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Impact of Corporate Social Responsibility on Financial Performance of Corporations: Evidence from Pakistan

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  • Nadeem Iqbal
  • Naveed Ahmad
  • Nauman Ahmad Basheer
  • Muhammad Nadeem

Abstract

This paper estimates the relationship of corporate social responsibility, financial performance, market value of the share and financial leverage . In this particular study, 156 listed companies on Karachi Stock Exchange (KSE) from textile sector, chemical sector, cement sector and the tobacco sector are taken. The observations are taken for the entire period of 2010 and 2011 from the published resources of state bank of Pakistan. In aggregate, the results of the study conclude that corporate social performance (CSR) has no effect on financial performance (CFP) . It is obvious from the results that CSR has negative effect on the market value of the share but no relationship to D/E behavior of the firm, significantly. Moreover, the investors do not have the same level of information as the information is captured by the management about the company affairs. In addition, the debt singling hypothesis indicates that the further incorporation of debt into capital structure should influence the behavior of the investor, regarding to the investment in the shares positively, but due to information asymmetry, it is negative. This study further provides the room to test the model of effect of CSR on stock returns in a portfolio construction. Key words- Corporate Social Responsibility, Financial Performance, Market Performance, Market Value.

Suggested Citation

  • Nadeem Iqbal & Naveed Ahmad & Nauman Ahmad Basheer & Muhammad Nadeem, 2012. "Impact of Corporate Social Responsibility on Financial Performance of Corporations: Evidence from Pakistan," International Journal of Learning and Development, Macrothink Institute, vol. 2(6), pages 107-118, December.
    • Handle: RePEc:mth:ijld88:v:2:y:2012:i:6:p:107-118
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    Cited by:

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    4. Eshiett Philip Kendy & Dr Dorathy Akpan & Joseph Ime Edet, 2023. "Accounting Perspective of Social Footprint Disclosure and its Implication on Firm’s Value of Selected Oil and Gas Companies in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(12), pages 981-1004, December.
    5. Mohammad Sohail Yunis & Laila Durrani & Amad Khan, 2017. "Corporate Social Responsibility (CSR) in Pakistan: A Critique of the Literature and Future Research Agenda," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(1), pages 65-88, March.
    6. Peter Krištofík & Juraj Medzihorský & Hussam Musa, 2022. "Capital Structure and Its Determinants—A Comparison of European Top-Rated CSR and Other Companies," JRFM, MDPI, vol. 15(8), pages 1-16, July.
    7. Muhammad Ikram & Abdul Qayyum & Omer Mehmood & Jahanzaib Haider, 2020. "Assessment of the Effectiveness and the Adaption of CSR Management System in Food Industry: The Case of the South Asian versus the Western Food Companies," SAGE Open, , vol. 10(1), pages 21582440199, January.
    8. Ismail O. Fasanya & Adegbemi B.O.Onakoya, 2013. "Does Corporate Social Responsibility Improve Financial Performance of Nigerian Firms? Empirical Evidence from Triangulation Analysis," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 9(3), pages 22-36, June.
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    11. Mariana Vu?ã & Sorin-Iulian Cioacã & Mihai Vuþã & Adrian Enciu, 2019. "An Empirical Analysis of Corporate Social Responsibility Effects on Financial Performance for Romanian Listed Companies," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 21(52), pages 607-607, August.
    12. Xiping Pan & Jinghua Sha & Hongliang Zhang & Wenlan Ke, 2014. "Relationship between Corporate Social Responsibility and Financial Performance in the Mineral Industry: Evidence from Chinese Mineral Firms," Sustainability, MDPI, vol. 6(7), pages 1-25, June.
    13. Musah Mohammed Saeed & Mahalakshmi Mudliar & Manisha Kumari, 2023. "Corporate social responsibility and financial performance nexus: Empirical evidence from Ghana," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 2799-2815, November.
    14. Ramzan, Muhammad & Amin, Muhammad & Abbas, Muhammad, 2021. "How does corporate social responsibility affect financial performance, financial stability, and financial inclusion in the banking sector? Evidence from Pakistan," Research in International Business and Finance, Elsevier, vol. 55(C).
    15. Mesut Doğan & Mustafa Kevser, 2021. "Relationship Between Sustainability Report, Financial Performance, and Ownership Structure: Research on The Turkish Banking Sector," Istanbul Business Research, Istanbul University Business School, vol. 50(1), pages 77-102, May.
    16. Bilal Fayiz Omar & Nidal Omar Zallom, 2016. "Corporate social responsibility and market value: evidence from Jordan," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 14(1), pages 2-29, July.
    17. Tanveer Bagh & Muhammad Asif Khan & Tahir Azad & Shamila Saddique & Muhammad Atif Khan, 2017. "The Corporate Social Responsibility and Firms' Financial Performance: Evidence from Financial Sector of Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 301-308.
    18. Fadi Alshannag & Mohamad Yazis Ali Basah & Khairil Faizal Khairi, 2017. "The Relationship between Corporate Social Responsibility and Corporate Financial Performance A Survey of Literature," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 3(1), pages 8-14.

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    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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