Impact of Corporate Social Responsibility on Financial Performance: A Case Study of Etihad Airways

The report analyzes the impact of Corporate Social Responsibility on the financial performance of firms using Review of Literature. The case of Etihad Airways is analyzed to measure theoretical concepts with a practical example.

Running head: CSR
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Name of the Student
Name of the University
Author Note

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Executive Summary
The Corporate Social Responsibility can be taken to be a crucial part of an organization and any firm`s
engagement in the CSR activities would result in ensuring that they find sustainable success. Hence, the
main aim of the report has been to find the meaning of corporate social responsibility which will then be
followed by analyzing the impact of the corporate social responsibility on the financial performance of
the firms using Review of Literature. Lastly the case of Etihad airways was analyzed whereby it was
witnessed that due to its large number of activities, the financial performance of the firm has improved.
This was then followed by a conclusion.

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Table of Contents
Introduction.................................................................................................................................................3
Analysis........................................................................................................................................................3
Analysis of Literature..............................................................................................................................3
The CSR Activities of Etihad Airways.......................................................................................................5
Impact of its CSR on the financial performance of the firm....................................................................6
Conclusion...................................................................................................................................................6
References...................................................................................................................................................7

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Introduction
The Corporate Social Responsibility can be stated to be a management concept which is
essentially concerned with ensuring that the different companies as present in the business
environment integrate their social as well as environmental matters in order to ensure that they
contribute to the society along with fulfilling the needs of the different stakeholder’s at large (Cochran
& Wood, 1984). Through engaging in the different activities, an organization aims to strike a balance
between their consumption activities and their re-imbursement activities with respect to the society. In
addition to this, the firm also aims to ensure that there exists a balance with respect to shareholder as
well as stakeholder expectations and experience (Weber & Wasieleski, 2018). The main aim of the given
report is to highlight the impact of the Corporate Social responsibility Disclosure on the financial
performance of the firm. The methodology to achieve the objective will be to conduct a literature
review on the same which will then be followed by analyzing the performance of a firm based in UAE
named Etihad Airways through which the theoretical concepts can be measured with a practical
example.
Analysis
Analysis of Literature
According to Suliman, Al-Khatib and Thomas (2016), corporate social responsibility is known to
have a positive impact on the operations of an organization and even on the financial side. This is
because, a firm with a good scheme of CSR activities impresses the audience present at large and then
improves the revenues and overall financial standings of the firm. The author in his paper conducted a
correlation between the CSR and the financial performance and a considerable set of data to figure that
there did exist a strong relationship between the two. Even the study conducted by Platonova et al.
(2018), on the same topic reflected that there did seem to exist a strong and positive relation between

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the financial performance of the firm because it tends to improve the overall impression of the firm in
the eyes of the investors and hence, the stock market positioning of the firm also undergoes a change
which thereby causes a good end result for the respective firm at large (Carroll, 2015).
In addition to this, the statement in regard to the stock market performance was confirmed by
the paper of the authors Orlitzky, Schmidt and Rynes (2003), who stated that the performance of any
firm financially is largely linked to the performance of the firm which is then in sync with the related CSR
Activities. The authors analyzed the relationship between the firm`s csr activities and the financial
performance and witnessed that the prior performance is closely linked to the CSR than the subsequent
performance of the firm (Chen, Feldmann & Tang, 2015). This was measured by the stock market and
accounting based measures. Hence it can be stated to be true that the financial performance is linked
with the CSR activities a firm engages in.
Even authors like McGuire, Sundered and Schneeweis (1988), have agreed to the statement by
analyzing the performance of the Islamic banks n Gulf corporation council hat there exists a significant
and high relationship between the CSR disclosure which a firm engages in and the performance of these
banks financially and this hints that if the firm engages in more corporate social responsibility activities,
then it has a positive long term impact (Clapp & Rowlands, 2014). This study is also in line with the study
was conducted by the authors, who examined the relationship between the two variables in the
manufacturing industry and found that when they took financial performance figures like return on
equity, cash flow, sales ratio and other related measures and then measured the CSR of the firm by
measures like Labor conditions, Society and Product responsibility, they analyzed with the help of
statistical tools that there exists a strong relation between them (Grinstein & Blekher, 2015). Hence, it
can be stated that the financial performance is greatly affected by CSR disclosures and the reasons may
be summarized as follows:

