Does Corporate Social Responsibility Fuel Firm Performance? Evidence from the Asian Automotive Sector

Abstract

Corporations are now expected to self-regulate in order to uphold their social obligations to society. This is known as the social responsibility of corporations or corporate social responsibility. CSR helps a business to be mindful of the impacts it has on the economy, society, and environment. The most important CSR component for the automotive industry is unquestionably environmental responsibility. Despite the fact that many businesses still place a strong emphasis on economic responsibility, it is widely acknowledged that all three CSR elements are essential for the success of a firm. This study’s objective is to look into the effects of corporate social responsibility (CSR) on business performance in the automobile sector, with an emphasis on Asian nations. Sample companies were selected from the Thomson Reuters database according to the data availability on corporate social performance and firm performance for more than 10 years. Data analysis was performed using the software STATA. Fixed and random effects panel regression models were used to analyse the relationships. The findings of this study are consistent with the idea that corporate social responsibility considerably improves the performance of automobile companies. The study concludes that companies need to focus more on CSR spending, as it improves the financial performance of the company. The study contributes to the existing literature as it validates the strong relationship between CSR components and firm performance in the automobile sector, which has not been much explored in the extant literature. The results of the panel data regression demonstrated that not only the environmental score is significant in determining the firm performance; other components such as social and governance scores are also equally important in achieving the desired firm performance, which is totally against the common notion that since automobile firms cause much damage to the environment, they need to focus only on environmental aspects through their CSR initiatives.