Does Corporate Social Responsibility Fuel Firm Performance? Evidence from the Asian Automotive Sector

Abstract

Corporations are now expected to self-regulate in order to uphold their social obligations to society. This is known as the social responsibility of corporations or corporate social responsibility. CSR helps a business to be mindful of the impacts it has on the economy, society, and environment. The most important CSR component for the automotive industry is unquestionably environmental responsibility. Despite the fact that many businesses still place a strong emphasis on economic responsibility, it is widely acknowledged that all three CSR elements are essential for the success of a firm. This study’s objective is to look into the effects of corporate social responsibility (CSR) on business performance in the automobile sector, with an emphasis on Asian nations. Sample companies were selected from the Thomson Reuters database according to the data availability on corporate social performance and firm performance for more than 10 years. Data analysis was performed using the software STATA. Fixed and random effects panel regression models were used to analyse the relationships. The findings of this study are consistent with the idea that corporate social responsibility considerably improves the performance of automobile companies. The study concludes that companies need to focus more on CSR spending, as it improves the financial performance of the company. The study contributes to the existing literature as it validates the strong relationship between CSR components and firm performance in the automobile sector, which has not been much explored in the extant literature. The results of the panel data regression demonstrated that not only the environmental score is significant in determining the firm performance; other components such as social and governance scores are also equally important in achieving the desired firm performance, which is totally against the common notion that since automobile firms cause much damage to the environment, they need to focus only on environmental aspects through their CSR initiatives.

The Effect of Corporate Social Responsibility and Ownership Structure on Financial Performance of Consumer Non Cyclicals Companies in Indonesian

“…The results of this study are not in line with the findings of Chandrasekaran (2022) which shows that firm size has no significant positive effect on the company's financial performance. Firm size has a negative and significant effect on company performance because a larger business size will increase its operational risk (Alkurdi et al, 2021).…”

“…Future researchers are expected to be able to add other aspects that affect the company's financial performance such as corporate governance including board composition, board meetings, board diversity and directors compensation to analysis of the impact on the company's financial performance (Dakhli, 2022). Future research is also expected to add company performance measurement variables to assess market performance through the Tobin Q measurement (Chandrasekaran, 2022).…”

“…long-term performance(Chandrasekaran, 2022, Hichri & Ltifi, 2021, Oncioiu et al, 2020 Stakeholders have different positions and negotiating power in influencing company decisions. Research on CSR activities on several stakeholders including the community, employees, the environment shows a significant positive effect on the company's financial and non-financial performance.…”

Sustainability reporting and corporate financial performance: Moderating effect of financial slack resource

“…For example; in the airline industry Abdi et al (2022) observed positive relationship between sustainability reporting and financial efficiencies. Spending on sustainability practices improve financial performance of automobile firms (Chandrasekaran, 2022). Also, mandatory ESG disclosures lower the likelihood of stock price crashes (Flammer, 2015;Krueger et al, 2021;Statman & Glushkov, 2008).…”

A Perceptual Approach to the Impact of CSR on Organizational Financial Performance

“…Social responsibility has been at the midpoint of public attention, but questions are raised about the tangible benefits it brings to the organization, especially regarding organizational financial performance. The relationship between responsibility and financial performance has been studied for a long time, through various approaches, in the economic literature, with three different points of view [29,[32][33][34][35][36][37][38][39][40][41]. The first approach is the neoclassical one, in which excessive spending on implementing social responsibility programs encumbers corporate profits, significantly reducing them [32].…”