Corporate Social Responsibility as a Driver of Financial Performance: An Exploration of South African Companies

Phathutshedzo Lemana (), Reon Matemane and Maatabudi Mokabane
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Phathutshedzo Lemana: Department of Financial Management, School of Accountancy, University of Limpopo, R71 Tzaneen Road and University Street, Mankweng Township, Polokwane 0727, Limpopo, South Africa
Reon Matemane: Department of Financial Management, Faculty of Economics, Management and Sciences, University of Pretoria, Lynnwood Rd, Hatfield, Pretoria 0002, Gauteng, South Africa
Maatabudi Mokabane: Department of Financial Management, Faculty of Economics, Management and Sciences, University of Pretoria, Lynnwood Rd, Hatfield, Pretoria 0002, Gauteng, South Africa

JRFM, 2025, vol. 18, issue 5, 1-23

Abstract: This study investigates the relationship between corporate social responsibility performance and financial performance among firms listed on the Johannesburg Stock Exchange in South Africa. Utilising a multi-metric approach, the research incorporates corporate social responsibility scores; environmental, social, and governance ratings; and the social pillar score to provide a comprehensive analysis. Data from 104 companies with 624 observations from 2017 to 2022 was analysed. This quantitative study employs a Generalised Least Squares estimation, and the findings reveal a significant positive correlation between corporate social responsibility performance and several key financial metrics, including return on assets, earnings per share, market value added, and Tobin’s Q ratio. The results suggest that companies prioritising corporate social responsibility initiatives are likely to experience improved financial outcomes. Furthermore, the study examines the influence of board characteristics on financial performance, identifying a positive effect of gender diversity and negative impacts from board independence and meeting frequency. Overall, this research contributes to the literature on corporate social responsibility and financial performance by highlighting the importance of corporate social responsibility in driving sustainable business practices and enhancing firm performance within the context of an emerging economy. The findings underscore the need for firms to integrate corporate social responsibility into their strategies to promote long-term success while addressing societal challenges.

Keywords: corporate social responsibility; financial performance; ESG; South Africa; board characteristics (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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