Corporate Social Responsibility and Financial Performance

This assignment investigates the relationship between Corporate Social Responsibility (CSR) and Financial Performance (FP). It explores the use of various models, including GRI and COMPL_RECOM, to measure the impact of CSR on FP. The analysis involves examining financial ratios such as ROA and ROE, as well as a Social Behaviour Index based on environmental emissions, practices, and social actions. The assignment discusses the results in relation to the research question and highlights the practical relevance for companies seeking to improve their sustainability ratings.

Social responsibility and financial performance: The role of good corporate governance
Report

1. Name(s) of the author(s): Mercedes Rodriguez-Fernandez
2. Title of article:
The title is appropriate as it highlights the empirical study to investigate the relationship between
the corporate social responsibility and the Financial Performance. This is based on the agency
and the resources with better stakeholder theories that provide the basis for the conceptual
model. The contribution is to make use of behavioural index which is set using the Global
Reporting, Down Jones Sustainability, Good Corporate Governance and Good Compact Signee.
3. The Abstract:
The abstract is appropriate to define the work and how the empirical study has been used to
focus on the financial performance and the social responsibility. The focus could have also been
on the different studies and the advantages which seek for the sustainability on the long-term
basis in any uncertain environment with key to value creation. The changes have occurred in the
values of the society with the growing interest in environmental and the social consequences of
the business activities, with ethics and transparency of business activities. A well-defined
conclusion relates to the companies and their registration on Madrid Stock Exchange which
helps in demonstrating positive relationships with social profitability and positive feedback.
4. Introduction:
a. Is the purpose of the article clearly stated?
The purpose of the study is clearly focusing on the issues of the social content with maximised
economic performance. The social and economic concerns tend to force the companies to take
into account different spheres which work for a betterment of the society. The shareholders

exercise the roles in demanding the ethical attitudes and behaviour with major influence on the
formulation of strategies. They also look for the transparency, efficiency and the efficacy for the
managers to obtain economic benefits and ensure the continuity of the company. The CSR
includes the emphasis on voluntary involvement in solution of different issues, with
multidimensional forms and embodies a large range of corporate behaviour which relate to the
resources, processes and the outputs.
b. is the background of the research relevant to the research study?
The background of the research is based on working over the corporate boards that social
policies should form. The stakeholder perspectives are to focus on the forms with the study of
different interests’ groups for both the corporations and the society at the large benefit. This is
set from the increased awareness along with reconciling the different viewpoints. The
background research has been about handling the different hypothesis sections to address he
CSR using the social behavioural index and the financial ratios.
5. Literature review:
a. is the literature review broad, yet focused on the issue?
The literature review focus on the issues related to the approaches that are pertinent and confirms
to the unique theory patterns. The framework also focusses on the overriding and preventing
conflicts which interfere with the smooth functioning of the company. The agency theory is
effective to match with the offers where ethical and professional motives exists to prevent the
conflict of interests. The resource dependency theory helps in analysing the relationship and
interactions based on facilitating the performance maximisation. The approach is set for the

social participants to seek legitimacy and developing rules so that it becomes easy to support the
interaction effectively.
b. Does the literature review use a theoretical framework?
The literature review makes use of the different responsible actions of CSR and responsible
investments to support the interrelationships. The theoretical framework is based on improving
the financial profitability and then favour the shareholders, employees and the customers. The
development over the time is mainly affected by the decisions taken by the company. The
development is mainly through the descriptive and the normative aspects where the research is
also about the importance of interests’ groups. This also includes the focus on the legitimacy of
the company interest group and the value of interest. The focus is on handling the imperative
goods where the companies are directed and controlled through development between the
shareholders and the management. The specific mechanism of governance plays important role
for ensuring a long-term viability of the company and maximising the profitability for the
shareholders. The results are set to define the ethical behaviour in business and the demand for
transparency by shareholders and corporate code of conduct.
6. Research Design:
a. Is there a clear rational for the chosen research approach, methods and/or
instruments used?
There is a clear rational which is set for the theoretical perspectives who seek legitimacy in
developing rules in the institutional environment. The descriptive and the normative aspects of
the theory have been effective where the account for responsibility, stressing is in the traditional
corporation and accountable to the shareholders. A method of the time lag factor is mainly to

investigate the relationship mainly in between the financial responsibility as well as the social
behaviour. This will help in recognizing the problems and handling the direct links that define
different approaches for non-linearity of certain variables. The companies display a greater CSR
behaviour to achieve higher financial profitability, with adopting superior CSR behaviour.
b. Is the research method appropriate for research question?
The methodology includes the analysis using the multivariate regression model with proper use
of econometric software which is used in empirical research. It includes the high sustainability
rated portfolio that have been performed better than he low rate ones. Based on the results, there
are specialised rating agency to adopt to the style biases in performance. The methodology tends
to allow the macro-economic effects with individual heterogeneity that allows the individual of
the firms to be under control. The dynamic performance of the firms is measured effectively with
allowing a consistent and robust results obtained for the problems.
c. Was the collection of data appropriate for the research question?
The data collection is based on the GRI index valuation where the numerical rating and
information is gathered from the global reporting website. The company belongs to the different
recommendations with suggesting the values and recommendations based on data and
paragraphs. The Annual Reports of Corporate Governance work in accordance with UCGG
which has been set with The Global Compact Network to handle the calculations with weighted
sum of four variables that are for CSR.
d. Were the methods/or instruments described in enough details?
The models have been described in detail with getting context from the different standards and
relationships. The conceptual model services the subset models with focus on instrumental

