Impact of Corporate Social Responsibility on Firm’s Financial Performance; A Case of Cement Sector of Pakistan

Abstract

Corporate social responsibility (CSR) is a significant notion that is progressively being deliberated and adopted worldwide. Some of the reasons why companies adopt CSR was; compliance with the law, to enhance a competitive advantage as it is the right thing to do for the society. The main purpose of study is to shed light on the impact of CSR on firm’s financial performance; a case of cement sector of Pakistan listed on Pakistan stock exchange. Data was obtained from audited financial statement by using Thomson router DataStream. Secondary data was obtained from the year 2005 to 2017. The data was cleaned, pretested and analyzed using STATA 5.0. The study adopted a descriptive research design to test, for the linear relationship between financial performance and corporate social responsibility. Targeted population comprised of twenty one (21) listed companies of which, complete and necessary data available was for eighteen 18 companies. The study applied multiple regression analysis model to assess the influence of corporate social responsibility on financial performance. Financial performance indicators return on assets (ROA), Return on equity (ROE) and earnings per share (EPS) were dependent variables while corporate social responsibility indicators were worker welfare fund (WWF), Size of firm (SF) and debt to equity ratio (DTE) used as an explanatory variables in the study. For analysis purpose used fixed and random effect models and on the basis of Hausman test random model was best for analysis. From the result it was concluded that worker welfare fund had statistically significant impact on firm’s financial performance. Whereas, size of firm and debt to equity ratio, had insignificant impact on firms financial performance. Some recommendations were provided for future use to any researcher in this hypothetical arena.