See

discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/305703330

The Impact of Corporate Social Responsibility on

Firm's Financial Performance

Article · April 2016

CITATIONS READS

0 1,444

1 author:

Muhammad Rizwan Ullah

Government College University Faisalabad
13 PUBLICATIONS 4 CITATIONS

SEE PROFILE

All content following this page was uploaded by Muhammad Rizwan Ullah on 29 July 2016.

The user has requested enhancement of the downloaded file.

 International Journal of Linguistics,
Social and Natural Sciences
www.ijlsns.com; editor@ijlsns.com
Research Article
The Impact of Corporate Social Responsibility on Firm’s Financial Performance
Muhammad Gulbaz Arshad, Faisal Anees and Muhammad Rizwan Ullah
Department of Banking & Finance, Government College University Faisalabad, Pakistan
*Corresponding author: m_gulbaz@yahoo.com

Article History: Received: November 04, 2015 Revised: November 22, 2015 Accepted: December 16, 2015

AB ST RACT
This study aims at to examine the impact of corporate social responsibility (CSR) on the firm’s financial performance.
Corporate social responsibility (CSR) is measured as the summation of the donation and the environmental cost
which is taken from annual reports of the companies over five years ranging from 2009 till 2013. The financial
performance of the firms is measured as return on assets (ROA) and Tobin’s Q. The study that is conducted consists
of 125 companies which are listed on the Karachi stock exchange in Pakistan. The companies which were selected for
sample purpose were taken from 25 sectors. A panel regression was then performed on the data to validate the impact
of corporate social responsibility on the financial performance of firms. The results revealed that there was no
significant impact of CSR on the financial performance in short-term scenario at 5 percent confidence level but found
positive impact at 10 per cent confidence value. In the long-term scenario, the independent variable CSR has no
impact on Tobin’s Q for the selected companies. The Study has documented recommendation for policy makers as
CSR practice in Pakistan is a new phenomenon.
Key words: Corporate social responsibility, Firm’s financial performance, Return on assets, Tobin’s Q

INTRODUCTION economic and ethical unrestricted expectations of a

society at its point of organization. Davis (1993) explains
Corporate social responsibility activities constitute an CSR as the responsibility of firms to respond to societies,
important part of doing a business ethically. Corporate ethically, to fulfill the economic need of people and the
social responsibility starts when businesses exist. legal requirements of government. The environment must
Companies must behave as responsible members of the be kept clean with legal requirements to get benefits from
society and perform their social duties in a manner as an governments.
individual is expected to serve his family. Socially Angelidis and Ibrahim (1993) explain that company’s
responsible companies have a comprehensive set of action should satisfy the people and work for societies.
policies and programs relating to the company’s Enderle and Tavis (1998) describe the procedure and
responsibility towards the society which they integrate policies related to corporate social responsibility. They
with their business operations and decision making define the law and practice to run the business in a better
processes. CSR can increase the goodwill of business. way. However, people and societies are not affected by
Holme and Watts (2007) describe that corporate social the illegal business. Doane (2005) described companies
responsibility is considered as a long term promise to act which are involved in social responsibilities to keep and
as economic development and to improve the living clean the environment. It is the responsibility of the
standard of the societies. CSR is about understanding and company to control environmental pollution and keep this
organizing the connection between our trading operations in the mind of its stakeholders. The institute of Economic
and the financial system, situation and communities Co-operation was shaped to encourage corporate social
within which we operate Scott, (2007). Bradshaw (1981) activities in the 19th century. They started to generate
explains that the basic aim of any business organization is separate budget for corporate social responsibility
to ensure that it is the responsibility of companies to fulfill activities. The United Nations Environment Programs are
the necessities of customers, providing facilities at a organized by conferences to protect national environment
minimum cost. Through efficient use of resources this is by the protection agencies. They adopted the CSR policy
possible. Carroll (1979) defines CSR as the legal, for the country's advancement. The Government of

Cite This Article as: Arshad MG, F Anees and MR Ullah, 2015. The impact of corporate social responsibility on firm’s
financial performance. Inter J Ling Soc Nat Sci, 1(1): 33-39. www.ijagbio.com (©2015 IJLSNS. All rights reserved)

