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The relationship between corporate social responsibility and financial performance

(In emerging Markets through different geographic areas and changing time)

Ahmed Salih

Department of Business, TIAS School of Business and Society

CC2020: Academic Writing Skills

Dr. Suzanne E. Peraino

October 2, 2022
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Corporation Social Responsibility and Financial Performance (In Emerging Markets)

Corporate Social Responsibility (CSR) can be defined as many meanings for example “CSR

activity is a way of changing a bad image of a company, especially for companies that have a

negative reputation” (Saleh, Zulkifli, & Muham, 2011). And it also defined as “The fundamental

goal of a business firm, especially a corporation, is to maximize shareholder wealth as reflected

in the market price of the firm’s stock. Achieving this goal assumes that managers operate in

the best interests of stockholders, avoid actions designed to deceive financial markets to boost

the firm’s stock price, and act in a socially responsible manner.” (Selcuk & Kiymaz, 2017) And

corporate financial performance (FB) always defined as the profit the firm gain in its financial

records.

This paper introduced the relation between corporate social responsibilities (CSR) and its

financial performance (FB) in an emerging markets for different geographic regions: Asia

(Turkey and Malaysia), South America (Brazil) and Africa (South Africa).

The relationship had been monitored from different scientific papers neglegted the different

ways used in monitoring this relation. The idea is here to get how this relationship would

affected through the different geographic region of immerging markets and through

throughout the years, So in this paper more concerns is about the relationship between CSR

and FP neglecting the monitoring methods and how they had been applied through different

companies of the selected region or country.

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CSR and FP among different Geographic area for Emerging Markets

More details on how the relationship between CSR and FP for a selected country in an

emerging markets will be shown throughout three continents (Asia, South America and Africa)

by taking a sample of firms from four countries (Turkey, Malaysia, Brazil and South Africa).

CSR and FB in the Turkish companies:

Selcuk & Kiymaz (2017) in their study they focused in the relationship between corporate social

responsibilities and financial performance of 341 firms listed in Bursa Istanbul during the period

of 2009-2011 as an emerging market setting.

Beside their methodology on research and what they used in monitoring the relation between

CSR and FP the paper shown that there is a negative relationship between corporate social

responsibilities and Financial Performance. “Our findings show a negative relationship between

CSRD variables and financial performance, meaning that firms which disclose more information about

CSR initiatives in their annual reports have a lower return on assets.” (Selcuk & Kiymaz, 2017). And they

also shown that the relationship go positive with liquid firms and larger ones.

CSR and FB in the Malaysian companies:

Saleh, Zulkifli, & Muham (2011) they had shown on Malaysian public listed companies (PLCs) the

relationship between corporate social responsibility and corporate financial performance (CFP) as an

emerging market setting. They use a sample of 200 Malaysian PLCs which are taken out of 474

companies listed on the main board of Bursa Malaysia during the years 1999-2005 as a recovery time

after the crises that hit Asian country.

They concluded that “there are positive and significant related of CSRD and dimensions of CSRD

variables on CFP.” (Saleh, Zulkifli, & Muham, 2011) That’s mean accompany who do will in CSR they will

get more good financial performance (Positive relation).

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CSR and FP in the Brazilian companies

Crisóstomo, Freire, & de Vasconcellos (2011) their paper studied the relation between CSR

and FP by using data of 78 non-financial listed companies during the period 2001-2006 in

Brazil. As they faced and suffered a lot from the unavailability of formal information about the

Brazilian markets at that time. The samples taken from The Brazilian Institute of Social and

Economic Analysis (IBase) and this faced that sending and storing data of firms is voluntary the

number of sampled company changed during the years 2001-2006 so at the end their samples

represent around 37% of all the non- financial companies listed in Brazilian stock marked at that

period.

So the paper indicate that “The estimation of a set of econometric models has provided results

that exhibit a trend toward a negative effect of CSR on firm value in Brazil. This negative

influence, in turn, appears to be strongly influenced by social action relative to the relation with

employees and environmental concerns” (Crisóstomo, Freire, & de Vasconcellos , 2011). The

CSR had a negative effect on FP.

CSR and FP in the Southern Africa companies:

Nyeadi, Ibrahim, & Sare (2018) they analysed the relation between CSR and FP in the Southern

Africa Firms. They used a sample of 56 firms during the period of 2011-2013. The survey was

carried on the selected firm from the Johannesburg Stock Exchange, The sampled is too small

as the limiting nature of the public investment corporation data set so it’s not possible in that

time at to get more firms to a long period of times.

From the resulting they conclude that “Findings from the study indicate that CSR impacts

positively on financial performance of firms in South Africa.” (Nyeadi, Ibrahim, & Sare, 2018).

The relation is positive and it increased with firm size.

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The table below summarize the above paragraphs on CSR and FB relationship:
Region Asia Asia South America Africa
Country Turkey Malaysia Brazil South Africa
Time Period 2009-2011 1999-2005 2001-2006 2011-2013
No of analyzed firms 341 200 78 56

Selected paper publishing time 2017 2011 2011 2018

Company size effects on CSR and FP Positive with Not mentioned Not mentioned Positive with larger
larger firms firms
Availability of formal information Available Available formal Less formal info Less formal info
formal info info problems problems
CSR and FP relationship Positive Positive Negative Positive Relationship
Relationship Relationship Relationship
Table 1: Show how the relation between CSR and FP may differ through region in emerging markets.

Conclusion

From the above we can see that the relation between CSR and FP goes to be more positive

and as we see in all new papers and papers analysed companies in the new era going towards

2005 and above the relation get more positive.

Also it appears that accompany which had more liquid an asset and can be classified as larger

company the relation goes more positive.

During the time as more emergency market country goes to be developed its CSR to FP relation

goes to be more positive and more company goes to concern about it.

Some times more government policy will encourage the company to add more CSR and that’s

also will add more to FP specially if there is a recovery from crises (Malaysian market as stated

above).
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References
Crisóstomo, V., Freire, F., & de Vasconcellos , F. (2011). Corporate social responsibility, firm value and
financial performance in Brazil. Social Responsibility Journal. Retrieved from
https://www.emerald.com/insight/publication/issn/1747-1117

Nyeadi, J., Ibrahim, M., & Sare, Y. (2018). Corporate social responsibility and financial performance
nexus: Empirical evidence from South African listed firms. Journal of Global Responsibility.
Retrieved from https://www.emerald.com/insight/content/doi/10.1108/JGR-01-2018-
0004/full/html

Saleh, M., Zulkifli, N., & Muham, R. (2011). Looking for evidence of the relationship between corporate
social responsibility and corporate financial performance in an emerging market. Asia-Pacific
Journal of Business Administration. Retrieved from
https://www.emerald.com/insight/content/doi/10.1108/17574321111169849/full/html?queryI
D=49%2F5408369

Selcuk, E., & Kiymaz, H. (2017). Corporate Social Responsibility and Firm Performance: Evidence from an
Emerging Market. Accounting and Finance Research, 10. Retrieved from
https://www.sciedupress.com/journal/index.php/afr