Impact of Corporate Social Responsibility on Corporate Financial Performance in Consumer Goods Industry of India

This study investigates the impact of Corporate Social Responsibility (CSR) on Corporate Financial Performance (CFP) in the consumer goods industry of India. The study uses secondary data and measures CSR using five dimensions. The results reveal a positive impact of CSR on ROA and ROE, but no significant impact on EPS.

50 Amity Global Business Review February
Impact of Corporate Social Responsibility on Corporate
Financial Performance: A Study Of The Consumer
Goods Industry of India
Uzma Amin Mir & Farooq Ahmad Shah
Corporate social responsibility (CSR) is a self-regulatory mechanism whereby a business monitors
and ensures its active compliance with the socio-ethical standards and international norms. A firm’s
implementation of CSR goes beyond legal compliance and it involves actions that appear to further
some social good, above the interests of the firm. Companies aim to embrace social responsibility in
corporate actions and encourage their positive impact on the environment and stakeholders including
customers, employees, investors and communities. Realizing the significance of CSR initiatives in social
development, India is the first country to have declared 2% of the company’s average net profits as a
mandatory spending on CSR initiatives with effect from April 1, 2014.
The last few decades have seen an increasing focus of the companies on fulfilling their social obligations. This
has led to the emergence of CSR as a widely researched area at the global level. Further, the relationship
between CSR and the financial performance of the companies is an area that has been extensively studied
by researchers all over the world. As the main aim of an organisation is to make profits, researchers
have attempted to find the impact of CSR spending on the Financial Performance, i.e. if it is a cost or an
investment for the organisation. Even though an extensive research has been conducted in the area, the
relationship between the two variables in hotel industry of India is yet to be investigated. This research,
therefore, aims to study the impact of CSR (measured as the total of five CSR dimensions) on the Corporate
Financial Performance (measured using ROA, ROE, EPS) in the consumer goods companies of India after
controlling for the effect of other variables (Age, Size and Leverage) on financial performance. The data for
the study has been collected from secondary sources, mainly consisting of the official published reports
of the companies included in the study. Descriptive statistics, correlations and regression and have been
used to analyze the data. The results reveal a significant positive impact of ROA and ROE on CSR. Also,
CSR does not have any significant impact on EPS.
Keywords: Corporate Social Responsibility, Financial Performance.
Introduction
Traditionally, a business focused mainly on
increasing its profits and a business was said to be
socially accountable if it produces goods and renders
services for profit maximisation which was considered
to be the sole aim of a business. Gradually, companies
realised that focussing only on profit maximisation is
not adequate to sustain in the changing world. This
led to the modern concept of social accountability
known as CSR (Corporate Social Responsibility).
According to Carroll (1979), the modern era of CSR
started with Howard R. Bowen’s publication “Social
Responsibilitiesof Businessman”in 1953. Bowen
(1953) was the first to comprehensivelydiscuss
social responsibility and business ethics and laid a
foundation for business executives and academicians
alike to consider them in managerial decision-making
and strategic planning.
Business for Social Responsibility (BSR) defines CSR
as “achieving commercial success in ways that honour
ethical values and respect people, communities, and
the natural environment.” McWilliams and Siegel
(2000) describe CSR as “actions that appear to further
some social good, beyond the interest of the firm and
that which is required by law.” The Commission of
European Communities (2002) defines CSR as “A
concept whereby companiesintegratesocial and
environment concerns in their business operations
and in their interaction with their stakeholders on a
voluntary basis, as they are increasingly aware that
responsible behaviour leads to sustainable business
success”.
From the perspective of a firm seeking profit, benefits
and implications of investments in socially responsible
activities have tom be taken into consideration. This
is studied in the form of organisational performance,
particularly financial performance. CSR spending
by a firm should enhance its triple bottom line,
otherwise such investment may not be considered
beneficial for the company in the long run. For
this purpose, the relationship between Corporate
Department of Management Studies, Central University of Kashmir, Kashmir

2018 51
Social Responsibility (CSR) and Corporate Financial
Performance (CFP) needs to be established i.e. does
socially responsible behaviour by a company lead to
an improved financial performance or not.
Literature Review
The basic problem that needs to be addressed
is whether firms actively participatingin CSR
outperform firms that do not exhibit the same
degree of social participation (Lee & Park, 2009;
McWilliams & Siegel, 2001).Critics of CSR argue
that the responsibility of a business is to carry out its
operations in accordance to its desires, which mainly
is maximising profits (Friedman, 1970). Furthermore,
investing in CSR could lead agency problems as
the corporate resources or the profits are used by
the managers for pursuing socially responsible
activities instead of maximising the shareholder’s
wealth (Brammer & Millington, 2008). Scholars in
support of CSR have proposed CSR as a source of
competitiveadvantage(Porter & Kramer, 2006).
