The Significance of Corporate Social Performance (CSP) Over Financial Performance of Firms : An Evidence from Pakistan

Abstract

This research is conducted with an aim to find the association that exists between Corporate Social Performance and firm’s financial performance. Usually various studies being conducted to find the relationship between the two variables have shown positive outcomes still there have been some studies which show no or neutral relationship between CSR and financial performance of various companies. But this study is targeted to find the linkage of corporate social performance with the financial performance of a firm in the context of Pakistan. This research has been conducted on fifteen companies from different sectors which have been listed on Pakistan Stock Exchange. Financial performance measures are ROA and ROE whereas for corporate social performance an index comprises of 24 items checklist has been employed to measure the significance of CSP over organization’s financial performance. The data has been collected from companies listed on Pakistan Stock Exchange for duration of six years. And in order to measure corporate social responsibility exercises, a questionnaire has been developed and got filled by various stakeholders. The results have been deduced by using SPSS software and various statistical methods have been used for the purpose of analyzing the results. The organizations who are actively participating in socially responsible activities have scored high on A and ROE which indicates they are highly correlated with each other hence impacting the financial performance of corporations. So it has been resulted in positive significant relationship between financial and corporate social performance. So it has been deduced that socially responsible activities have become immensely important for the companies in order to better maintain their financial performance. The results of this research has depicted that there exists a positive association between the two variables. Companies which are actively contributing towards charitable purposes and environmental safety are scoring high levels of returns and hence show better profitability