Do Corporate Social Responsibilities Support Its Financial Performance? Evidence of the Listed Firms in Vietnam

Tran Dang Thanh Minh, Pham Thi Thu Hong, Le Thi Anh

Abstract


In the latest decades, corporate social responsibilities (CSR) are incrementally noticed in emerging countries regarding to the surge of globalization and the advance of social concerns. However, there exist opposing arguments on how CSR practices influence a firm’s financial performance (CFP), either in theoretical or empirical perspectives, causing many managers’ hesitation in CSR engagement. This study, therefore, examines the impacts of CSR on CFP, considering the individual effect of each CSR endeavor by using the data from listed firms’ financial statements during the period 2015-2019 and panel regression analysis methods. The findings reveal inconstant effects of different CSR activities on CFP. Specifically, a firm’s fulfillment of shareholders’ and customers’ interests contributes to raise its profitability, while its engagement in the benefits of employees and creditors causes a reduction in financial returns. Interestingly, the correlations between firms’ responsibilies towards regulators and suppliers and CFP are statistically insignificant. Furthermore, we make pairwise marginal comparisons to identify the distinctions of CSR-CFP relations across industries. The results only indicate that listed firms in Utilities sector have the lower level of CSR intensity than those in Consumer Discretionary and Consumer Staples sectors. The implications and limitations are also discussed in this study.

Keywords


Corporate Financial Performance (CFP); Corporate Social Responsibilities (CSR); Regression models; Vietnam

Full Text:

PDF

References


Adair, P., & Adaskou, M. (2015). Trade-off-theory vs. pecking order theory and the determinants of corporate leverage: Evidence from a panel data analysis upon French SMEs. Cogent Economics & Finance, 24(1). https://doi.org/10.1080/23322039.2015.1006477

Albertini, E. (2013). Does Environmental Management Improve Financial Performance? A Meta-Analytical Review. Organization & Environment, 26(4), 431–457. https://doi.org/10.1177%2F1086026613510301

Al-Mamun, A., & Seamer, M. (2021). Board of director attributes and CSR engagement in emerging economy firms: Evidence from across Asia. Emerging Markets Review, 46. https://doi.org/10.1016/j.ememar.2020.100749

Aras, G., Aybars, A., & Kutlu, O. (2010). Managing corporate performance: Investigating the relationship between corporate social responsibility and financial performance in emerging markets. International Journal of Productivity and Performance Management, 59(3), 229–254. https://doi.org/10.1108/17410401011023573

Auer, B. R., & Schuhmacher, F. (2016). Do Socially (Ir)Responsible Investments Pay? New Evidence from International ESG Data. The Quarterly Review of Economics and Finance, 59, 51–62. https://doi.org/10.1016/j.qref.2015.07.002

Ausat, S. A. A. (2018). The Relationship Between Corporate Governance and Financial Performance in Islamic Banks. Jurnal Ekonomi & Studi Pembangunan, 19(2), 91–100. https://doi.org/10.18196/jesp.19.2.5001

Bahadorestani, A., Naderpajouh, N., & Sadiq, R. (2020). Planning for sustainable stakeholder engagement based on the assessment of conflicting interests in projects. Journal of Cleaner Production, 242. https://doi.org/10.1016/j.jclepro.2019.118402

Belal, A. R. (2001). A Study of Corporate Social Disclosures in Bangladesh. Managerial Auditing Journal, 16, 274–289. https://doi.org/10.1108/02686900110392922

Bergmann, A. (2016). The Link between Corporate Environmental and Corporate Financial Performance—Viewpoints from Practice and Research. Sustainability, 8(12). https://doi.org/10.3390/su8121219

Birch, D., & Moon, J. (2004). Introduction. The Journal of Corporate Citizenship, 13, 18–23. Retrieved from http://www.jstor.org/stable/jcorpciti.13.18

Busch, T., & Friede, G. (2018). The Robustness of the Corporate Social and Financial Performance Relation: A Second-Order Meta-Analysis. Corporate Social Responsibility and Environmental Management, 25(4), 583–608. https://doi.org/10.1002/csr.1480

Carroll, A. B. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review, 4(4), 497–505. https://doi.org/10.2307/257850

Carroll, A. B. (1995). Stakeholder Thinking in Three Models of Management Morality: A Perspective with Strategic Implications. Helsinki: LSR-Publications.