33
 Inter J Ling Soc Nat Sci, 2015, 1(1): 33-39.

Canada selected corporate social responsibility in 2009 for when the men and women worked together, the image of
social and environmental improvement (Waheed, 2005). the company in the societies had a valuable factor. They
Pirsch (2007) recognizes the materialization of CSR use regression analysis for analyzing the data. The
activities for Stakeholder speculation, which suggested hypotheses which were used in the research consisted
that the companies’ existence and achievement is upon gender factor. Finally, they found that, the
documented by the realization of its financial and non- composition of gender had a good role in the enhancement
financial objectives in stakeholder’s interest. It is of the reputation of board and the companies.
company’s obligation to define and decide where to work. Bauman and Skitka (2012) have explored that
That happens when companies motivate and tell about corporate social responsibility (CSR) was considered as a
their works and benefits related to their abilities. After source of satisfaction for employees. They have examined
doing that, the percentage of employees in the companies that the factor which was responsible for success of the
rose (Kotler and lee, 2005). happens to be the primary stakeholders such as the
employee. They conducted a questionnaire survey in
Research Propositions which they found that employees were the best source for
CSR is a new phenomenon and CSR practices started the successfulness of the companies. They use statistical
from the last decade in Pakistan. For CSR practices, measurements (mean, mode, median, etc) in their
companies generate separate budget that is now in the research. They found that every organization or firm had
growing stage. In the course of research, planned corporate social responsibility to provide the four factors
affiliation between corporate social responsibility and the for employees such as security, self-esteem,
firm’s financial performance in Pakistan mutually on belongingness, and a meaningful existence. These four
short-term period and long-term period of five years is factors increase the employee’s satisfaction.
quite a new phenomenon. Singh (2014) has investigated the influence of CSR
disclosure on the financial performance of the companies
Objectives of the Study in the UK. He has conducted his research on three main
ƒ The most important purpose of this study is to industries which consist of sub-industries. The data taken
examine the impact of corporate social responsibility for the study was from annual reports for the period of 5
on the firm’s financial performance. It is examined years from 2008-2012. He used linear regression model in
that the CSR has an influence on the success of his study. He tried to find the CSR influence on the
business. financial performance of the companies. The results show
ƒ The Objective of our research is to identify the that CSR has no influence on the financial performance of
possible benefits of CSR for stakeholders. the companies, both in short-term and long-term for the
ƒ The attention of our study is to examine the selected companies in the UK.
connection among corporate social responsibility cost Kanwal et al. (2013) have explained and tried to find
and economic benefit, the relationship between CSR in Pakistan whether many organizations had a significant
and effectiveness of firms (ROA and Tobin’s Q). interest in the corporate social responsibility. By taking
the data from 15 companies listed on the Karachi stock
Literature review exchange, they tried to explore the relationship between
The employees of firms and consumer are part of the FP and CSR. For social activities, there must be a strong
strategic aspect of CSR practices. Firstly, prior literature financial performance of firm or organization and
related to CSR and consumer and CSR and employees is reasonable fund for social activities.
described. In instrumental aspects, the prior literature McGuire, Sundgren and Schneeweis (1988) have
related to CSR and financial performance of firm has been highlighted in their study that there was a positive
described. relationship between corporate social responsibility and
Moir (2001) have discussed the business loyalty with financial performance. They used regression analysis
corporate social responsibility. They described CSR to method to analyze the data. They found out that
know the attitude of people who were known as users. measurement of risk and corporate social responsibilities
They find out the outcomes by using the corporate social were interlinked. Finall,y their judgment is that there was
responsibility for creating loyalty among consumers just a positive relationship between corporate social
like Ali, Rehman, Yilmaz, Nazir and Ali (2010) and the responsibility and the financial performance of firms.
Al‐Khater and Naser (2003). They have concluded that Rapti and Medda (2010) examined in their study,
response of consumer and CSR were the different corporate social responsibility (CSR) related to
segments. They have concluded that positive attitude had environmental issues. And they also used ratio analysis
a positive impact on the value of shares which can for some extent purpose. In the theoretical model,
enhance the loyalty of a business. Four factors which were financial performance of firm is measured. The data was
defined above had positive influence on CSR but out of taken from annual reports. They used ten (10) top airports
them one factor “friendly environment” had negative with branches for the sake of research and calculation.
impacts on some types of consumer groups. They use the They used data over the period of 2003-2009. Finally,
segmentation process to find the best initiatives of CSR. they found that there is positive relationship between
Bear, Rahman and Post (2010) have narrated that the corporate social responsibility and industries of airlines.
corporate social responsibility of firms depended upon Dianita (2011) examined the impact of corporate
different aspects for rating purpose. They examined that social responsibility on earnings management. He used 27
the participation of women in the corporation might also companies in Indonesia, which were listed on the
increase the reputation of the firm. They described that Indonesia Stock Exchange over the period of 2006-2008.

