Corporate Social Responsibility and Firm’s Financial Performance: Evidence from the Banking Industry of Pakistan

Abstract

The present work examines the effects of corporate social responsibility on profitability (CSR) of banking sector of Pakistan. The existing literature mainly focused on manufacturing industry of developed countries, while this study investigating the impact of CSR on financial sector of Pakistan. Secondary data were collected from 15 different banks from their annual reports for the period 2007-2016. Furthermore, study used summary statistics and two step system GMM to analyse the impact of corporate social responsibility on the financial performance of banks and found significant positive impact of CSR on financial sector performance. Moreover, the present work also observe that banks with good history of CSR spends less at present as they have established good reputation in society. Our study provides important empirical insights for regulators and other key stakeholders especially State Bank of Pakistan and banking industry of Pakistan for improvement in firm performance and profitability.