Do Corporate Social Responsibility Disclosures Improve Financial Performance? A Perspective of the Islamic Banking Industry in Pakistan

Zia Ur Rehman, Muhammad Zahid, Haseeb Ur Rahman, Muhammad Asif, Majed Alharthi, Muhammad Irfan and Adam Glowacz
Additional contact information
Zia Ur Rehman: Department of Management Sciences, City University of Science and IT, Peshawar 25000, Pakistan
Muhammad Zahid: Department of Management Sciences, City University of Science and IT, Peshawar 25000, Pakistan
Haseeb Ur Rahman: Institute of Management Sciences, University of Science and Technology, Bannu 28100, Pakistan
Muhammad Asif: Department of Management Sciences, City University of Science and IT, Peshawar 25000, Pakistan
Majed Alharthi: Finance Department, College of Business, King Abdulaziz University, Rabigh 21911, Saudi Arabia
Muhammad Irfan: Electrical Engineering Department, College of Engineering, Najran University Saudi Arabia, Najran 61441, Saudi Arabia
Adam Glowacz: Department of Automatic, Control and Robotics, AGH University of Science and Technology, 30-059 Krakow, Poland

Sustainability, 2020, vol. 12, issue 8, 1-18

Abstract: This study aims to investigate the impact of corporate social responsibility disclosures (CSRD) on the financial performance of the Islamic banking industry of Pakistan. The study employed the method of content analysis for collecting the required data from annual reports of all four full-fledged Islamic banks operating in Pakistan from 2012 to 2017. The study developed a novel comprehensive CSRD index by using the “Global Reporting Initiative” (GRI) and “Accounting and Auditing Organization of Islamic Financial Institutions” (AAOIFI). This index consists of five dimensions and 105 sub-dimensions of CSRD. The use of Ordinary Least Squares (OLS), Panel Corrected Standard Errors (PCSEs), and Generalized Least Squares (GLS) using random-effect (RE) and fixed-effect (FE) estimators revealed a significant negative relationship between CSRD and the financial performance of the sample firms. Regarding separate dimensions, the relationship of the Environmental and Economic dimensions of CSRD is significantly positive with current performance, but it is insignificant for the relationships of Legal, Philanthropic, and Ethical dimensions of CSRD with the current financial performance. In addition to contributing to the scarce literature in the Islamic banking industry of a developing country like Pakistan, the study will also help the policymakers and other stakeholders, including the AAOIFI, to develop a comprehensive CSRD policy or index and further improve the already established standards for CSRD.

Keywords: corporate social responsibility disclosure (CSRD); financial performance; Islamic Banking Industry of Pakistan; GRI; AAOIFI; CSRD index (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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