CSR has been shown to be positively affecting firm
reputation (Brammer & Millington, 2005; Turban
&Greening,1996),consumersatisfaction(Luo &
Bhattacharya, 2006), attractiveness of a firm as an
employer (Backhaus, Stone, & Heiner, 2002; Turban
& Greening, 1996), and organizational commitment
among employees (Peterson, 2004).
In spite of the empirical evidence demonstrating
the positive relationship between CSR and various
aspects of firm performance, the results still remain
inconclusive (Godfrey & Hatch, 2007; Margolis &
Walsh, 2003; McWilliams & Siegel, 2000). Corporate
Financial Performancehas been measured in
terms of company’s market value or the short-
term profitability of the firm (Schuler & Cording,
2006).The literaturerelating the CSR-CFP link
has revealed mixed set of results which includes
positive, negative and neutral relationships;
thereby revealing lack of agreement on whether
or not increased CSR spending leads to improved
CFP (Margolis & Walsh, 2003; McWilliams &
Siegel, 2000).
Various researchers have found a negative
relationship between CSR and CFP following that
increased CSR spending involves costs and these
costs deplete the profits meaning a negative impact
on the profitability of the firm (Moore, 2001; Vance,
1975; Wright and Ferris, 1997). Scholars like Preston
and O’Bannon 1997; Ruf et al. 2001; Russo and Fouts
1997; Simpson and Kohers 2002; Tsoutsoura (2004);
Waddock and Graves (1997) have shown CSR and
CFP to have a positive relationship. They propose
that if organisationsexhibit socially responsible
activities,then the financial performanceshows
a significant increase. Also, increased social
involvement creates a favourable public image for
the company (Krishna, 1992; Rashid and Ibrahim,
2002). Customers prefer to buy from a company
with a positive public image and one which is
socially responsible (Creyer and William 1997; Mohr
and Webb 2005). Inconclusive relation between CSR
and CFP has been found by Abbott and Monsen
(1979), Griffin and Mahon (1997), and McWilliams
and Siegel (2000). They found that there is no effect
of improved CSR bon CFP of the firm. Ullmann
(1985) stated that the relationship between CSR and
CFP does not exist as there are many intervening
variables between the CSR-CFP relationships.
Moskowitz (1972)studied the CSR-CFP link by
studying 14 firms. He studied the social performance
of these firms and notices that these firms exhibited
a 7.28 percent increase in the stock price over a
period of six months. The findings reveal that firms
that exhibit socially responsiblebehaviour show
a positive relationshipbetween CSR and CFP.
However, Moskowitz did not mention the criteria
for selectingthese 14 firms. Later, Vance (1975)
studied the market performanceof the same 14
firms for a period of 3 years i.e. 1972-1975 and found
that the stock price of all the 14 firms declined thus
establishing a negative relation between CSR and
market value of the firms.
Abbott and Monsen (1979) studied 450 firms out
of the Fortune 500 firms to study the impact of
CSR on the investor’s return. CSR was measured
by developing SID (Social Development Index) for
these firms for the year 1974. SID was generated
by applying content analysis on the annual reports
of the firms for that particular year. The results
revealed that there exists no association between the
variables under study.
Ullmann (1985) examined the work done by other
researchers on the CSR and economic performance
link. Among the 13 reviews, 8 were found to have
a positive relationship, 4 showed no association and
only one revealed a negative relation between the
variables. This variation in results may be due to
lack in theory, inappropriate sample size, different
methods used for CSR measurement. Also, proper
Uzma Amin Mir & Farooq Ahmad Shah

52 Amity Global Business Review February
control variables like size, leverage, risk, industry,
etc. have not been included to control for the effects
of the additional variables.
Griffin and Mohan (1997) studied seven companies
of chemical industry to examine the CSR-CFP
relation. CFP was measured using ROA (Return
in Assets), ROE (Return on Equity), ROS (Return
on Sales), Assets age and Total assets. The data
for Corporate Social Responsibility was obtained
from Fortune reputation survey, Toxic Release
Inventory (TRI) index, Kinder, LyndenbergDomini
& Co. (KLD) index and CorporatePhilanthropy. The
results reveal a positive relation between CSR and
CFP when Fortune and KLD measures of CSR were
used. However CSR and CFP showed no association
when TRI and Corporate Philanthropy measured
were used. These results reveal that the choice of
CSR measures has an impact on the relationship
between the two variables.
Inoue and Lee (2001) have attempted to disaggregate
CSR dimension-wise based on corporate voluntary
activities for five primary stakeholders.The five
dimensionsused are: employee relations,product
quality, community relations, environment and
diversity. The effect of each of these dimensions
on financial performance of firms among the four
tourism-related industries (airline, casino, hotel, and
restaurant) has been studied. The results have revealed
a positive impact of all the five CSR dimensions on
the financial performance of the firms.
