Political instability and corporate social responsibility: the case of Egypt

Abstract

PurposeThis paper aims to examine the impact of political uncertainty and instability caused by the 2011 Egyptian revolution on the corporate social responsibility (CSR) practices of Egyptian firms. The study provides empirical evidence to support the link between political instability, financial performance, stock market uncertainty and CSR in the post-revolution context of Egypt.Design/methodology/approachData on CSR practices in Egypt were collected through a survey of Egyptian firms and content analysis of annual reports from publicly traded firms. The final survey sample consisted of 99 listed Egyptian companies. Structural equation modeling was performed to examine the relationship between the variables of this study.FindingsThe results of the study show that political instability is perceived to have a significant positive effect on the CSR practices of Egyptian firms. The results also reveal that the financial performance of firms is perceived not to be affected by the political instability after the 2011 Revolution as opposed to stock market uncertainty, which is perceived to be significantly affected. However, financial performance and stock market uncertainty have a significant positive influence on the CSR practices of Egyptian firms.Originality/valueThis paper capitalizes institutional theory to capture the complex interactions between organizations and their external institutional environments. Previous studies tackling CSR in unstable political environments in the African context focused on countries with prolonged periods of violent conflict and on more localized forms of conflicts. Yet, little is known about CSR during the occurrence of different types of political instabilities in other African countries.