The effects of internal, external and aggregated CSR practices on the firm's reputation and profitability

Abstract

PurposeContemplating the concerns often expressed by skeptics about the value generated by corporate social responsibility (CSR) practices, this study aims to examine the effects of CSR practices on the firm's reputation and profitability in the distinct socio-economic context of Nepal.Design/methodology/approachThe study used a simple random sampling method in collecting data from 168 listed companies in Nepal. The data were collected using structured questionnaires. Then, hierarchical multiple regression analyses were used to test the stated hypotheses.FindingsResults showed that all types of CSR practices positively affect the firm's reputation and profitability. However, a firm's reputation was better explained by the external CSR practices, and profitability was better explained by the internal CSR practices. Moreover, CSR practices were more strongly linked with the firm's reputation than profitability.Research limitations/implicationsPerceptual data on profitability may be seen as a limitation although it can capture the current profitability situation as well as a future prospect within a single construct.Practical implicationsPracticing managers can consider CSR as an important strategic issue to stay ahead in competition rather than simply a response to regulatory requirements or stakeholder pressures.Originality/valuePerhaps this is the first study to examine the effects of internal CSR practices, external CSR practices, and aggregated CSR practices separately on the firm's reputation and profitability in the unique socio-economic context of Nepal.