Aggarwal (2013) has attempted to assess the relation
between CSR and FP (Financial Performance). To
measure FP, both market- based measures (PE Ratio
and Beta) and accounting-based measures (ROA and
ROE) have been considered. CRISIL’s ESG index
has been used to measure CSR. Data for a period of
five years i.e. 2008 to 2012 has been collected. Her
findings reveal that there is no significant association
between the variables under study.
Govindrajan and Amilan (2013) have studied
the CSR-CFP link in the oil and gas products
industry in India consisting of 12 companies. The
analysis was done for a period of four years i.e.
from 2007 to 2010. CSR has been measured using
three parametersi.e. Karmayog ratings;NGO
ratings for companies exhibiting CSR activities;
the amount of CSR spend and the focus area of
CSR. EPS (Earnings per Share) has been used as
a measure of Financial Performance. The findings
demonstrate a positiveimpact of CSR initiatives
on EPS.
Yang and Baasandorj (2017) analyses the impact
of CSR on the Financial Performance of low-cost
carriers (LCC) and full-service air carriers (FSC). The
period under study is from 2006 to 2015. Panel data
analysis has been used to study the impact. FSC’s
show an improved financial performance with an
increase in environmentaland social activities.
LCC’s show an increase in the financial performance
with an increased firm size and environmental CSR
activities. Also, firm age shows a significant negative
influence in LCCs, while leverage shows a mixed
influence in FSCs. It means that increased CSR lead
to an increasein current and expectedfinancial
performance for FSCs and LCCs, respectively.
To explain the inconclusive results of the CSR-CFP
link over time, the researches have tried to identify
the methodologicalissues in the studied trying
to establish the CSR-CFP link (Godfrey & Hatch,
2007; Griffin & Mahon, 1997; Margolis & Walsh,
2003; McWilliams & Siegel, 2000). Godfrey & Hatch
(2007) identified three main issues: the use of multi-
industry sample, cross-sectional observations and
the aggregationof various CSR dimensions.For
these reasons, it has been suggested that a long-
term relation between the two variables within a
single industry using disaggregated CSR measures
should be studied. Keeping this in view, this study
has employed different CSR dimensions to study
the CSR-CFP link in the consumer goods industry in
India. This study proposed that CSR can be divided
into five different dimensions i.e. Community &
Society, Environmentalcontribution,Employees,
Customer Relation & Product Contributionand
Others (Includes investors, legal and ethical
dimensions).
Objectives of the Study
To study the impact of Corporate Social Responsibility
onCorporate Financial Performance of the consumer
goods sector in India.
To study the relation of the CSR dimensions i.e.
Community & Society, Environmental contribution,
Employees, Customer Relation & Product
Contribution and Others (Includes investors,legal
and ethical dimensions) with Financial performance
(measured by ROA-Return on Assets; ROE- Return
on Equity and EPS-Earningsper Share) of the
companies under study.

2018 53
Research Methodology
Sample
To study the relationship between the variables,
15 consumer goods companies have been selected.
These companiesare a part of Nifty 100 Index
(based on market capitalisation). Out of these 15,
only 13 form a part of the sample as the data for the
remaining 2 was not available. These 13 consumer
goods companies are represented below in Table 1:
Table 1: Sample of the Study
Sample for the Study
Asian Paints Ltd. Hindustan Unilever Ltd.
Britannia Industries Ltd. I T C Ltd.
Colgate Palmolive (India)
Ltd.
Marico Ltd.
Dabur India Ltd. Titan Company Ltd
Emami Ltd. United Breweries Ltd
Godrej Consumer Products
Ltd.
United Spirits Ltd.
Havells India Ltd
Variables
CSR (Corporate Social Responsibility): In
accordance with Kim et al. (2014), Seo et al.
(2015) and Ding et al. (2016), CSR scoreshave
been used to study its impact on financial
performance. The CSR score includes the total
score of all the CSR dimensions i.e. Community &
Society, Environmental contribution, Employees,
Customer Relation & Product Contribution and
Others (Includes investors, legal and ethical
dimensions).
Financial Performance: Accounting-based
measures i.e. ROA (Return on Assets), ROE
(Return on Equity) and market-based measure
i.e. EPS (Earnings per Share) have been used
to measure financial performance. Accounting-
based measures indicate a firm’s current
financial performance, whereas market-based
measurements indicate market expectation of
future financial performance (McGuire et al.,
1988).
