Corporate Social Responsibility and Firm’s Financial Performance: Evidence from the Banking Industry of Pakistan

Abstract

The present work examines the effects of corporate social responsibility on profitability (CSR) of banking sector of Pakistan. The existing literature mainly focused on manufacturing industry of developed countries, while this study investigating the impact of CSR on financial sector of Pakistan. Secondary data were collected from 15 different banks from their annual reports for the period 2007-2016. Furthermore, study used summary statistics and two step system GMM to analyse the impact of corporate social responsibility on the financial performance of banks and found significant positive impact of CSR on financial sector performance. Moreover, the present work also observe that banks with good history of CSR spends less at present as they have established good reputation in society. Our study provides important empirical insights for regulators and other key stakeholders especially State Bank of Pakistan and banking industry of Pakistan for improvement in firm performance and profitability.

A Review on Corporate Social Responsibility (CSR) Constructs and Theoretical Debate in Pakistan

“…In the above-mentioned studies five studies have used perceived financial performance. These are the studies by Aga et al [28]; Khan and Majid [36]; Qazi et al [50]; Waheed and Yang [67] and Ikram et al [70]. The study by Aga et al [28] and Waheed and Yang [67] perceived sales growth and perceived sales performance, Corporate Governance -Recent Advances and Perspectives respectively.…”

“…In the studies analyzed, few studies have used theoretical perspective. Only six of the studies have used explicit theoretical perspectives in CSR scholarship which are by Khan and Majid [36]; Sharif and Rashid [15]; Malik and Kanwal [61]; Syed and Butt [60]; Khan et al [65]; and Waheed and Yang [67]. The studies by Zulfiqar et al [68] and Ali et al [86] have used social identity theory as depicted in the Table 2 below.…”

A társadalmi felelősségvállalás és a pénzügyi teljesítmény kapcsolata a hagyományos és az iszlám kereskedelmi bankok gyakorlatában a pakisztáni bankrendszer tükrében

“…A korábbi empirikus kutatásokhoz kapcsolódva a pakisztáni bankok körében folytattunk vizsgálatot. Elemzéseinket a pakisztáni tőzsdére bevezetett bankok körében végeztük (Khan, 2020;Szegedi, Khan & Lentner, 2020). Célunk annak elemzése volt, hogy a tőzsdei elvárásokat követő, pakisztáni tőzsdén jegyzett bankok menynyiben integrálják a saját országkultúrájuktól gyökeresen eltérő "nyugati-hátterű" vállalati társadalmi felelősségvállalás koncepciót, mennyiben fejlődött a CSR-gyakorlat a 2008-as pénzügyi válságot és a 2009-es CSR-szabályozást követően, hogyan függ össze a bankok CSR-gyakorlata és pénzügyi teljesítményük.…”

Do the same executive compensation strategies and policies fit all the firms in the banking industry? New empirical insights from the CEO pay–firm performance causal nexus

“…Thus, it is CEO pay that causes and explains firm performance. This implies that the pay is meant to incentivize and motivate the executives to act in the best interests of the firm's shareholders (Ahmed et al, 2020; Ahmed & Saidu, 2021; Ibrahim & Ahmed, 2020; Kayani & Gan, 2022; Olaniyi, 2019; Pareek et al, 2023; Rahman et al, 2021; Sakawa et al, 2017; Wijeweera et al, 2022; Zik‐Rullahi & Farouk, 2021). This corroborates the philosophical foundation of principal‐agent theory.…”