged the assumption that managers consider all stakeholders equally important and we contend that managers prioritize stakeholders ...