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Does Corporate Social Responsibility Affect the Financial Performance of the Manufacturing Sector? Evidence from an Emerging Economy

Authors: 

Jacob Cherian, Muhammad Umar, Phung Anh Thu, Thao Nguyen-Trang*, Muhammad Safdar Sial, Nguyen Vinh Khuong

Source title: 
Sustainability, 11(4): 1182, 2019 (ISI)
Academic year of acceptance: 
2019-2020
Abstract: 

The present study analyzed the impact of corporate social responsibility (CSR) reporting on the financial performance of Indian companies. It used secondary data from 50 manufacturing companies over the period of fiscal years 2011 to 2017. The results suggested that there exists a significant relationship between the performance of Indian companies and their CSR. The CSR not only improves the firm’s social value and reputation but also improves profitability and performance. According to the results, return on assets is significantly determined by corporate governance, customers, products, number of employees, and board size. The customer has a negative impact on return on assets (ROA). The relationship between return on equity and independent variables is the same as the relationship between ROA and independent variables. Corporate governance and product positively impact ROE, but the relationship between customers, number of employees, and board size are negative. Corporate governance and product positively impact return on capital employed (ROCE), but the relationship between customer and the number of employees is negative. Education has positive impact on profit after tax (PAT) and profit before tax (PBT), but the PAT relationship between environments is negative. Corporate governance and product positively impact PBT. In general, we concluded that in India, socially responsible corporations perform better and vice versa.