Empirically examining the impact of corporate social responsibility on financial performance: evidence from Indian steel industry

Nripinder Kaur,Vikramjit Singh

doi:10.1108/ajar-07-2020-0061

Abstract

PurposeThis paper aims to examine the impact of corporate social responsibility (CSR) on financial performance (FP) of Indian steel industry in terms of value-added (VAM), profitability (PM), market (MM) and growth measures (GM).Design/methodology/approachIt is an empirical study using secondary data of 40 companies for 14 years collected from CSR/annual reports/official websites of the companies and Prowess database. The panel regression analysis, MANOVA and univariate ANOVA have been conducted to examine the impact of CSR on FP.FindingsThe result indicates a positive impact of CSR on FP in terms of VAM, PM and GM, thereby indicating that more investments in CSR will generate wealth for shareholders, enhance profitability and sales. Moreover, this study shows no noticeable relationship between CSR and MM.Social implicationsThis study contributes to the literature on the CSR–FP relationship and also has implications for managers, investors and other stakeholders. Companies with higher CSR rating create a brand image, attract proficient employees, get greater profit, loyal customers and have less possibility of bribery and corruption. This study may result in being influential to companies confined not only to this sector but also reaching to the others, thus inspiring them to contribute their share of profit for the welfare of society.Originality/valueTo the best of the authors' knowledge, it is the first comprehensive study to examine the impact of CSR on FP of Indian steel industry by considering four dimensions for measuring FP. It provides evidence about the relationship between CSR and FP.

Highlights

The role of a company towards the social context within which it operates has been altered over the past few years due to globalization and pressing ecological issues (Pradhan and Ranjan, 2010)
The importance of Corporate Social Responsibility (CSR) activities can be seen through the presence of these activities in the annual and sustainability reports and official websites of the companies (Servaes and Tamayo, 2013)
CSR may be defined as business contribution to sustainable development, which ensures appropriate return to shareholders and employees, better quality of products and services to customer as well as overall welfare of the society

Summary

Introduction

The role of a company towards the social context within which it operates has been altered over the past few years due to globalization and pressing ecological issues (Pradhan and Ranjan, 2010). Try to meet the needs of the present generation without compromising the ability of the generations to meet their own needs (Babalola, 2012). Due the shift from merely profit to profit with social responsibility, many companies are approving the term “Corporate Social Responsibility (CSR)”. CSR is beyond the legal duties and obligations as it a voluntary initiative by companies which is apparently encouraged by both the national and international governments, but they are reluctant to regulate it. It is a continuation of the motivation that led earlier businesses into the field of philanthropy, which gradually developed into a. The importance of CSR activities can be seen through the presence of these activities in the annual and sustainability reports and official websites of the companies (Servaes and Tamayo, 2013)

Objectives

Findings

Discussion

Conclusion