34
 Inter J Ling Soc Nat Sci, 2015, 1(1): 33-39.

He used least square regression for analyzing the data. He Development of hypothesis
used sampling method and the data was collected by using H0: There is no impact of CSR activities on firm’s
the method of statistical and purposive sampling. He also financial performance in short term.
used dependent, independent, Moderating and Control H1: CSR activities have an impact on the financial
variables. He found that there was no influence on performance of firms in short term.
corporate social responsibility activities. Furthermore, he H0: There is no impact of CSR activities on firm’s
also fined that in future there might be negative effects of financial performance in long term.
firm’s financial performance. H2: CSR activities have an impact on the financial
Coffey and Wang (1998) have stated in their research performance of firms in long term.
that good corporate governance was the best predictor to
increase the corporate social performance of the firm. Model design
They described that corporate governance was considered Regression analysis technique is used to authenticate
as the best predictor to handle business. They used the impact of CSR on the financial performance of
correlation method for analyzing the data. They found that companies.
there is a good relationship between management and In short term, the financial performance of companies
society to understand the responsibility of corporation and is calculated by an accounting-based variable return on
firms. They also discussed all perspectives which are assets. And in long term the financial performance of the
related to further research investigations. In a similar case, companies is calculated as an accounting based variable
Mazuarkiwwicz (2004) have also described the corporate Tobin’s Q is also engaged. Leverage, size of firm, sales
governance and government laws to handle business. growth and age of firm are control variables which are
Sarwar et al (2012) have conducted the research on also used in the regression model. To examine the effect
Financial Performance linkage with the CSR in of corporate social responsibility activities on the financial
Bangladesh banks and found that the banks that focus on performance of the companies, control variables are used.
CSR practice have more ROA than those banks that do The regression equation 1 is used to examine the effects
not focus on this practice. of social activities of the firm on the financial
Khalid et al (2012) conducted research on CSR and performance of companies in the short-term. Return on
Firm performance and they found the positive relationship assets is used as dependent variable which calculate
between CSR and Firm performance. They also concluded accounting-based measurement to examine the financial
the mediating effect of customer satisfaction on firm performance of the companies in short-term. In equation
performance and CSR services. 1, return on assets is used to find the short term
profitability. The representation of shows the companies
Research gap and t indicate year or time period. Error term is used as ε.
As per discussed literature, it is not cleared about the
relationship between CSR and the firm’s financial
performance in the short term and the long term as
conflicting results have been observed. This study will To find the effect of corporate social actions on the
attempt to observe the association between CSR and ROA monetary performance of the companies on potential
and CSR and the Tobin‘s Q in short and long term in a effectiveness, another equation is also used. To know the
developing country scenario. CSR is used as the long term profitability another variable Tobin’s Q is used
independent variable. The dependent variable is the firm’s as accounting base measurements. The i represents the
financial performance. The control variables are firm size, company and t signifies year. Error term is used as ε.
age of firm, leverage and sales growth. In this study, Using accounting-based measure,
monetary performances of the companies are measured,
an accounting-based measurement return on assets
representing short term period. To examine the financial
performance of companies for long-term, another Variables
accounting based variable Tobin’s Q is used. The dependent variable is the financial performance
of the firms. The independent variable is corporate social
MATERIALS AND METHODS responsibility. This study also uses control variables to
measure actual outcomes because there are many firms
The study is conducted on companies publicly listed which do not pay for societies in particular period. The
on the Karachi stock exchange. In this study, we used study also uses four controlling variables which are
secondary data, which is taken from annual reports of defined in table 1.
companies because the annual reports are readily available Kanwal et al (2013) explains the CSR in her study as
and listed online (In the list of Karachi Stock exchange) the amount spent on the activities of CSR. In this study,
and at the head offices of the companies. the independent variable, corporate social responsibility is
The data related to corporate social responsibility is measured as the amount of donation and environmental
taken from annual reports, head office and the website of cost. Corporate Social responsibility is measured as the
the company. In annual reports the data related to combination of both cost such as donation and the
corporate social responsibility (CSR) exist in value added environmental cost. Firm’s financial performance is
statement, core values and other statement with the name measured by two variables; returns on assets and Tobin’s
of particularly donation, environmental cost and society at Q. Return on assets is calculated as net income divided by
large. the total assets. Tobin’s Q is calculated as the number of

