Does Corporate Social Responsibility Affect the Financial Performance of the Manufacturing Sector? Evidence from an Emerging Economy

Abstract

The present study analyzed the impact of corporate social responsibility (CSR) reporting on the financial performance of Indian companies. It used secondary data from 50 manufacturing companies over the period of fiscal years 2011 to 2017. The results suggested that there exists a significant relationship between the performance of Indian companies and their CSR. The CSR not only improves the firm’s social value and reputation but also improves profitability and performance. According to the results, return on assets is significantly determined by corporate governance, customers, products, number of employees, and board size. The customer has a negative impact on return on assets (ROA). The relationship between return on equity and independent variables is the same as the relationship between ROA and independent variables. Corporate governance and product positively impact ROE, but the relationship between customers, number of employees, and board size are negative. Corporate governance and product positively impact return on capital employed (ROCE), but the relationship between customer and the number of employees is negative. Education has positive impact on profit after tax (PAT) and profit before tax (PBT), but the PAT relationship between environments is negative. Corporate governance and product positively impact PBT. In general, we concluded that in India, socially responsible corporations perform better and vice versa.

The impact of corporate social responsibility transparency on the financial performance, brand value, and sustainability level of IT companies

“…The closest relation was with the ROE (albeit only 13.80%), where the information of only four CSR variables was related to that ratio. Although some CSR variables positively affected financial behaviour, which agrees with several studies (Cherian et al, 2019;Chon, 2019;Isanzu & Xu, 2016) that found a positive relation with ROE, other CSR variables negatively affected it, which coincides with other studies (Sheikh, 2019) that negatively related CSR and firm leverage. To find such evidence, it may be necessary to increase the sample size.…”

“…First, the study reveals that a company's sustainability transparency is well related to its size (number of employees and its assets logarithm), which coincides with other studies (Broadstock et al, ; Cherian et al, ; Kao et al, ; Liesen et al, ; Niron & Aryani, ). Some social variables are positively related to size, such as the percentage of women managers and ethnic variety, whereas the number of White people does so negatively.…”

“…More recently, Cherian et al (2019) suggested that a significant relation exists between the performance of 50 manufacturing Indian companies and their CSR during the period from 2011 to 2017. These authors also used financial indicators, such as return on assets (ROA), return on equity (ROE), or number of employees, which are also used herein.…”

Sustainable development and economic performance: Gaps and trends for future research

“…They found that there is a significant negative short-term impact of CSR adoption and business performance. The CSR-CFP Corporate Financial Performance (CFP) relationship was visited again by several authors (Škare & Golja, 2012;Pätäri, Arminen, Tuppura, & Jantunen, 2014;Vergini, Jacomossi, Turra, & Hein, 2015;Rodriguez-Fernandez, 2016;Carini, Comincioli, Poddi, & Vergalli, 2017;Choongo, 2017;Oh, Hong, & Hwang, 2017;Ang & Weber, 2018;Beck, Frost, & Jones, 2018;Hategan, Sirghi, Curea-Pitorac, & Hategan, 2018;Cherian et al, 2019;Lin, Hung, et al, 2019;Lin, Law, et al, 2019), some of which considered environmental leadership (DiSegni, Huly, & Akron, 2015), its impact on innovation, and firm performance as possible moderating variables (Martinez-Conesa, Soto-Acosta, & Palacios-Manzano, 2017). Ekatah, Samy, Bampton, and Halabi (2011) sought to explore whether CSR is linked to profitability employing simple statistic methods and linear regression.…”

“…that analyzed whether credit ratings, such as Standard and Poor's, take sustainability performance into account;Liang, Chang, and Shao (2018) that, while not analyzing the financial performance of banks using commonly employed variables based on revenue or assets, sought to determine whether sustainable banks are more cost efficient than their counterparts; and Xiao, Wang, van der Vaart, and van Donk (2018) that determined if country-level sustainability can be a moderating variable in the CSP-CFP relationship Hategan et al, 2018;Kim & Lee, 2018;Liang et al, 2018;Shin et al, 2016;Zhao et al, 2018;Adegbite et al, 2018;Cherian et al, 2019;Xie et al, 2018)…”