Corporate Social Responsibility and Its Impact on Financial Performance: A Case of Banking Industry of Pakistan

Abstract

There has been a significant growth of interest in the field of CSR and the debate is still hot. There are however very few studies done in the least developed countries on the subject matter. The divergent views in the literature regarding type of relationship that exists between CSR and Financial performance have necessitated this paper that examined the impact of corporate social responsibility(CSR) all dimensions (as per SECP voluntary guideline 2013) individually as well as collectively TCSR on the Financial performance of commercial banks from 2011-2015.Secondary data of CSR,ROA,ROE is collected from annual reports of commercial banks and Stock returns data is collected from Pakistan stock exchange website. Slack resource theory, Good management theory and stakeholders’ theory of CSR are used in this study. Financial performance is measured by ROA, ROE, Stock returns. Results depict that there is significant positive impact of CSR dimensions (WLB, PR, SAF) on ROA except for CI which has insignificant impact on ROA and overall TCSR has significant positive impact on ROA in addition, except CSR dimensions (PR, SAF, CI) the WLB has significant positive impact on ROE and even overall TCSR has significant positive impact on ROE. Further, in case of SR as the dependent variable, all dimensions of CSR and TCSR individually has an insignificant impact on the market stock. Bank size as a control variable is used to run regression analysis by using OLS (ordinary least square technique). Results show CSR strengthens accounting returns but have not any influence on market returns i.e. stock returns.

Keywords: Total Corporate social responsibility, Financial Performance, Commercial banks, Stock Returns, Product Responsibility, Safety, Community Investment, Work-life balance, Bank size, Return on Assets, Return on Equity.