Impact of Corporate Social Responsibility (CSR) Practices on Financial Performance: Evidence from Pakistan Stock Exchange (PSX) Listed Non-Financial Firms

Abstract

The study aims to provide an investigation of the relationship between corporate social      responsibility (CSR) practices and firm financial performance (ROA, ROE, Tobin’s Q) across non-financial firms. The primary focus of the study is to examine separately the impact of environmental, community, customers’ and employees’ CSR on firms’ financial performance in Pakistan. A sample of 108 listed non-financial firms have been selected.  Firm’s specific data is collected for 10 years’ period from 2011 to 2020. The descriptive statistics, correlation and regression analysis have been applied for analysis. The study contributes to the literature by offering mixed results on the relationship between CSR practices and firm’s financial performance. The environmental CSR practices have a negative impact on firms’ ROA and an insignificant impact on ROE and Tobin’s Q. The community CSR has a positive impact on ROA and the Tobin’s Q. The customers’ CSR practices have a negative influence ROE while employees’ CSR practices unable to explain firm’s financial performance. The study has implications for management, policy makers and academia. The management and board are advised to watch the impactful category of CSR and they must focus on long term sustainable growth while investing in CSR. Policy makers are advised to enhance efforts to foster external stakeholder awareness of total CSR. Future academic research can include financial firms and can extend the scope to other emerging markets.

Key Words:  Corporate Social Responsibility, financial performance. Pakistan Stock Exchange, Non-Financial Firms.

https://doi.org/10.5281/zenodo.23119405