35
 Inter J Ling Soc Nat Sci, 2015, 1(1): 33-39.

Table 1: Variable description

Category Variable Name Description
Independent variable Corporate social responsibility(CSR) Donation + Environmental cost
Dependent variables a. Return on Assets (ROA) Net income to total Assets
b. Tobin’s Q Market value of firms to book value of Assets
Controlling variables a. Firm size (LTA) Logarithm of total assets
b. Firm age (LOA) Logarithm of age
c. Leverage (LEV) Long term debt to total assets
d. Total sale growth (TSt-TSt-1)/TSt-1

Table 2: Descriptive statistics

CSR Firmsize Age Leverage Roa Sales Growth Tobinq
Mean 35750.23 7.021705 3.339003 0.32986 6.787135 4.886192 1.370478
Median 2370 6.9816 3.367296 0.3223 4.5284 0.148801 0.9887
Maximum 2430000 9.2343 4.779123 3.2287 170.7982 2914.851 29.356
Minimum -5241 5.2438 0.693147 -2.2003 -46.4883 -1.727026 0.0949
Std. Dev. 167506.7 0.811429 0.68718 0.365588 15.38436 116.5907 1.707008
Skewness 9.113839 0.334485 -0.88029 -0.619591 3.79645 24.93638 9.327271
Kurtosis 102.0275 2.390578 4.121400 17.02463 34.57503 622.8821 129.7368

Jarque-Bera 264028.5 21.32598 113.4691 5162.134 27464.45 10071383 427349.0

Probability 0.000000 0.000023 0.000000 0.000000 0.000000 0.000000 0.000000
Sum 22343891 4388.566 2086.877 206.1625 4241.959 3053.87 856.5485
Observations 625 625 625 625 625 625 625

outstanding shares multiplied by market value of share of Tobin’s Q at (1.370478) shows that all companies
price plus total liabilities and divided by the book value of witnessed high development. From the perspective of
total assets. Firm’s size, firm’s age, leverage and the sales control variables, the size of companies is measured in
growth are the controlling variables. Firm’s age is terms of total assets with the mean value of 7.021705. The
calculated as company or firm’s listing date. Total assets minimum size is just 5.2438 and the maximum size being
of the firms show the size of the firms. Leverage is 9.2343. The values point out a medium gap among
calculated by the ratio of long-term debt to total assets. smallest amount and highest values of assets for the
Sales growth is measured by taking the current year sale companies. Therefore, we consider the value of median
minus previous year sale divided by the previous year that is an average of the firm to be 6.9816. Furthermore,
sales. in arrangement to the large positive skewness, the value of
sales growth is 24.93638. The average age of the firms for
RESULTS AND DISCUSSION all companies is 3.339003 years. Similarly, the mean
value of leverage is 0.32986 representing a long term
In this chapter, justification and investigation of the debt, failing small of their total assets. The highest value
results attain for the interpretation provided, which is of Kurtosis is (622.8821) at sales growth. The highest
composed for all company over the period of 2009 - 2013. value of Jarque-Bera is (10071383) at sales growth.
First, an examination of the descriptive data is provided
for all selected companies. Then the analysis of Correlation Analysis
correlation for the selected companies. The table and the explanation of Correlation analysis
of All Selected Companies for the Years 2009-2013 is
Descriptive Statistics discussed below (Table 3).
The table and the explanation of Descriptive Statistics Table 3 describes the correlation analysis for all firms
of all Selected Companies for the Years 2009-2013 is for the period of five years ranging from 2009-2013. The
discussed as below. control variables firm size has a correlation with CSR at
Table 2 illustrates an explanatory summary of all the the value of (0.20550). The value (0.20550) indicates a
variables engaged in the model. During the five-year positive correlation of CSR with firm size suggesting a
period, the independent variable CSR has the highest positive impact of CSR. Age has negative and below
mean value of 35750.23. standard impact with CSR and the value is (-0.058099).
On the dependent variables, the mean value for ROA The correlation between Age and firm size is at the value
is 6.787135. The negative values of return on assets of (-0.13897). Leverage has not correlation with CSR at
commonly designate that the companies practiced a loss the value of (0.044679). But the correlation between
during the particular period of 2009-2013. But the results leverage and firm size is negatively significant at the
reveal that ROA of all companies has the positive values value of (-0.125468). The leverage is positively correlated
qualified for profit, during the five-year period of 2009- with age at (0.1190). There is no correlation of ROA with
2013. CSR and age at the value of (0.070072), (-0.016483)
The second dependent variable Tobin’s Q is respectively. ROA has correlation with firm size (-
calculated as the number of outstanding shares multiplied 0.124347) and correlated with leverage at (0.464030).
by market value of share price plus total liabilities and Tobin’s Q has no correlation with the independent
divided by the book value of total assets and has the mean variable CSR at (0.032281). Tobin’s Q is correlated with
value of 1.370478 for the selected companies. The value Age (0.15889) and ROA (0.3115) for the firm.

