Looking for evidence of the relationship between corporate social responsibility and corporate financial performance in an emerging market

Abstract

Purpose

The purpose of this paper is to examine the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) of Malaysian public listed companies (PLCs) as an emerging market setting.

Design/methodology/approach

A longitudinal data analysis with a large‐sample testing was carried out from 200 Malaysian PLCs by using panel data analysis during a seven‐years period. The statistical power with fixed effect and random effect model was utilized.

Findings

Results of earlier estimations indicate that there are positive and significant related of the CSR on CFP. Two of the CSR dimensions, namely employee relations and community involvement, were found to be positively related to financial performance. This proves that CSR practices can be considered as effort to enhance the financial performance of PLCs in Malaysia. The results also reveal that there is limited evidence of the relationship between CSR and CFP in the longterm.

Practical implications

These findings suggest that Malaysian PLCs should be involved consistently in their CSR practices because CSR has a significant impact on improving financial performance in Malaysian PLCs.

Originality/value

The majority of studies on CSR in Malaysia pertain to the analysis of such reporting and motivations of managers toward CSR practices. This study conducts a comprehensive empirical research on the relationship between CSR and CFP in Malaysian PLCs.

Citation

Saleh, M., Zulkifli, N. and Muhamad, R. (2011), "Looking for evidence of the relationship between corporate social responsibility and corporate financial performance in an emerging market", Asia-Pacific Journal of Business Administration, Vol. 3 No. 2, pp. 165-190. https://doi.org/10.1108/17574321111169849