approach. The representation is about the operating profit and return on equity that helps in
handling the divisions by the stockholder equity, with market value of share divided by the book
value. The independent variables are for controlling the variables and the size of company where
GRI properly define the valuation of sustainability for the universal character and allowing the
classification of the companies.
e. Were the reliability and validity tested and explained?
The tests could have been done through the Hansen’s statistics which is for following the chi-
square distribution with degree of freedom and over-identifying restrictions. There is a need to
handle the elimination of individual effective with correlation to the other remaining variables. It
could have helped in matching with the serial correlation tests using the residuals and the tests
under the null hypothesis.
f. Are any limitations of the study discussed?
There are problems of the limited geographical and the temporal scope with handling the
bidirectional relationship where the feedback is generated mainly in between the social and
financial variables. There is a need to focus on the concepts of social responsible investments
and avoid the survivorship biasing which is relative to the time horizon.
7. Results and Findings:
a. Are the presented results relevant to the research question?
The results clearly determine the performance on the initial sample with no valid result, where
the correlations are indicated with low values as well. With this, the decision has ben taken to
reduce the sampling size and test the group of companies. The result displayed with the

sustainability presented better explanatory models. The compliance is set with maximum value
and minimum where the companies focus on index variable. The maximum value of 99.6%
generally corresponds to the single company that is followed with the GRI to draft the
sustainability report. The financial variables, where maximum and minimum values are defined
are set to draw attention to the high correlation values for Global Compact.
b. Were the steps involved in data analysis well explained and justified?
The steps for the analysis are depending upon the models, which clearly shows about the
estimates offered by the model. It includes the GRI an COMPL_RECOM. The hypothesis is
correct by including the variables and observing the tests of Breeusch Godfry about the
autocorrelation. The hypothesis is about confirming for carrying the statistical analysis for the
company and drafting them with obtaining better rating as per the sustainability.
c. Do the tables and graphs make data analysis clearer?
The data analysis is based on the variables which are used for the model for handling the
financial variables and the control. The performance is used depending upon the ROA, ROE and
the QTOBIN which is set to define the calcification of the companies. The study is about
handling the standards of work which could be used for CSR indices by independent agencies to
evaluate the social behaviour. This is based on the reports of environmental emissions,
environmental practices and the social actions that are carried out by the companies.
8. Discussion:
a. Have the results been discussed with reference to the research question?

The research question focusses on the CSR with FP to measure the hypothesis using Social
Behaviour Index and financial ratios. Here, the results are determined for the interest group with
maintaining relationship depending upon the measurement of CSR output. The descriptive
statistics define the mean, media and the maximum or the minimum index value which is
effective for the role of good corporate governance. It includes the detailed correlations between
the variables that helps in analysing the results based on R-Squared values, ROE, AR, Number of
firms etc.
b. How relevant and useful the results to the practice?
The results are effective to handle the correlation between the models and to check how the
companies can obtain a better rating of sustainability. The companies enjoy a higher percentage
of compliance with recommendations measured by ROE, and ROA. The hypothesis is based on
obtaining a better and greater social behaviour index where the use of accounting ratios is set to
deem with better predictors. From the theoretical point of view, the results are effective to be put
in practice with good government as a component element to measure the CSR of the company.
c. Did the research highlight the most important results?
The research included the Cochrane-Orcutt Model which is for estimating the limits of auto-
correlation problems. With this, the models are observed, and autocorrelation is detected
depending upon the Breusch Godfrey tests that could be for correction and verification purpose.
9. Conclusion:
a. Were the main points drawn out?

The points clearly show the social profitability, with virtuous circle that helps in socially
responsible policies that transform into higher profits and better direction. The economic terms
are affirming for the firms with increased CSR layouts that leads to applying the policies with
financial resources. The contribution to the work is important mainly due to the combination of
variables to assess CSR which is based on valuation of GRI. It includes the variables referring to
the empirical study and then analysing the system depending upon the research. The aim is also
about initiating the profitability cycle and clarifying how profitable companies tend to invest in
CSR with gaining additional advantage for better economic returns.
b. Have any recommendation of suggestion for future research mentioned?
The aim is set for the uniformity evolving the increased awareness. The complexity involves the
calculations and comparisons for representing the social behaviour that would help in
homogenizing the future empirical analysis. The agreements are set with focus on stakeholder
theory and setting instrumental approach for the index formulation. The aim is also to work on
the improvement of social behaviour and inverse relationship business that helps to focus on the
better financial results.
10. References:
a. Are all sources cited clearly, with full bibliography and followed APA style?
The sources are cited clearly in HARVARD style and sample of the listed companies as well.