36
 Inter J Ling Soc Nat Sci, 2015, 1(1): 33-39.

Table 3: Correlation Matrix

CSR Firmsize Age Leverage Roa Sales growth Tobinq
CSR 1
Firmsize 0.205** 1
Age -0.058099 -0.138** 1
Leverage 0.044679 -0.125** 0.119** 1
Roa 0.070072 -0.124** -0.016 0.464** 1
Salegrowth -0.008279 -0.052922 0.016612 0.035648 -0.00838 1
Tobinq 0.032281 0.021837 0.158** 0.030074 0.311** -0.020812 1
Note: *Sig. at 0.1, **Sig. at 0.05; ***Sig. at 0.01

Table 4: Results of panel regression Panel A presents the regressed value for return on
Panel A: ROA (Dependent Variable) assets (ROA). The data reveals that corporate social
Variable Coefficient t – value p – value responsibility has an impact on ROA (Coef. = 0.000005 at
Constant 19.54181 3.299671 0.001*** t= 1.658525, p=0.10000) for all selected companies at the
CSR 0.000005 1.658525 0.1000* significant level 10%. But CSR has no significant impact
Firmsize -1.83215 -2.62889 0.0088***
at the level of 5% on ROA. However, the control variable
Age -1.93805 -2.40065 0.0167***
Leverage 19.42099 12.85735 0.000***
firm’s size has a 1% significant negative impact on
Salesgrowth -0.00412 -0.87994 0.3792 dependent variable (ROA) coefficients (1.832152) at (t=-
2.628885, p=0.008800). The impact between Age and
N 625 ROA is significant at the level of 10 % on value (coef. =-
R sq 0.235131 1.938045, t=-2.400650 and p=0.016700). Leverage has
Adj-R sq 0.223938 the significant positive impact on ROA with the value of
F-value 21.00657 (coef. =19.420990, t=12.857350 and p=0.000000) at the
Note: *Sig. at 0.1, **Sig. at 0.05; ***Sig. at 0.01 significant level of 1%. Sales growth has no impact on
ROA and has a negative value of (coef. =-0.004116, t=-
Table 5: Results of panel regression 0.879937 and p=0.379200). The constant value has a
Panel B: Tobin's Q (Dependent Variable) positive significant impact on ROA with the value of
Variable Coefficient t – value p – value
(coef. =19.541810, 3.299671 and 0.001000 at the
Constant 9.42354 3.651776 0.0003***
significant level of 1%. The value of N indicates the
CSR 0.0000 0.077706 0.9381
Firmsize -1.91384 -5.2199 0.000*** number of total observation in the analysis that is 625.
Age -0.16006 -0.55903 0.5764 The values of R sq, Adj-R sq and F-value are 0.235131,
Leverage 1.628171 3.208163 0.0014*** 0.223938 and 21.006570 respectively. However, in
Salesgrowth 0.000126 0.292115 0.7703 selected companies CSR has an impact on ROA at (coef.
=0.000005, t=1.638525 and p=0.101800). Hence the
N 625 theory H0 is proved for the selected companies that there
R sq 0.659346 is no significant impact of CSR activities on small tenure
Adj-R sq 0.57057 prosperity as calculated by the return on assets at the level
F-value 7.427049 of 5% (.05). But CSR has a significant impact at the level
*Sig. at 0.1, **Sig. at 0.05; ***Sig. at 0.01
of 10% on ROA.
Singh (2014) investigated in his study; there was
Hausman analysis lowest impact of CSR on the financial performance of
The Hausman test is applied to check which model is companies in small phase measured as return on assets in
suitable to accept. It is used to find that random effect the business of crude petroleum. The impact of CSR was
model is appropriate or fixed effect model while using negative on return on assets for the industry of Mining
ROA as dependent variable. According to table value Metal. But the CSR has positive impact on firm’s
(p<.5), fixed effect model is suitable for application on financial performance of pharmaceutical industry.
ROA. The Hausman test is also applied to check which
model is suitable to accept. It is used to find that random Panel B: Tobin's Q
effect model is appropriate or fixed effect model while The table and the interpretation of Results of Panel
using Tobin’s as dependent variable. According to table Regression with whole Sample on Dependent Variable
value (p<.5), fixed effect model is suitable for application (TOBIN Q) of all the Companies over a Period from
on Tobin’s Q. 2009-2013 is described as below (Table 5).
Panel B of table 5 shows the results of linear
Regression analysis regression performed on the whole selected companies’
Table 4 and 5 display the outcome obtained after data for Tobin’s Q. The data reveals that the independent
performing a regression analysis on the whole sample data variable CSR has no impact on Tobin’s Q at the value of
for all the companies over a period from 2009-2013. (coef. =0.0000003, t=0.077706 and p=0.938100) for all
the companies. Firm size has a significant negative impact
Panel A: Roa on Tobin’s Q at the value of (coef. =-1.913841, t= -
The table and the explanation of Panel Regression 5.219896 and p=0.000000) at the significant level 1%.
with Whole Sample on Dependent Variable (ROA) of all The variable Age has no impact on Tobin’s Q at the value
the Companies over a Period from 2009-2013 is of (coef. =-0.160058, t=-0.559025 and p=0.576400).
described. below (Table 4). Tobin’s Q has been influenced by the leverage value

