The effects of internal, external and aggregated CSR practices on the firm's reputation and profitability

Abstract

Purpose Contemplating the concerns often expressed by skeptics about the value generated by corporate social responsibility (CSR) practices, this study aims to examine the effects of CSR practices on the firm's reputation and profitability in the distinct socio-economic context of Nepal. Design/methodology/approach The study used a simple random sampling method in collecting data from 168 listed companies in Nepal. The data were collected using structured questionnaires. Then, hierarchical multiple regression analyses were used to test the stated hypotheses. Findings Results showed that all types of CSR practices positively affect the firm's reputation and profitability. However, a firm's reputation was better explained by the external CSR practices, and profitability was better explained by the internal CSR practices. Moreover, CSR practices were more strongly linked with the firm's reputation than profitability. Research limitations/implications Perceptual data on profitability may be seen as a limitation although it can capture the current profitability situation as well as a future prospect within a single construct. Practical implications Practicing managers can consider CSR as an important strategic issue to stay ahead in competition rather than simply a response to regulatory requirements or stakeholder pressures. Originality/value Perhaps this is the first study to examine the effects of internal CSR practices, external CSR practices, and aggregated CSR practices separately on the firm's reputation and profitability in the unique socio-economic context of Nepal.

The effect of social responsibility and managerial ability on firm value-mediated profitability

“…This can be interpreted that the higher CSR disclosure index carried out by company, the more it affects the increase in the company profitability in the return on assets for company operating activities or return on assets (ROA) obtained by company. Results of this study are in line with research by (Amin & Lastanti, 2020;Chapagain, 2021;).…”

“…Stakeholders also play a role in the survival and development of company so that it needs to provide benefits and social responsibility for environment because operating company process certainly has an impact on society (Azhar & Wijayanto, 2018). CSR disclosure on profitability can indicate that if it carries out social responsibility for the surrounding environment then in the long term it will bring a positive impact reflected in company profits and improved financial performance (Amin & Lastanti, 2020;Chapagain, 2021;Y.-C. Chen et al, 2018)…”

“…Thus, the higher value of this ratio, the better situation of a company stated to be (Shim et al, 2018). Firm that have good financial performance will have more resources to invest in social performance (Tsoutsoura, 2004) (Chapagain, 2021;Gong et al, 2021;;Pratiwi et al, 2020;Xu et al, 2020, ). This shows that CSR, companies through profitability will be able to increase firm value.…”

“…Firm that does CSR send a good signal that they are engaging in environmental strategies proactively. This information is a positive signal delivered to shareholders (Chapagain, 2021;Hao & He, 2022). Firm in running its business wheel is also influenced by managerial abilities (Gong et al, 2021;La'bi et al, 2018;Pamungkas & Setiawardani, 2016).…”

Effects of Internal Finance, Islamic Governance and Islamic Corporate Responsibility on Profitability: Evidence of Islamic Banking in Indonesia

“…Yoon and Chung (2018) argue that this is possible because implementing ICSR social performance is expected to provide material returns in the long term so it takes time to achieve financial benefits from investments in customers, communities and activities related to the environment. In addition, ICSR programs are often not performed consistently, and implementation is only limited to fulfilling obligations under regulations to avoid administrative sanctions (Chapagain, 2021). In fact, Asim et al (2020) stated that disclosure of ICSR is not an obligation for companies and CSR activities are voluntary activities according to the will of the company.…”