Corporate Social Responsibility and Financial Performance: The Moderating Role of Ownership Concentration in Turkey

Elif Akben-Selcuk

doi:10.3390/su11133643

Abstract

The objective of this study is to investigate the impact of corporate social responsibility (CSR) engagement on firm financial performance in a developing country, Turkey, and to analyze the moderating role of ownership concentration in the CSR–financial performance relationship. The sample consists of non-financial public firms listed on the Borsa Istanbul (BIST)-100 index and covers the period between 2014 and 2018. Empirical results using an instrumental variable approach show that corporate social responsibility has a positive relationship with financial performance. Furthermore, findings indicate that this relationship is negatively moderated by ownership concentration even when endogeneity is controlled for.

Highlights

Nowadays, society makes greater demands on companies to act in a socially responsible manner in addition to their traditional role of providing goods and services [1,2]
We focus on one particular corporate governance characteristic, the ownership concentration, and attempt to investigate how it affects firms’ financial performance and, whether and in which direction it moderates the link between corporate social responsibility (CSR) and financial performance
The role of corporate governance factors for the CSR–financial performance relationship is especially limited within the context of developing countries

Summary

Introduction

Society makes greater demands on companies to act in a socially responsible manner in addition to their traditional role of providing goods and services [1,2]. Neoclassical theory suggests that the relationship between CSR and financial performance is negative because CSR expenditures cause additional costs for the firms and divert funds from more profitable potential investments [6]. This negative relationship was confirmed by a number of empirical studies e.g., Gollop et al [7], Moore [8], López et al [9]. Resource-based theory suggests a positive relationship between CSR and financial peformance because investment in CSR may help firms develop new internal resources, such as know-how and corporate culture, as well as generate external benefits through corporate reputation [11]. Other studies showed no significant association between CSR and financial performance at all [14]

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Conclusion