The Effects of Corporate Social Responsibilities on Financial Performance of Small and Medium Enterprises of Khulna City

Abstract

Purpose: Corporate Social Responsibility (CSR) is now a growing concern throughout the world. All type of firms i.e. large firms to small and medium firms are becoming aware about the term as it has found to be significantly associated with improving corporate image, which in turn influence overall performance of the firms. The main purpose of this study is to investigate the level of awareness of SME owners about CSR and also to identify the effects of CSR on financial performance particularly on Small and medium Enterprises (SME). Methodology: Total 330 SMEs have been surveyed to achieve the objective of the study. Five variables has been used to determine SMEs’ CSR activities i.e. activities on employees, customers, environment, country, community and society. To determine financial performance, data regarding sales and profitability of past five years is used. Correlation and regression is used to determine the effect of CSR activities on financial performance. Beside this, SME owners’ perception has been summarized from open-ended question. Findings: The study suggests that more than half of the SME owners (around 60%) are aware about CSR, but they cannot give a concrete definition regarding it. From correlation analysis it was found that all the variables (activities on employees, customers, environment, country, community and society) have significant positive relationship with financial performance of SMEs. Regression analysis says that three variables e.g. CSR on employees, customers and environment has significant positive effect on financial performance of SMEs. Other two variables e.g. CSR on country and CSR on community and society have no significant effect on financial performance of the firms. Originality/Value: This study summarized the SME owners’ perception regarding CSR and their activities on CSR. No such study has been conducted in Bangladesh particularly on SMEs and influence of CSR activities on their financial performance.