The Nonlinear Relationship between Corporate Social Responsibility and Hospitality and Tourism Corporate Financial Performance: Does Governance Matter?

Eman Fathi Attia (), Rewayda Tobar, Heba Farid Fouad, Hamsa Hany Ezz Eldeen, Ahmed Chafai and Wafa Khémiri
Additional contact information
Eman Fathi Attia: Accounting Department, College of Business and Administration, University of Business and Technology, Jeddah 21448, Saudi Arabia
Rewayda Tobar: Insurance and Risk Management Department, University of Business and Technology, Jeddah 23435, Saudi Arabia
Heba Farid Fouad: Finance Department, College of Management and Technology, Arab Academy for Science, Technology and Maritime Transport, Cairo P.O. Box 1029, Egypt
Hamsa Hany Ezz Eldeen: Finance Department, College of Management and Technology, Arab Academy for Science, Technology and Maritime Transport, Cairo P.O. Box 1029, Egypt
Ahmed Chafai: Department of Economics, École Supérieure de Commerce de Tunis, Campus Universitaire Manouba, University of Manouba, ThÉMA LR16ES10, 2010 Manouba, Tunisia
Wafa Khémiri: Department of Finance, École Supérieure de Commerce de Tunis, Campus Universitaire Manouba, University of Manouba, LARIMRAF LR21ES29, 2010 Manouba, Tunisia

Sustainability, 2023, vol. 15, issue 22, 1-32

Abstract: This paper is interested in examining the impact of corporate social responsibility and governance on corporate financial performance. We selected a panel of 141 worldwide hospitality and tourism firms spanning the period 2012–2018 to assess the effects (direct and indirect) of corporate social responsibility and governance on corporate financial performance (measured in terms of return on assets, return on equity and Tobin’s Q). Although a few studies examine the moderating effect of certain factors, our study fills this gap by examining the moderating effect of governance practices (governance structure and institutional quality) on the nonlinear relationship between corporate social responsibility and corporate financial performance. The results of the system generalized method of moments suggest the existence of a nonlinear, U-shaped relationship between corporate social responsibility and corporate financial performance (return on equity and Tobin’s Q). This nonlinearity is confirmed for corporate social responsibility and corporate financial performance (measured by return on assets). However, this relationship is inverted-U-shaped. Furthermore, our results also show that lagged corporate social responsibility, governance practices, firm-specific variables and macroeconomic variables affect current corporate financial performance. The predictions of stakeholders and agency theories are validated. Given our results, it is recommended that policy makers trade off the benefits and costs of corporate social responsibility and take appropriate financial strategies, thus enabling value creation for their companies.

Keywords: corporate social responsibility; governance; corporate financial performance; hospitality and tourism (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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