Several research studies have examined corporate social responsibility (CSR) and its effects on business performance, but their results vary widely.
This paper studies the interaction between social, environmental and short-term financial performance. Using a sample of the 16 largest multinational FMCG companies from the US and Europe covering the period 2005-2012 and employing two different test methods, namely ordinary least squares (OLS) and Granger causation.
We demonstrate that while all CSR dimensions have significant financial effects, there has been only one causality link found between employment structure and short-term profitability.
Table of Contents
1. Corporate Social Responsibility Theories: The Past and the Present
1.1. CSR Concepts Evolution
1.2. Corporate Sustainability and Its Impact on Non-financial Reporting
2. Empirical Analysis of CSR Practices and Corporate Financial Performance
2.1. Sampling and data collection
2.2. Descriptive Statistics
3. Econometric Model
3.1. Model Specification
3.2. Granger Causality Test
3.3. Empirical Results: Discussion
Research Objectives and Focus
The primary objective of this research is to examine the interdependence between corporate social responsibility (CSR) practices and corporate financial performance (CFP). Specifically, the study investigates whether there is a causal relationship between CSR dimensions and short-term profitability, and identifies how social and environmental factors influence the financial outcomes of major multinational FMCG corporations.
- Theoretical evolution of CSR and corporate sustainability concepts.
- Empirical analysis of CSR indicators and financial return on assets (ROA).
- Application of OLS regression analysis to measure financial impacts.
- Investigation of causality links using the Granger causality test.
- Evaluation of the business case for socially responsible corporate strategy.
Excerpt from the book
1.1. CSR Concepts Evolution
Though the roots of the corporate social responsibility concept have a long and wide-ranging history, it is mostly a product of the 20th century, especially from the 1950s up to the present time. Howard R. Bowen's publication of his landmark book Social Responsibilities of the Businessman (1953) best marks the beginnings of the modern period of literature on this subject.
The concept of CSR was developed in the 1950-60s by Theodore Levitt, Milton Friedman and John Kenneth Galbraith. Th. Levitt and M. Friedman considered CSR a threat to the modern business because the only responsibility of business is maximizing its profits. [Levitt, pp. 48-50; Friedman, p. 133]. J.K. Galbraith described CSR as compliance with external legal regulation. [Благов, c. 26].
During the 1970s there began many writings suggesting the importance of a managerial approach to CSR. Thus, it was recommended that companies forecast CSR, organize CSR, assess social performance, and institutionalize social policy and strategy. The concept of Corporate Social Responsiveness was developed by S. Sethi and D. Votaw and implied Responsiveness as moral choice at all the levels of the firm as a response to some social needs. [Благов, c. 30]
The three-fold concept of Corporate Social Performance (CSP) was introduced by A. Carroll who argued that social responsibility should be thought of as principles (1), social responsiveness should be thought of as processes (2), and social issues management should be thought of as policies (3). [Siegel et al., p. 34]. D. Wood suggested using the results as the third component because it was the only quantitative variable in the system. [Wood, p. 713].
The CSR concept served as the basepoint for other complementary concepts and themes. The prominent themes which continued to grow in the 1990s included the following: stakeholder theory, business ethics, corporate sustainability, and corporate citizenship.
Summary of Chapters
1. Corporate Social Responsibility Theories: The Past and the Present: This chapter reviews the historical development of CSR and the evolution of the corporate sustainability concept, including the triple bottom line approach.
2. Empirical Analysis of CSR Practices and Corporate Financial Performance: This section details the data collection process from sustainability reports and provides descriptive statistics for the selected CSR indicators and financial performance metrics.
3. Econometric Model: This chapter presents the regression models and Granger causality tests used to evaluate the empirical link between CSR dimensions and short-term firm profitability.
Keywords
corporate social responsibility, financial performance, FMCG, econometric research, sustainability, OLS regression, Granger causality, stakeholder theory, return on assets, CSR dimensions, management strategy, business performance, corporate sustainability, quantitative analysis, international business
Frequently Asked Questions
What is the primary focus of this research?
The study investigates the interdependence between corporate social responsibility (CSR) and corporate financial performance (CFP), specifically analyzing multinational FMCG corporations.
What are the central thematic areas?
The research explores CSR history, sustainability reporting according to GRI standards, financial measures like ROA, and the econometric modeling of these variables.
What is the central research question?
The primary research question is whether an interaction exists between CSR and financial performance, and specifically, whether financial performance precedes CSR, or if CSR efforts drive financial results.
Which scientific methods are employed?
The study uses OLS regression analysis to test the impact of CSR on profitability and the Granger causality test to determine the direction of the causal relationship.
What is covered in the main section?
The main section covers the theoretical background of CSR, data sampling from global corporations, descriptive statistics, econometric model specification, and a discussion of the empirical findings.
Which keywords characterize the work?
Key terms include corporate social responsibility, financial performance, FMCG, econometric research, sustainability, OLS, and Granger causality.
Did the study confirm the corporate sustainability theory?
Yes, the results suggest that all three dimensions of CSR—economic, social, and environmental—have significant positive effects, supporting the validity of the corporate sustainability approach.
What unique link was discovered between employment and profitability?
The study identified a single unidirectional causality link: financial returns of the firm do Granger-cause changes in the women employment rate.
How is the relationship between waste and profitability explained?
The study indicates that higher ecological performance often requires increased spending on new equipment and standards, which may lower short-term profitability, although it could be beneficial in the long run.
- Arbeit zitieren
- Evgeny Nosenko (Autor:in), 2014, Interaction Between CSR and Financial Performance. Comparing the Largest Multinational FMCG Corporations in Europe and the USA, München, GRIN Verlag, https://www.hausarbeiten.de/document/298397
