Exploring the Dynamics of Firm Financial Performance and Economic and Policy Uncertainty: The Moderating Role of Corporate Social Responsibility

Assessing the impact of CSR has recently gained momentum all over the world. Most related literature examines how CSR investments affect financial performance without considering the nexus under commonly uncertain times. The study uses Indian data to extend the nascent literature on CSR and EPU by examining the impact of CSR on firm financial performance during commonly uncertain times. The Prais–Winsten estimation econometric technique has been employed to explore the influence of CSR on ROE across ten years for NIFTY 100 index firms. Besides, System GMM estimation has been used to deal with the endogeneity bias. Evidence suggests that during ordinarily uncertain periods, CSR investments act as a social capital reservoir and improve firm financial performance. Moreover, the results show that the positive influence of CSR during times of uncertainty is more significant for firms belonging to high visibility and more sensitive sectors. These novel findings would help corporate policymakers, individual investors, and managers to better understand and minimize the losses due to regular uncertainty.