The Effect of Corporate Social Responsibility Disclosure on Financial Performance: Evidence from Credit Institutions in Vietnam

Nguyen Bich Ngoc

doi:10.5539/ass.v14n4p109

Abstract

This study examines the relationship between corporate social responsibility (CSR) disclosure and financial performance of banks in Vietnam over the period 2011 – 2016. By using content analysis to approach CSR related data as well as ordinary least square (OLS) estimator to analyse data, the finding of this study indicates that there is a significant negative relationship between CSR disclosure and financial performance of commercial banks in Vietnam. This result might be explained by additional requirements of the law for social responsibility while banks are in difficult situation as a result of economic slowdown during researched period. Together with that, perception of banks’ customers toward banking corporate social responsibility of Vietnam also contributed to build up this negative linkage.

Highlights

It is about eighty five years from the day when Professor Dodd had looked at the relationship between corporate social responsibility and financial performance (Dodd, 1932) which untill still has been an interest and controversial topic to researchers
While scholars confirming ‘trade-off hypothesis’ show that joining CSR practices might make firms undermine the main object of the company which is according to Friedman (1970) is maximising profit; corporate social responsibility of firms is stressed by supporters of ‘social impact hypothesis’, who indicate that by satisfying the needs of different group of stakeholders, firms can achieve greater effectiveness and efficiency and enhance their financial performance
Not like other studies in which economic disadvantage or opportunity cost were often considered as main reasons why negative relationship between corporate social performance and financial performance existed in previous researches, additional requirements of the law for social responsibility while banks are in difficult situation as a result of economic slowdown during researched period might be the best explanation for this negative linkage

Summary

Introduction

It is about eighty five years from the day when Professor Dodd had looked at the relationship between corporate social responsibility and financial performance (Dodd, 1932) which untill still has been an interest and controversial topic to researchers. While scholars confirming ‘trade-off hypothesis’ show that joining CSR practices might make firms undermine the main object of the company which is according to Friedman (1970) is maximising profit; corporate social responsibility of firms is stressed by supporters of ‘social impact hypothesis’, who indicate that by satisfying the needs of different group of stakeholders, firms can achieve greater effectiveness and efficiency and enhance their financial performance. Discussing about this problem, there are many researchers have studied the effect of corporate social responsibility on financial performance, but the results are mixed. The lack of existence of this relationship according to Ullmann (1985) is because it is affected by many factors or variables that if a linkage existed, it is difficult to be detected due to the problems associated with measurement in empirical studies

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Results

Conclusion