In accordance with Roberts and Dowling (2002),
Guenster et al. (2011) and (Gama Boaventura et
al., 2012), ROA and ROEhave been selected as the
accounting-based measures to indicate a firm’s
financial performance and profitability toward
corporate social performance. Eq. (1) presents
the ROA calculation formula:
ROA = Net Profit (1)
Total Assets
Eq (2), given below presents the ROE calculation
formula:
ROE= Net Income (2)
Shareholder’s equity
Also, Govindrajan and Amilan (2013) have been
referred to in selecting EPS as the market-based
measure of financial performance. Eq. (3) denotes
the EPS calculation formula:
EPS = (Net Income - Preferred Dividends)(3)
Number of Common Shares Outstanding
Control Variables: The effects of the following
variables on financial performance has been
controlled for in this study:
Firm Size: Firm size show a positive influence
towards CSR participation (Kim et al., 2014)
i.e. large firms are more likely to employ CSR
initiatives than small firms (Luo & Bhattacharya,
2006; McWilliams & Siegel, 2001; Waddock &
Graves, 1997). For a majority of firms, firm size
causes a significant positive increase in corporate
profit (Roberts and Dowling, 2002). Following
Kim et al. (2014); Chen and Gavious (2015); Seo
et al. (2015), and Ding et al. (2016), firm size
has been selected to identify the causal effect
toward financial performance. Previous research
has also established a significant influence of
firm size onfinancial performance, though no
agreement appears to the direction of its effects
(e.g., Hillman & Keim, 2001; Kang et al., 2010;
Waddock & Graves, 1997). Relying on Previous
literature (e.g., Hillman & Keim, 2001; Lee & Park,
2009; Waddock & Graves, 1997), Size has been
operationalised as the log of the total assets.
Leverage: Leverage is the defined as the ratio
of total liabilities to total assets. This has been
introduced into the model by McWilliams &
Siegel, 2000; Waddock & Graves, 1997. It has
also been used as a control variable by Kim et al.
(2014); Seo et al. (2015); Chen and Gavious (2015),
and Ding et al. (2016) as it controls for the effect
of firm specific capital structure. Leverage affects
Uzma Amin Mir & Farooq Ahmad Shah

54 Amity Global Business Review February
the CSR-CFP link as high leverage firms (high
risk tolerant firms) may behave differently than
low risk tolerant firms in terms of CSR investment
because of different levels of risks involved in
CSR investment (Waddock & Graves, 1997).
Age of the firm: Firm’s age also influences the
CSR-CFP link as given by Saeidi et al. (2015)
and has therefore been incorporated as one of
the control variables.
Data Collection
Data for this study has been collected from secondary
sources. The data has been collected for a period
of 10 years from 2006-07 to 2015-16 with 130 firm-
year observations.To measure CorporateSocial
Responsibility, a CSR measurement scale consisting
of 62 items has been formulated for this purpose.
To collect data using this scale, the technique of
content analysis has been used. Content analysis
of the annual reports, sustainability reports, CSR
reports and other published data of the companies
under study has been done. Content analysis is the
attributionof the incidence of an event as indicated
by the mention of the event under question in the
literary document that constitutesthe raw data
(Abbott and Monsen 1979). But one of the limitations
of using this method is that it does not give any
priority to the information items which have been
given more importance by the company (Gray et
al. 1995). The CSR scoring procedure adopted is in
accordance with Ernst and Ernst (1978)and Abbott
and Monsen (1979) wherein an item if disclosed is
scored one and an item not disclosed is given a zero.
In this scoring technique, all the CSR items across all
the dimensions get an equal importance i.e. equal
weightage. The final CSR is calculated using the
following formula:
CSR Score of a company = No. of CSR items adopted by a Company×100
(In percentage) Total no. of items in the CSR
Measurement instrument
Further, secondary data for Financial Performance measures and control variables has been collected from
Capitaline which is a digital corporate financial database for Indian listed companies.
Proposed Model for the study:
CSR Dimensions: CFP Measures: Control Variables:

2018 55
Analysis
In accordance withKapoor, S. & Sandhu, H.S. (2010)
and Inoue, H. & Lee, S. (2011), descriptive analysis,
correlation and OLS regression analysis has been
used to analyse the data to determine the relation
between the variables.The relationshipbetween
CSR and the accounting-based measure i.e. ROA
(Return on Assets) and ROE (Return on Equity) can
be analysed using Eq.(3) and Eq (4):
ROAit= α0 +α1CSRit*+ α2 SIZEit + α3LEVit + α4 AGE
it + εit (3)
ROEit= α0 + α1CSRit*+ α2 SIZEit + α3LEVit + α4 AGE
it + εit (4)
Similarly, for the market-basedmeasure of the
financial performance i.e. EPS (Earnings per
Share), Eq. (5) has been developed to analyse the
relation between CSR and EPS. The equation can be
represented as follows:
EPSit = β0 +β1 CSRit*+ β2 SIZEit + β3 LE Vit +β4AG
E it + μit (5)
where, ROAitrepresents Return on Assets i.e. the
financial performanceof the company attime t;
ROE itrepresents Return on Assets i.e. the financial
performanceof the company at time t ; EPS it
representsEarningsper Share i.e. the Corporate
financial performance of the company at time t CSR
it* represents the total CSR score of company at time
t [Total CSR score is the sum of the scores of the 5
dimensions of CSR used in the study i.e.Community
& Society, Environmental contribution, Employees,
Customer Relation & Product Contributionand
Others (Includes investors, legal and ethical
dimensions)]; SIZEitrepresents the log of the total
assets of the company at time t; LEVitrepresents the
ratio of total liabilities over the total asset of company
at time t; AGEitrepresents the age of the company at
time t;it and μ it signifies the error terms of company
at time t for the models. The sub-variables for CSR
include C&Sitwhich denotes the total Community
& Society score of the company at time t; ECit
denotes the total Environmental Contribution score
of the company at time t; EMPit denotes the total
Employees score of the company at time t; CR&PC
it denotes the total of Customer Relation & Product
Contribution dimension of company at time t and
OTH it denotes the total of the others dimension of
company at time t.