Carroll, A. B. (2015). Corporate social responsibility: The centerpiece of competing and complementary frameworks. Organizational Dynamics, 44(2), 87–96. https://doi.org/10.1016/j.orgdyn.2015.02.002

Chen, H. (Amy), Karim, K., & Tao, A. (2021). The effect of suppliers’ corporate social responsibility concerns on customers’ stock price crash risk. Advances in Accounting, 52. https://doi.org/10.1016/j.adiac.2021.100516

Cochran, P. L., & Wood, R. A. (1984). Corporate Social Responsibility and Financial Performance. The Academy of Management Journal, 27(1), 42–56. https://doi.org/10.2307/255956

Crifo, P., Diaye, M.-A., & Oueghlissi, R. (2017). The effect of countries’ ESG ratings on their sovereign borrowing costs. The Quarterly Review of Economics and Finance, 66, 13–20. https://doi.org/10.1016/j.qref.2017.04.011

Darsono, S. N. A. C., Wong, W. K., Nguyen, T. T. H., Jati, H. F., & Dewanti, D. S. (2022). Good Governance and Sustainable Investment: The Effects of Governance Indicators on Stock Market Returns. Advances in Decision Sciences, 26(1), 69–101. https://doi.org/10.47654/v26y2022i1p69-101

Delmas, M. A., Nairn-Birch, N., & Lim, J. (2015). Dynamics of Environmental and Financial Performance. Organization & Environment, 28(4), 374–393. https://doi.org/10.1177%2F1086026615620238

Dobre, E., Stanila, G., & Brad, L. (2015). The Influence of Environmental and Social Performance on Financial Performance: Evidence from Romania’s Listed Entities. Sustainability, 7(3), 2513–2553. https://doi.org/10.3390/su7032513

Donaldson, T., & Preston, L. E. (1995). The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications. The Academy of Management Review, 20(1), 65-91. https://doi.org/10.2307/258887

Fernando, S., & Lawrence, S. (2014). A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and intitutional work. The Journal of Theoretical Accounting, 10(1), 149–178.

Freeman, R. E., & Dmytriyev, S. (2017). Corporate Social Responsibility and Stakeholder Theory: Learning from Each Other. Symphonya Emerging Issues in Management, 1, 7–15. https://doi.org/10.4468/2017.1.02freeman.dmytriyev

Friede, G., Busch, T., & Bassen, A. (2015). ESG and Financial Performance: Aggregated Evidence from More Than 2000 Empirical Studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917

Friedman, M. (1970). The Social Responsibility of Business Is to Increase Its Profits. Corporate Ethics and Corporate Governance, 173–178. https://doi.org/10.1007/978-3-540-70818-6_14

Gallardo-Vázquez, D., Barroso-Méndez, M., Pajuelo-Moreno, M., & Sánchez-Meca, J. (2019). Corporate Social Responsibility Disclosure and Performance: A Meta-Analytic Approach. Sustainability, 11(4). https://doi.org/10.3390/su11041115

Garcia, A. S., Mendes-Da-Silva, W., & Orsato, R. J. (2017). Sensitive industries produce better ESG performance: Evidence from emerging markets. Journal of Cleaner Production, 150, 135–147. https://doi.org/10.1016/j.jclepro.2017.02.180

Gond, J.-P., El Akremi, A., Igalens, J., Swaen, V. (2010). A corporate social responsibility–corporate financial performance behavioural model for employees. In Smith, C., Bhattacharya, C. B., Vogel, D., Levine, D. (Eds.), Global challenges in responsible business: Corporate responsibility and strategy: 13-48. Cambridge, England: Cambridge University Press. https://doi.org/10.1017/CBO9780511777660.003

Han, J.-J., Kim, H. J., & Yu, J. (2016). Empirical Study on Relationship between Corporate Social Responsibility and Financial Performance in Korea. Asian Journal of Sustainability and Social Responsibility, 1(1), 61–76. https://doi.org/10.1186/s41180-016-0002-3

Ho, N. T. T., & Yekini, L. S. (2014). Investigating the link between CSR and Financial performance – Evidence from Vietnamese listed companies. British Journal of Arts and Social Sciences, 17(1), 85-101. Retrieved from http://hdl.handle.net/10545/624269

Ilter, C. (2020). A Discussion Paper on Accounts Payable Ratio. Acta Oeconomica Pragensia, 27(3), 85–94. https://doi.org/10.18267/j.aop.630

Jamali, D., & Karam, C. (2016). Corporate Social Responsibility in Developing Countries as an Emerging Field of Study. International Journal of Management Reviews, 20(1), 32–61. https://doi.org/10.1111/ijmr.12112

