Corporate social responsibility and financial performance – the role of corporate reputation, advertising and competition

Abstract

PurposeThe research on corporate social responsibility (CSR) and firm performance (FP) has seen a surge over the years. However, the role of corporate reputation (CR), advertising strategy and market competition is still unclear. The purpose of this study is to consider this gap and test an integrative model of CSR-FP, in the context of India.Design/methodology/approachThe data for CSR expenditure were collected from the annual reports of the selected companies. CR was captured using the ranks of Fortune India 500, Business Standard 1,000 and Economic Times 500. The financial data were collected from CMIE (Prowess) database.FindingsResults of structural equation modeling (SEM) revealed a significant relationship between CSR expenditure of the firm and its reputation; but no relationship between CR and performance. When CR increases, the performance of a firm may not improve. Competitive intensity (CI) had no statistically significant role in the CR-FP relationship for performance. Results suggest that reputed firms perform well despite high competition within an industry. High reputation is effective in improving performance irrespective of competition. CI has a positive impact in the reputation–performance linkage. Advertising intensity (AI) played a significant moderating role in the CSR intensity and CR relationship.Originality/valueThis research represents an added value for the literature on CSR by highlighting the importance of CR, advertising strategy and market competition in the relationship between CSR and FP. The findings have several implications for theory and practice, which have been discussed in the study.

When pretesting corporate social responsibility advertising can mislead: feelings vs attitudes

“…It was argued earlier that CSR advertising be regarded as a core activity within the corporate communications function and that by, implication, having a theoretically grounded approach to ensure its effectiveness should be an issue within the corporate communications literature. Fortune Global 500 firms alone spend an estimated $20bn a year on CSR activities (Dattani et al, 2015) and research continues to claim causal links between how socially responsible companies are perceived to be and their financial performance (Bashir, 2022) with advertising being one way to promote an image for being responsible. However, many advertising campaigns do not create the effects expected of them (Hu et al, 2009), and even large advertising agencies can fail to pretest their ads and, among those that do, the use of qualitative methods appears to dominate (King et al, 1993;Turnbull and Wheeler, 2017).…”

“…Fortune Global 500 firms alone spend an estimated $20bn a year on CSR activities (Dattani et al. , 2015) and research continues to claim causal links between how socially responsible companies are perceived to be and their financial performance (Bashir, 2022) with advertising being one way to promote an image for being responsible. However, many advertising campaigns do not create the effects expected of them (Hu et al.…”

Striving for sustainable development: The impact of corporate social responsibility on corporate performance of Chinese manufacturing multinationals in Africa

“…The mixed results introduced the possibility of an indirect relationship between CSR and corporate performance that is mediated or moderated by certain factors. Examples of mediating factors that have already been investigated are corporate image and customer satisfaction (Ali et al, 2020), internationalization (Sang et al, 2022), corporate reputation (Fourati & Dammak, 2021;Park, 2017;Saeidi et al, 2015), customer loyalty (Le, 2022), intangible resources (Surroca et al, 2010), competitive advantage (Saeidi et al, 2015) and advertising (Bashir, 2022;Hsu, 2012). Barnett (2007) pointed out that the effective fulfillment of CSR needs to acquire stakeholder influence capacity (SIC) before it can further influence corporate performance.…”

Environmental Performance with Firm Size as an Intervening Variable

“…Companies must create a good image in front of the community (Bashir, 2022). This will have a good impact on the company, such as increasing the company's value.…”