Study on the Relationship between CSR and Financial Performance

Sang Cho,Chune Chung,Jason Young

doi:10.3390/su11020343

Sang Cho, Chune Chung + Show 1 more

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https://doi.org/10.3390/su11020343

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Journal: Sustainability	Publication Date: Jan 11, 2019
Citations: 223	License type: CC BY 4.0

Affiliation: Chung-Ang University, Washington State University

Abstract

This study analyzed whether a systematic relationship exists between corporate social responsibility (CSR) performance and corporate financial performance using 191 sample firms listed on the Korea Exchange. The Korea Economic Justice Institute (KEJI) index of 2015 was used to measure CSR performance; profitability and firm value were used to measure corporate financial performance. Return on assets was used as a proxy for profitability, and Tobin’s Q was used as a proxy for firm value. The correlation between these variables and CSR performance was examined through correlation and regression analysis. The results confirm that CSR performance has a partial positive correlation with profitability and firm value. These results are partly consistent with those of previous studies reporting a positive relationship between CSR and Korean firms’ financial performance using the KEJI index before 2011. In the relationship between CSR performance and profitability, only social contribution yields a statistically positive correlation. Analysis of the correlation between CSR performance and financial performance indicators revealed a positive relationship between the growth rate of total assets and corporate soundness and social contribution. Both soundness and social contribution showed a positive correlation with Tobin’s Q, the measure of corporate value.

Highlights

Many global studies mention that the effect of corporate social responsibility (CSR) on corporate performance varies depending on industrial characteristics
This study conducted an empirical analysis to examine whether there is a correlation between financial performance and CSR performance
The samples in this study use the Korea Economic Justice Institute (KEJI) index measured by the Korean Economic Justice Institute and 200 indexes surveyed in 2015 are used for analysis

Summary

Introduction

Along with the advent and rapid spread of environmental management, the importance of corporate social responsibility (CSR) is gradually increasing. The influence of the social corporate has increased, becoming ever more significant. Society expects firms to produce goods and services and play a more desirable role in society, rather than being limited to their traditional role. Companies are not actively coping with this and are being criticized by society [1], indicating that they are not sufficiently trusted by society. A firm can expect to experience sustainable growth through the trust placed in it by society. If a firm performs trust-based entrepreneurial activities, it can maintain good relationships with various stakeholders, and expect improvement in economic performance [2]

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