Results and Discussions:
Primarily, the normality of the data has been
examined using skewness and kurtosis measures.
The data was found to be approximately normal
except for EPS which was positively skewed. To
correct this, the natural logarithm transformation
was conducted, and the improvement of the
normality of the variable was confirmed (Hair et al.
2005 & Malhotra. 2007). The final data as shown in
Table 2 revealed the values between +1.96 and -1.96
for skewness (Kline, 2015) and between +3 and -3
for kurtosis (DeCarlo, 1997). These values reveal
that the data is normal and further analysis can be
conducted on it.
After this, the basic assumptionsfor regression
have been checked including normality, linearity,
homoscedasticity and multicollinearity have been
checked and successfully met. Normality has been
checked using kurtosis and skewnessmeasures.
Linearity has been checked using partial regression
plots. For multicollinearity the correlation matrix
has been checkedfor values above 0.7 amongst
the dependent variables, but as all the values were
found to be below 0.7, the issue of multicollinearity
did not exist. Also, to check the assumptionof
homoscedasticityBreusch-Pagantest (Breusch&
Pagan, 1979)and Koenker test have been used,
proving that the assumption holds true.
Descriptive Statistics:
Table 2 presentsthe descriptivestatisticsof the
variables under study. The table reveals that all the
five CSR dimensions have a mean score in the range
of 2.60 to 2.65 with the total CSR mean being 2.62
for the 13 companies under study. Also, the average
age of these 13 companies are 45.73 and the average
size being 4.26. Also, the respective kurtosis and
skewness values for the variables under study have
been given in the table.
Uzma Amin Mir & Farooq Ahmad Shah

56 Amity Global Business Review February
N=130 Mean Standard Deviation Skewness Kurtosis
C&S
EC
EMP
CR&PC
OTH
CSR
ROA
ROE
EPS
SIZE
LEV
AGE
2.60 0.024 -0.025 -0.725
2.60 0.026 0.323 -0.666
2.63 0.012 0.144 -0.956
2.64 0.011 0.295 -0.588
2.65 0.012 -0.341 -1.093
2.62 0.015 0.144 -1.001
2.57 0.011 -0.164 2.111
2.60 0.033 1.346 1.562
2.58 0.025 1.333 2.894
4.26 0.478 0.377 0.068
2.55 0.000 0.973 -0.330
45.73 31.48 0.518 -1.249
Pearson Correlation
Table 3: Correlation matrix
N=130 CS EC EMP CRPC OTH CSR ROA ROE EPS SIZE LEV AGE
CS 1
EC .745** 1
EMP .694** .689** 1
CRPC .392** .372** .449** 1
OTH .577** .555** .755** .508** 1
CSR .911** .901** .859** .531** .744** 1
ROA .173* .158 .083 -.041 .169 .158 1
ROE .014 -.053 -.097 -.168 .018 -.048 .830** 1
EPS -.321** -.224* -.266** -.058 -.014 -.271** .112 .103 1
SIZE .455** .574** .486** .104 .421** .549** -.288** -.424** -.069 1
LEV -.311** -.373** -.236** -.305** -.393** -.380** -.629** -.346** -.146 -.075 1
AGE .140 .302** .088 -.073 .378** .222* .501** .387** .286** .209* -.552** 1
**Correlation is significant at the 0.01 level (2-tailed).
*Correlation is significant at the 0.05 level (2-tailed).
Table 3 shows the pair-wise correlationfor the
variables under study. The results reveal that ROA
has a significant positive relation with Community
& Society dimension of CSR at significance level 0.05.
Further ROE does not show any significant relation
with any of the CSR. On the other hand, EPS shows
a significant positive correlation with Community
& Society, Employees,at 0.01 significancelevel
and with Environmental Contribution at 0.05
significance level. Also, the overall CSR shows a
significantpositive correlationwith EPS at 0.01
significance level. This may be due to the fact that
the control variables i.e. leverage, age and size all
show a positive correlation with ROA and ROE.
