Exploring the link between corporate social responsibility and financial performance in social enterprises: The mediating role of productivity

A key discussion in the current management literature is how businesses react to and can contribute to solving societal challenges while meeting the needs of their shareholders and their broader set of stakeholders. Most extant research focuses on corporate social responsibility (CSR) issues in large for‐profit corporations, but social enterprises are also critical given their ability to promote financial inclusion and focus on stakeholders' needs. This study explores the mediating role of total factor productivity (TFP) in the relationship between CSR and financial performance within social enterprises, using a sample of microfinance institutions (MFIs) from Latin America. Our analysis demonstrates TFP's critical role in translating CSR initiatives into sustainable financial outcomes and enhancing both economic and social objectives. Thus, our results may provide insights to regulators, policymakers, and practitioners, allowing them to better understand best practices and actions that foster stakeholders' trust and expectations, with the potential outcome of improving MFIs overall sustainability goals. Our findings are robust due to the use of a variety of methodological approaches to address possible endogeneity problems and alternative specifications of financial performance.