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 It improves the overall financial standing of the firm in the stock market
 It increases revenues by arousing consumer interest
 It improves the goodwill of the firm which helps in gaining consumer interest (Schwartz, 2017).
 Lastly, the effectivity of CSR activities often help in reducing the costs of the firm
The CSR Activities of Etihad Airways
The Etihad Airways is a prime airline company of the UAE and has been immensely popular for
its holistic approach to the corporate social responsibility along with being responsible for the economic
activities they are concerned with which is making the airlines one of the best in the world. According to
Roy et al. (2015), a large number of the airlines activities are primarily concerned with ensuring that the
company is able to add value to its people, the community and the planet. It is their aim to ensure that
they engage in a set of cohesive program of initiatives which cover aspects of their operations as well as
their business (Etihad.com , 2018). The company has formed a set of framework which is popularly
known as the Etihad`s Together framework and is largely concerned with ensuring the following
objectives and their objectives:
 Growing together: The firm supports the Abu Dhabi 2030 vision and aims to provide support to
the company
 It has aimed for a greener together initiative and aims to minimize the environmental impact of
their activities and commit to the best.
 Etihad also aims to work together and develop a sense of wellbeing for the diverse set of
employees (Tai & Chuang, 2014).
 It aims to contribute to the different charities as well as humanitarian reliefs in case of
epidemics and other calamities.

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Moreover, over the years, Etihad has taken several initiatives to ensure that they attain success
with the responsibility.
Impact of its CSR on the financial performance of the firm
Etihad airways has engaged in a series of Corporate Social Responsibilities over the last few
years irrespective of the fact that they have not been performing that well professionally. However, the
continuous efforts as taken by the firm for the diverse employee base, environment and the overall
community at large has resulted in the betterment of the financial performance of the firm. According to
Etihad.com (2018), Etihad Airways has been able to improve its financial performance and its core
operating income has increased by 22% despite its challenges like fuel charges and a reasonable amount
of this success can be contributed to the CSR activities of the firm. In 2017, Etihad Airways engaged in a
large number of activities which have then reflected well in the performance of the company. There has
been a 7.3% reduction in unit costs along with considerable capacity reductions (Etihad.com, 2018). The
employees of the company have contributed considerably and for this reason, the CSR activities have
been stated to be a successful one. The firm has transformed itself and earned a sustainable financially
stable growth for itself over the last few years and this can be largely contributed towards its indulgence
in the Corporate Social Responsibility Activities.
Conclusion
Hence, with the help of the above analysis, it can be rightfully stated that the Corporate Social
Responsibility forms an important part of the organization and any firm which wants to attain success in
the long run needs to see to it that they engage in social responsible activities which not only improves
the overall welfare of the society but also the employees. The given report identified the manner in
which the corporate social responsibility has an effect on the performance of the firm financially by
analyzing the different literature available on the topic, which was then followed by the analysis of the

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case of Etihad Airways which helped in the understanding how the firm had improved its financial
positioning by engaging in socially correct activities and other contributions.
References
Carroll, A. B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), 87-96.
Chen, L., Feldmann, A., & Tang, O. (2015). The relationship between disclosures of corporate social
performance and financial performance: Evidences from GRI reports in manufacturing
industry. International Journal of Production Economics, 170, 445-456.
Clapp, J., & Rowlands, I. H. (2014). Corporate social responsibility. Essential concepts of global
environmental governance, 42.
Cochran, P. L., & Wood, R. A. (1984). Corporate social responsibility and financial performance. Academy
of management Journal, 27(1), 42-56.
Etihad.com (2018) Etihad News [online]. Accessed from:
https://www.etihad.com/en-us/about-us/etihad-news/archive/2018/etihad-reduces-losses-in-
2017/ (Retrived on: 06 Nov. 2018).
Etihad.com (2018) Responsbility [online]. Accessed from:
https://www.etihad.com/en-us/about-us/corporate-profile/responsibility/ (Retrived on: 06
Nov. 2018).
Grinstein, A., & Blekher, M. (2015). Corporate social responsibility. Wiley Encyclopedia of Management,
1-3.
McGuire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate social responsibility and firm financial
performance. Academy of management Journal, 31(4), 854-872.

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Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-
analysis. Organization studies, 24(3), 403-441.
Platonova, E., Asutay, M., Dixon, R., & Mohammad, S. (2018). The impact of corporate social
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