Abstract
This paper attempts to measure the financial performance of the Shariah-compliant companies, specifically on the consumer products and trading & services industry and to investigate the relationship between the CSR practices and financial performance of the two abovementioned industries. The idea of this comparative study is established from the prior literature pertaining to the embedded-typed and peripheral-typed CSR which attempt to reflect the nature of the business and CSR practices of the companies. Since this study is quantitative in nature, thus it employs analysis of secondary data through the Shariah-compliant company’s annual report. The findings of the study seem to suggest that the association between the tested variable(s) is relatively unable to be supported, as there is no significant relationship between the embedded CSR and peripheral CSR and the financial performance of the sample companies. Ways forward and limitation of the study are further deliberated.
Highlights
The emergence of the corporate social responsibility (CSR) is viewed as a positive response of companies towards fulfilling the interests of wider circles of its constituents
Given the abundant of previous studies have been carried out to examine CSR-performance, most of the existing studies have focused on the CSR practices which peripherally undertaken far from company’s nature of business as a way to legitimise its business to the stakeholders
The stakeholders may appreciate with this kind of social responsibility that has been exuded by company to weigh on their wellbeings, in turn this could elevate the firm’s performance which resulted from the built perceptions among the stakeholders
Summary
The emergence of the corporate social responsibility (CSR) is viewed as a positive response of companies towards fulfilling the interests of wider circles of its constituents. The heightened interests of CSR by managers can be attributed to the presence of reciprocal actions and responsibilities between the two parties. Unlike the conventional theory of the firm which clung on the solely profit maximation motive (Friedman, 1970), CSR is a kind of actions that transcend the abiding by legal requirements, which takes account social obligations towards society (McWilliams & Siegel, 2001). The initiatives of company to engage in CSR are seen as succumbing to the demand by stakeholders who are vulnerable to the consequences of the company’s decisions and its business activities, which could substantially affect to the viability of its stakeholders. There is a misconception of CSR pertaining to the motive(s) of carrying out CSR since most of the CSR activities are carried out far from the company’s domain business activities and are spent at the expenses of shareholders
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