Exploring the Bi-directional relationship between corporate social responsibility and financial performance in Indian context

Shafat Maqbool and Shabir Ahmad Hurrah

Social Responsibility Journal, 2020, vol. 17, issue 8, 1062-1078

Abstract: Purpose - This study aims to investigate the relationship between corporate social responsibility (CSR) and financial performance from the bi-directional perspective. Design/methodology/approach - The final sample for this study are 79 companies listed in the national stock exchange for a period of eight-years (2008–2015). Random effect panel regression was performed to examine the possible link. Findings - The result shows that CSR has a positive impact on the contemporaneous and future financial performance of the selected companies. Further, the study shows that only social dimension has a positive and significant impact on concurrent and future financial performance. The results further validate slack resource theory as lagged financial performance has a positive and significant impact on CSR. Practical implications - The strategic value of CSR indicates that it should be seen as a value-enhancing strategy, and therefore, incorporated with the broader corporate strategy of the company. Companies should not trade-off between CSR and financial performance, rather a strategic synchronization of CSR with corporate functioning is essential. This will pave a way to build a stakeholder-sense in the corporate entities. Originality/value - The study comprehensively examines the relationship between CSR and financial performance from both “prospective” and “retrospective” framework. This bi-directional approach has received minimal attention in the Indian context.

Keywords: Environment; Social and governance; Corporate social responsibility; Indian companies; Prior and subsequent financial performance (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:srjpps:srj-05-2019-0177

DOI: 10.1108/SRJ-05-2019-0177

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