The Effect of the 2008 Financial Crisis on Corporate Social Responsibilities: Evidence from Multinational Companies

Abstract

The purpose of this study was to examine the effects of financial crisis on the number and extent of CSR projects. The assumption is that, during a financial crisis, organizations act more conservatively and defensively and as such fail to balance the expectations of related parties. This study made use of secondary data in analysing the effect of the 2008 financial crises on the corporate social responsibility as well as analysing relationship between corporate social responsibility and financial performance of some 30 firms randomly sampled from the FTSE 100 in the United Kingdom. The secondary data for the study were retrieved from the Bloomberg database. Paired sample T-test, Pearson Correlation and regression analysis were used to find out whether there is significant difference between corporate social responsibility score in 2007 and 2008. The study revealed a positives significant relationship between CSR in 2007 and 2008. Though there was a positive highly significant rise in the CSR during the 2008 financial crises, there was no enough evidence to attribute the rise to the effects of the financial crises. Also, the impact of the CSR on the firms’ profitability during the 2008 financial crises was negative but insignificant. The study adds to the literature by contributing to the discussions on CSR and the ways they are affected by financial crisis.

Keywords: financial crisis, corporate social responsibility, financial performance.