Kanakriyah, R. (2020). Dividend Policy and Companies’ Financial Performance. The Journal of Asian Finance, Economics and Business, 7(10), 531–541. https://doi.org/10.13106/jafeb.2020.vol7.no10.531

Kim, E.-H., & Lyon, T. P. (2015). Greenwash vs. Brownwash: Exaggeration and Undue Modesty in Corporate Sustainability Disclosure. Organization Science, 26(3), 705–723. https://doi.org/10.1287/orsc.2014.0949

Li, D., Cao, C., Zhang, L., Chen, X., Ren, S., & Zhao, Y. (2017). Effects of corporate environmental responsibility on financial performance: The moderating role of government regulation and organizational slack. Journal of Cleaner Production, 166, 1323–1334. https://doi.org/10.1016/j.jclepro.2017.08.129

Lin, C.-S., Chang, R.-Y., & Dang, V. (2015). An Integrated Model to Explain How Corporate Social Responsibility Affects Corporate Financial Performance. Sustainability, 7(7), 8292–8311. https://doi.org/10.3390/su7078292

López-Arceiz, F. J., Bellostas, A. J., & Rivera, P. (2017). Twenty Years of Research on the Relationship Between Economic and Social Performance: A Meta-analysis Approach. Social Indicators Research, 140(2), 453–484. https://doi.org/10.1007/s11205-017-1791-1

Low, M. P. (2016). Corporate Social Responsibility and the Evolution of Internal Corporate Social Responsibility in 21 st Century. Asian Journal of Social Sciences and Management Studies, 3(1), 56–74. https://doi.org/10.20448/journal.500/2016.3.1/500.1.56.74

Lyon, T., Lu, Y., Shi, X., & Yin, Q. (2013). How Do Investors Respond to Green Company Awards in China? Ecological Economics, 94, 1–8. https://doi.org/10.1016/j.ecolecon.2013.06.020

Madueño, J. H., Jorge, M. L., Conesa, I. M., & Martínez-Martínez, D. (2016). Relationship between corporate social responsibility and competitive performance in Spanish SMEs: Empirical evidence from a stakeholders’ perspective. BRQ Business Research Quarterly, 19(1), 55–72. https://doi.org/10.1016/j.brq.2015.06.002

Mcguire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate Social Responsibility and Firm Financial Performance. Academy of Management Journal, 31(4), 854–872. https://doi.org/10.5465/256342

Mcwilliams, A., & Siegel, D. S. (2000). Corporate Social Responsibility and Financial Performance: Correlation or Misspecification? Strategic Management Journal, 21(5), 603–609. https://doi.org/10.1002/(sici)1097-0266(200005)21:5%3C603::aid-smj101%3E3.0.co;2-3

Ngoc, N. B. (2018). The Effect of Corporate Social Responsibility Disclosure on Financial Performance: Evidence from Credit Institutions in Vietnam. Asian Social Science, 14(4). https://doi.org/10.5539/ass.v14n4p109

Nollet, J., Filis, G., & Mitrokostas, E. (2016). Corporate social responsibility and financial performance: A non-linear and disaggregated approach. Economic Modelling, 52, 400–407. https://doi.org/10.1016/j.econmod.2015.09.019

Okafor, A., Adusei, M., & Adeleye, B. N. (2021). Corporate social responsibility and financial performance: Evidence from U.S tech firms. Journal of Cleaner Production, 292. https://doi.org/10.1016/j.jclepro.2021.126078

Oktarina, A., & Mu’alim, A. (2017). Implementation of Islamic Business Ethics on Small and Medium-sized Enterprises (SMEs): Case study of SMEs XYZ. Jurnal Ekonomi & Studi Pembangunan, 18, 155–163. https://doi.org/10.18196/jesp.18.2.4042

Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate Social and Financial Performance: A Meta-analysis. Organization Studies, 24(3), 403–441. https://doi.org/10.1177/0170840603024003910

Porter, M. E., & Kramer, M. R. (2018). Creating Shared Value. Managing Sustainable Business, 323–346. https://doi.org/10.1007/978-94-024-1144-7_16

Prasetya, H. D., Saraswati, E., & Ghofar, A. (2017). Corporate social responsibility disclosure and corporate financial performance: a meta-analysis. Russian Journal of Agricultural and Socio-Economic Sciences, 68(8), 3–11. https://doi.org/10.18551/rjoas.2017-08.01

Preston, L. E., & O’Bannon, D. P. (1997). The Corporate Social - Financial Performance Relationship - A Typology and Analysis. Business & Society, 36(4), 419–429. https://doi.org/10.1177/000765039703600406

Quyen, P., Ha, N., Darsono, S., & Minh, T. (2021). Income Diversification and Financial Performance: The Mediating Effect of Banks’ Size, Ownership Structure, and the Financial Crisis in Vietnam. Journal of Accounting and Investment, 22(2), 296-309. https://doi.org/10.18196/jai.v22i2.10775

Rahman, S. (2011). Evaluation of definitions: ten dimensions of corporate social responsibility. World review of business research, 1(1), 166-176.