Regression analysis
Tables 4.1, 4.2 and 4.3 show the results of OLS
regressionfor the three dependentvariablesi.e.
ROA, ROE and EPS respectively.
In Table 4.1, the analysis reveals that the independent
variables significantly explain a considerable portion
of the variation in ROA as the value for adjusted R2
is 0.586 i.e. 58.6% of the variation is explained by
the independent variable i.e. CSR. Out of the three
control variables used, two i.e. Size and Leverage
having t-values of -7.085 and -5.414 respectively,
have significant negative effects on the predicted
variable. On the other hand, age has a significant
positive impact on the outcome variable.
Similarly, the results shown in Table 4.2 reveal that
the Adjusted R2 for the model is .429 i.e. 42.9% of the
variation in ROE is substantially explained by CSR.
Here, Size and Leverage having t-values -7.253 and
-5.414 have a significant negative and Age having
t-value of 4.829 has a significant positive impact on
the variation in the outcome variable.

2018 57
To check the model for EPS, the results have been
shown in Table 4.3. According to the results, CSR
does not substantiallyexplain the variation in
EPS as the Adjusted R2 for the model is only .192
showing that only 19.2% variation in EPS is due to
CSR. Also, the t-value of -4.338 shows a significant
negative impact of CSR on EPS. Age, which has a
t-value of 2.822, shows a significant positive impact
on the variation in EPS.
Table 4.1, 4.2, and 4.3: OLS regression analysis
ROA (N=130) ROA it= α0 + α1CSRit*+ α2 SIZEit +
α3LEVit +α4 AGE it +εit
CSR SIZE LEV AGE
Coefficients
t-value
Adj R2 = 0.586
F-Value=46.69
0.206 -0.501 -0.403 0.337
2.756** -7.085*** -5.414*** 4.829***
ROE (N=130) ROA it= α0 + α1CSRit*+ α2 SIZEit +
α3LEVit +α4 AGE it +εit
CSR SIZE LEV AGE
Coefficients
t-value
Adj R2 = 0.429
F-Value = 25.24
0.151 -0.603 -0.099 0.425
1.721* -7.253*** -1.132** 5.179***
EPS (N=130) ROA it= α0 +α1CSRit*+ α2 SIZEit +
α3LEVit +α4 AGE it +εit
CSR SIZE LEV AGE
Coefficients
t-value
Adj R2 = 0.192
F-Value=8.665
0.453 0.111 -0.159 0.275
-4.338*** 1.119 -1.526* 2.822**
*, ** and ***, represent significance level of 0.05, 0.01 and 0.001
respectively.
Conclusion
In accordance with the results, it may be concluded
that if a firm is more socially responsible,i.e.
exhibits an increase in CSR spending, there is an
increase in the profitability of the firm as there is a
positive association between CSR and ROA & ROE.
Also, there is an interference of other variables like
age which explain the variation in the outcome
variables.It may also be noted that CSR has a
minimal association with EPS, which is a market-
based measure of firm performance. These results
reveal that, other variables in addition to ROA, ROE
and EPS have to be included in the model to explain
the CSR-CFP link in a better way.
Limitations and Suggestions for future
research
One of the main limitations of this study is that
equal weight (by assigning binary values) has
been given to each CSR item irrespective of the
importance given to it by the company. Further, a
small sample size of only 13 companies has been
used to study the CSR-CFP link. Future researchers
should consider extending the research by including
more firms to increase the robustness of the study.
Also future researchers may consider taking into
view the reverse causality effects of CSR-CFP link.
References
1. Abbott, W.F., & Monsen, J.R. (1979). On the Measurement
of Corporate Social Responsibility: Self- Reported Disclosure
as a Method of Measuring Corporate Social Involvement’.
Academy of Management Journal, 22(3), 501–515.
2. Aggarwal, M. (2013). Corporate social responsibility
and financial performance linkage evidence from Indian
companies. International Journal of Management and
Development Studies, Vol. 2 (7), 12-24.
3. Backhaus, K. B., Stone, B. A. & Heiner, K. (2002). Exploring
the relationship between corporate social performance and
employer attractiveness. Business & Society, 41, 292-318.
4. Breusch, T.S. & Pagan, A.R. (1979). A Simple Test for
Heteroscedasticity and Random Coefficient Variation.
Econometrical, 47(5), 1287-1294.
5. Chen, E. & Gavious, I. (2015). Does CSR have different value
implications for different shareholders? Finance Research
Letters, 14, 29–35.
6. Bowen, H. R. (1953). Social responsibilities of businessman.
New York: Harper & Row.