37
 Inter J Ling Soc Nat Sci, 2015, 1(1): 33-39.

(coef. =1.628171, t=3.208163and p=0.001400) at the REFERENCES

significant level of 1%. Similarly, as ROA, sales growth
has no impact on Tobin’s Q but has a positive value of Al‐Khater and Naser, 2003. Impact of corporate social
(coef. =0.000126, t=0.292115 and p=0.770300). The responsibility on financial performance of
constant value has positive significant impact on Tobin’s corporations: Evidence from Pakistan: International
Q with the value of (coef. =9.423540, 3.651776 and Journal of Learning and Development, 2: Pages-107.
0.000300) at the significant level of 1%. The value of N Ali I, Rehman, KU, Yilmaz, AK, Nazir S, & Ali, JF 2010.
indicates the number of total observation in the analysis, Effects of corporate social responsibility on consumer
that is 625. The values of R sq, Adj-R sq and F-value are retention in cellular industry of Pakistan: Afric J
0.659346, 0.570570 and 7.427049 respectively. Busin Manag, 4: 475-485.
According to hypothesis 2, it is anticipated to have a Angelidis JP, Ibrahim NA, 1993. Social demand and
significant positive effect of CSR on the financial corporate strategy: a corporate social responsibility
performance of companies in long term. But our results model‘, Rev Bus, 15: (summer/fall), 7–10.
suggest that CSR has no impact with Tobin’s Q of all Bauman, CW, & Skitka, LJ 2012. Corporate social
selected firms. responsibility as a source of employee
Singh (2014) investigated in his study; there was no satisfaction: Research in Organizational Behavior, 32:
impact of CSR activities on the economic performance of 63-86.
firms in long term measured as Tobin’s Q in the industry Bear S, Rahman N & Post C 2010. The impact of board
of mining metal and crude petroleum but positive impact diversity and gender composition on corporate social
was for the company of pharmaceutical. responsibility and firm reputation: J Busin Ethic, 97:
207-221.
Conclusion and limitation Bradshaw Thornton and David Vogal, 1981, Corporations
For many years, companies are under pressure to and their Critics: Issues and answers to the problems
engage in CSR. To examine the influence of CSR on the of corporate social responsibility, New York,
McGraw Hill Book Company.
company’s financial performance, publicly-listed
Carroll AB 1997. The Pyramid of Corporate Social
companies have been selected from Karachi Stock
Responsibility: Toward the Moral Management of
Exchange. The effect of corporate social responsibility on
Organizational Stakeholders. Busin Horiz, 34: 39-48.
the firm’s financial performance is evaluated both in Coffey BS & Wang J 1998. Board diversity and
short-term period and long-term circumstances. The social managerial control as predictors of corporate social
responsibility of companies is measured in the study as performance: J Busin Ethic, 17: 1595-1603.
the summation of the donation and environmental cost, Davis 1993. Is the socially responsible corporation a
which is clearly mentioned in value added statements, myth? The good, the bad, and the ugly of corporate
core values and other statements in the annual reports. social responsibility: The Academy of Management
The firm’s financial performance is measured by two Perspectives, 23: 44-56.
variable ROA and Tobin’s Q. The variable ROA is used Doane 2005. Is the socially responsible corporation a
to find the financial performance of companies in the myth? The good, the bad, and the ugly of corporate
short term period. And the variable Tobin’s Q is used to social responsibility: The Academy of Management