Ruiz-Pérez, F., Lleo, A., & Ormazabal, M. (2021). Employee sustainable behaviors and their relationship with Corporate Sustainability: A Delphi study. Journal of Cleaner Production, 329. https://doi.org/10.1016/j.jclepro.2021.129742

Salehi, M., DashtBayaz, M. L., & Khorashadizadeh, S. (2018). Corporate social responsibility and future financial performance. EuroMed Journal of Business, 13(3), 351–371. https://doi.org/10.1108/emjb-11-2017-0044

Sardana, D., Gupta, N., Kumar, V., & Terziovski, M. (2020). CSR “sustainability” practices and firm performance in an emerging economy. Journal of Cleaner Production, 258. https://doi.org/10.1016/j.jclepro.2020.120766

Seetharaman, S., Moorthy, K., Saravanan, S., & Pitta, S. (2016). Impact of Selling, General and Administrative expenses on financial sustainability of IT companies listed in S&P 500. Journal of Distribution Science, 14(4), 13–20. https://doi.org/10.15722/jds.14.4.201604.13

Soana, M. (2011). The Relationship Between Corporate Social Performance and Corporate Financial Performance in the Banking Sector. Journal of Business Ethics, 104(1), 133–148. https://doi.org/10.1007/s10551-011-0894-x

Su, R., Liu, C., & Teng, W. (2020). The Heterogeneous Effects Of CSR Dimensions On Financial Performance – A New Approach For CSR Measurement. Journal of Business Economics and Management, 21(4), 987–1009. https://doi.org/10.3846/jbem.2020.12394

Taliento, M., Favino, C., & Netti, A. (2019). Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe. Sustainability, 11(6). https://doi.org/10.3390/su11061738

Tiwari, A. K., & Ahamed, N. (2018). Executive Tenure and Firm Performance: An Empirical Examination of the Indian Corporate Landscape. (2018). Advances in Decision Sciences, 22(1), 321–350. https://doi.org/10.47654/v22y2018i1p321-350

Tran, D. T. M., & Nguyen, T. T. H. (2021). Revisiting the nexus between Corporates’ Environmental, Social, and Governance Responsibilities and Financial Performance: Proposing a Hybrid Approach. The 4th International Conference on Finance, Accounting and Auditing, 756–768.

Tseng, M.-L., Chang, C.-H., Lin, C.-W., Nguyen, T. T. H., & Lim, M. K. (2020). Environmental responsibility drives board structure and financial and governance performance: A cause and effect model with qualitative information. Journal of Cleaner Production, 258. https://doi.org/10.1016/j.jclepro.2020.120668

Waddock, S. A., & Graves, S. B. (1997). The Corporate social performance - Financial performance link. Strategic Management Journal, 18(4), 303–319. https://doi.org/10.1002/(sici)1097-0266(199704)18:4%3C303::aid-smj869%3E3.0.co;2-g

Yoon, B., & Chung, Y. (2018). The effects of corporate social responsibility on firm performance: A stakeholder approach. Journal of Hospitality and Tourism Management, 37, 89–96. https://doi.org/10.1016/j.jhtm.2018.10.005

Zhao, C., Guo, Y., Yuan, J., Wu, M., Li, D., Zhou, Y., & Kang, J. (2018). ESG and Corporate Financial Performance: Empirical Evidence from China’s Listed Power Generation Companies. Sustainability, 10(8). https://doi.org/10.3390/su10082607




DOI: https://doi.org/10.18196/jesp.v23i1.14187

Refbacks

  • There are currently no refbacks.


Copyright (c) 2022 Tran Dang Thanh Minh, Pham Thi Thu Hong, Le Thi Anh

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

 

Office:
Redaksi JESP UMY, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183
Telp: (0274) 387656 ext.184
Fax: (0274) 387646
Email: jesp@umy.ac.id


Jurnal Ekonomi & Studi Pembangunan (JESP) is licensed under Creative Commons Attribution-ShareAlike 4.0 International.