7. Brammer, S. & Millington, A. (2005). Corporate reputation
and philanthropy: an empirical analysis. Journal of Business
Ethics, 61, 29-44.
8. Brammer, S. & Millington, A. (2008). Does it pay to be
different? An analysis of the relationship between corporate
social and financial performance. Strategic Management
Journal, 29, 1325-1343.
9. Carroll, A. B. (1979). A three-dimensional model of corporate
social performance. Academy of Management Review, 4,
497-505.
10. Commission of the European Communities. (2002).
Communication from the Commission Concerning Corporate
Social Responsibility: A Business Contribution to Sustainable
Development.
11. Creyer, E. & T.R. William Jr. (1997). The Influence of Firm
Behaviour on Purchase Intention: Do Consumers Really Care
about Business Ethics? Journal of Consumer Marketing, 14(6),
421–32.
Uzma Amin Mir & Farooq Ahmad Shah

58 Amity Global Business Review February
12. DeCarlo, L.T. (1997). On the meaning and use of kurtosis.
Psychological methods, 2(3), 292.
13. Ding, D.K., Ferreria, C. & Wongchoti, U. (2016). Does it pay
to be different? Relative CSR and its impact on firm value.
International Review of Financial Analysis, 47, 86–98.
14. Ernst and Ernst. (1978). Social Responsibility Disclosure,1978
Survey. Ohio: Cleveland.
15. Friedman, M. (1970). Social responsibility of business is to
increase profit. The New York Times Magazine, 13, 122-126.
16. Gama Boaventura, J.M., da Silva, R.S. & Bandeira-de-Mello, R.
(2012). Corporate Financial Performance and Corporate Social
Performance: methodological development and the theoretical
contribution of empirical studies. Revista Contabilidade &
Finanças, 23, 232–245.
17. Godfrey, P. C. & Hatch, N. W. (2007). Researching corporate
social responsibility: An agenda for the 21st century. Journal
of Business Ethics, 70, 87-98.
18. Govindarajan, A.L. and Amilan, S. (2013). A Study on linkage
between Corporate Social Responsibility Initiatives with
Financial Performances: Analysis from Oil and Gas Products
Industry in India.Pacific Business Review International, Vol
6 (5), 81-93.
19. Gray, R., R. Kouhy and S. Lavers. 1995. Corporate Socialand
Environmental Reporting: A Review of theLiterature and a
Longitudinal Study of UK Disclosure. Accounting, Auditing
and Accountability, 8(2), 47–77.
20. Griffin, J.J. and J.F. Mahon. (1997). The Corporate Social
Performance and Corporate Financial Performance Debate:
Twenty-Five Years of Incomparable Research.Business and
Society, 36(1), 5–31.
21. Guenster, N., Bauer, R., Derwall, J. & Koedijk, K. (2011).
The economic value of corporate eco-efficiency. European
Financial Management, 17, 679–704.
22. Hair, J.F., Anderson, R.E., Tatham, R.L. & Black, W.C. (2005).
Multivariate Data Analysis. Delhi: Pearson Education Pte Ltd.
23. Hillman, A. J. & Keim, G. D. (2001). Shareholder value,
stakeholder management, and social issues: what’s the bottom
line? Strategic Management Journal, 22, 125-139.
24. Inoue, Y. & Lee, S. (2001). Effects of different dimensions
of corporate social responsibility on corporate financial
performance in tourism-related industries. Tourism
Management.
25. Kang, K. H., Lee, S. & Huh, C. (2010). Impacts of positive and
negative corporate social responsibility activities on company
performance in the tourism industry. International Journal
of Hospitality Management, 29(1), 72-82.
26. Kapoor, S. & Sandhu, H.S. (2010). Does it pay to be Socially
Responsible? An Empirical Examination of Impact of
CorporateSocial Responsibility on Financial Performance.
Global Business Review, 11(2), 185-208.
27. Kim, Y., Li, H. & Li, S. (2014). Corporate social responsibility
and stock price crash risk. Journal of Banking & Finance. 43,
1–13.
28. Kline, R. B. (2015). Principles and practice of structural
equation modelling. Guilford publications.
29. Krishna, C.G. (1992). Corporate Social Responsibility inIndia.
New Delhi: Mittal Publications.
30. Lee, S. & Park, S. (2009). Do socially responsible activities help
hotels and casinos achieve their financial goals? International
Journal of Hospitality Management, 28, 105-112.
31. Luo, X. & Bhattacharya, C. B. (2006). Corporate social
responsibility, customer satisfaction, and market value.
Journal of Marketing, 70, 1-18.
32. Malhotra, N.K. (2007). Marketing Research. Delhi: Pearson
Education, Inc.
33. Margolis, J. D. & Walsh, J. P. (2003). Misery loves companies:
rethinking social initiatives by business. Administrative
Science Quarterly, 48, 268-305.