find the financial performance of companies in the long Perspectives, 23: 44-56.
term. Panel regression analysis is used to evaluate the Dianita PS 2011. Analysis of the Effect of Corporate
sample data for the time period of 2009-2013. The control Social Responsibility on Financial Performance with
variables which are used such as firm’s size, age of the Earnings Management as a Moderating Variable: J
companies, leverage and sales growth to validate the Accoun Audit, 7: 1034-1045.
impact of CSR. Enderle and Tavis 1998. A longitudinal study of corporate
The results obtained from this study advocate that the social reporting in Singapore: The case of the
effect of corporate social responsibility on financial banking, food and beverages and hotel
performance of companies in short term scenario is not industries", Accoun, Audit Accountab J, 11: 624-635.
positively significant at the level of 5%, which support the Kanwal, M, Khanam, F, Nasreen, S, Hameed, S 2013. The
hypothesis 1(H0) and reject the alternative hypothesis impact of corporate social responsibility on firm’s
financial performance.
(H1). But the CSR is positively significant on firm’s
Khalid A & Fares J 2012. Corporate Social Responsibility
financial performance at the level of 10%. The results of
associated with Customer Satisfaction and Financial
this study suggest that CSR has no impact on Tobin’s Q in
Performance a Case study with Housing Banks in
the scenario of long term which rejects the H2 and support Jordan. Inter J Humanit Soc Sci, 2, No 15: August
to H02 (hypothesis). The impact of CSR on other control 2012.
variable such as leverage and sales growth is positive. The Kotler P, Nancy L 2005. Corporate Social Responsibility:
results of our study are almost parallel to the study of Doing the Most Good for Your Company and Your
(Singh, 2014) and deviate from the study of Kanwal et al. Cause. New York: John Wiley & Sons
(2013), Sarwar et al (2012), Khalid et al. (2012) and the Lord Holme and Richard Watts, 2007. Making Good
Rapti and Medda (2010). Business Sense" The World Business Council for
The sample size and data source of this study is Sustainable Development. See at:
limited. In this study there is only nominal five years http://www.mallenbaker.net/csr/definition.php (12-2-
observation included for the purpose of sampling data. 2010)

38
 Inter J Ling Soc Nat Sci, 2015, 1(1): 33-39.

Mazurkiewicz, P 2004. Corporate environmental Rapti E & Medda F 2010. Corporate Social Responsibility
responsibility: Is a common CSR framework and Financial Performance in the Airport Industry.
possible. World Bank, Sarwar A, Zahid I & Ikram H 2012. Corporate Social
McGuire JB, Sundgren, A, & Schneeweis, T 1988. Responsibility and Financial Performance linkage
Corporate social responsibility and firm \financial evidence from the Banking Sector of Bangladesh:
performance. Academy of management Journal, 31: Journal of Organizational Management Page 14-21.
854-872. Singh, S 2014. Impact of corporate social responsibility
Moir L 2001. What do we mean by corporate social disclosure on the financial performance of firms in
responsibility? Corporate Governance, 1: 16-22. UK.
Pirsch J, Gupta S & Grau SL 2007. A framework for Waheed Ambreen, 2005 Evaluation of state of corporate
understanding corporate social responsibility social responsibility in Pakistan and strategy for
programs as a continuum: An exploratory study. J implementation, responsible business initiatives,
Busin Ethic, 70: 125-140. Islamabad.

39

View publication stats