Abstract
In today's competitive business environment, it is impossible to survive for the organizations which concentrate only on profit. As businesses are social entities, they have to go beyond ensuring profit and serve those who directly or indirectly get benefited or worsened by the organizations. Hence, publicly traded companies tend to perform Corporate Social Responsibility (CSR) and report this information. This paper investigates whether CSR amount reported in annual reports of companies has any significance as far as profitability and valuation of those companies are concerned. Linear regression analysis of three models under study incorporate five years' data of 30 listed banking companies, the results of which reveal that CSR has no significant impact on neither the profitability nor the share price of the banking industry of Bangladesh. Therefore, the notion that supports CSR's correlation with profitability, firm performance, and stock performance does not hold true in Bangladesh.
Highlights
THE idea of corporate social responsibility was developed in the early 1930’s; in Bangladesh, the field of corporate social responsibility has grown exponentially in last few years that can be seen from the reported Corporate Social Responsibility (CSR) amounts expended by the publicly listed companies in the stock exchanges of Bangladesh
The following three models have been designed: M1: ROE = b0 + b1CSR + u M2: Return on Assets (ROA) = b0 + b1CSR + u M2: Market Value of Shares (MVS) = b0 + b1CSR + u Where: ROE= Return on Equity of year t+1 ROA= Return on Asset of year t+1 MVS= Average Market Value of Share of year t+1 CSR = Corporate Social Responsibility amount reported in the annual report of year t b0, b1 = Parameter of the Estimate U = Error term
While some support the notion that CSR have significant impact on Earnings Per Share, Return on Equity, Return on ROA, Sales Growth, Stock Price and etc. of a firm, opposite views subsist that are supported by different studies
Summary
THE idea of corporate social responsibility was developed in the early 1930’s; in Bangladesh, the field of corporate social responsibility has grown exponentially in last few years that can be seen from the reported CSR amounts expended by the publicly listed companies in the stock exchanges of Bangladesh. CSR has been studied and associated with business organizations by many researchers and academicians in different ways. The banking companies are the largest contributor in the society in terms of performing CSR activities. There are several studies on the CSR activities of banks in Bangladesh, ISSN: 2321-242X. Most of the studies highlight the disclosure pattern of CSR that contributed towards indexing of CSR disclosure. Unlike other studies, this particular study examines whether the amount of the total CSR spent on a year by the banks has significant relation with the financial performance in the following year. To identify whether CSR influences the market value of the firm’s share
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