34. McGuire, J.B., Sundgren, A. & Schneeweis, T. (1988). Corporate
social responsibility and firm financial performance. Academic
ManagementJournal, 31, 854–872.
35. McWilliams, A. & Siegel, D. (2000). Corporate social
responsibility and financial performance: Correlation or
misspecification? Strategic Management Journal, 21 (5), 603-
609.
36. McWilliams, A. & Siegel, D. (2001). Corporate social
responsibility: A theory of the firm perspective. Academy
of Management Review, 26(1), 117-127.
37. Mohr, L.A. &D.J. Webb. (2005). The Effects of Corporate Social
Responsibility and Price on Consumer Responses.Journal of
Consumer Affairs, 39(1), 121–47.
38. Moore, G. (2001). Corporate Social and Financial Performance:
An Investigation in the U.K. Supermarket Industry, Journal
of Business Ethics, 34(3/4), 299–315.
39.Moskowitz, M.R. (1972). Choosing Socially Responsible Stocks.
Business and Society Review, 1(1), 71–75.
40. Peterson, D. (2004). The relationship between perceptions
of corporate citizenship and organizational commitment.
Business and Society, 43(3), 296-319.
45. Porter, M. E. & Kramer, M. R. (2006). Strategy and society:
the link between competitive advantage and corporate social
responsibility. Harvard Business Review, 84(12), 78-92.
46. Preston, L.E. & Bannon. (1997). The Corporate Social-Financial
Performance Relationship: A Typology and Analysis.Business
& Society, 36(4), 419–29.
47. Rashid, Z.A. & Ibrahim, S. (2002). Executive and Management
Attitudes towards Corporate Social Responsibility in
Malaysia.Corporate Governance, 2(4), 10–16.
48. Roberts, P.W. & Dowling, G.R. (2002). Corporate reputation
and sustained superior financial performance. Strategic
Management Journal, 23, 1077–1093.
49. Ruf, B.M., Muralidhar, K., Brown R.M., Janney, J.J. &Paul,
K. (2001). An Empirical Investigation of the Relationship
between Change in Corporate Social Performance and
Financial Performance: A Stakeholder Theory Perspective.
Journal of Business Ethics, 32(2), 143–56.
50. Russo, M.V. & Fouts, P.A.(1997). A Resource-based Perspective
on Corporate Environmental Performance and Profitability.
Academy of Management Journal, 40(3), 534–59.

2018 59
51. Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. & Saaeidi, S.A.
(2015). How does corporate social responsibility contribute to
firm financial performance? The mediating role of competitive
advantage, reputation, and customer satisfaction. Journal of
Business Research, 68, 341–350.
52. Sankar, R. (2014). Impact of Corporate Social Responsibility
Initiatives on Financial Performance of Firms. Global Wisdom
Research Publications, 12, 39-45.
53. Schuler, D. A. & Cording, M. (2006). A corporate social
performance-corporate financial performance behavioural
model for consumers. Academy of Management Review,
31(3), 540-558.
54. Seo, K., Moon, J. & Lee, S. (2015). Synergy of corporate social
responsibility and service quality for airlines: the moderating
role of carrier type. Journal of Air Transport management,
47, 126–134.
55. Simpson, W.G & Kohers, T. (2002). The Link between Social
and Financial Performance: Evidence from Banking Industry.
Journal of Business Ethics, 35(2), 97–109.
56. Tsoutsoura, M. (2004). Corporate Social Responsibility and
Financial Performance.
57. Turban, D. B. & Greening, D. W. (1996). Corporate social
performance and organizational attractiveness to prospective
employees. Academy of Management Journal, 40(3), 658-672.
58. Ullmann, A.A. (1985). Data in Search of a Theory: A Critical
Examination of the Relationships among Social Performance,
Social Disclosure, and Economic Performance of U.S. firms.
The Academy of Management Review, 10(3), 540–57.
59. Vance, S. (1975).Are Socially Responsible Firms Good
Investments Risks? Management Review, 64(8), 18–24.
60. Waddock, S. A. & Graves, S. B. (1997). The corporate
social performance-financial performance link. Strategic
Management Journal, 18(4), 303-310.
61. Wright, P. &S.P. Ferris. (1997). Agency Conflict and Corporate
Strategy: The Effect of Divestment on Corporate Value.
Strategic Management Journal, 18(1), 77–83.
62.Yang, A. S. & Baasandorj, S. (2017).Exploring CSR and financial
performance of full-service and low-cost air carriers. Finance
Research Letters.
Uzma Amin Mir & Farooq Ahmad Shah

Copyright of Amity Global Business Review is the property of Amity International Business
School and its content may not be copied or emailed to multiple sites or posted to a listserv
without the copyright holder's express written permission. However, users may print,
download, or email articles for individual use.