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Does CSR disclosure influence financial performance of firms? Evidence from an emerging economy

Does CSR disclosure influence financial performance of firms? Evidence from an emerging economy This study aims to empirically examine the relationship between corporate social responsibility disclosure (CSRD) and financial performance (FP) in Indian firms.Design/methodology/approachData for CSRD is collected by conducting content analysis of CSRD in annual reports of the sampled firms. A multidimensional measure of CSRD is constructed based on the stakeholder theory, consisting of six stakeholder groups – employees, customers, investors, community, environment and others. The aggregate CSRD measure is created by combining disclosure of the six CSR dimensions. Multiple regression analysis is used to examine the CSRD–FP linkage, controlling for the confounding effects of size, risk, age, industry, ownership and period.FindingsThe results of this study indicate that the aggregate CSRD measures, both for quality and quantity, have a positive association with the accounting measures of firms’ FP. However, the market measure of FP is observed to have a statistically insignificant association with aggregate quality and quantity of CSRD of Indian firms.Practical implicationsThe results reveal that adopting transparent and extensive CSRD is relevant for the profitability of firms, and that government interventions are required to promote CSR programs, with a specific focus on the CSR dimensions that provide no apparent financial gains.Social implicationsThis study recommends the adoption and reporting of CSR practices by Indian firms for their stakeholders.Originality/valueThis study contributes to the scarce literature on the CSRD–FP linkage in the context of emerging economies by using a more inclusive data set, creating a reliable measure of CSRD applicable to a large universe of firms and including relevant control variables that affect the CSRD–FP relationship. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Sustainability Accounting, Management and Policy Journal Emerald Publishing

Does CSR disclosure influence financial performance of firms? Evidence from an emerging economy

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2040-8021
eISSN
2040-8021
DOI
10.1108/sampj-02-2018-0042
Publisher site
See Article on Publisher Site

Abstract

This study aims to empirically examine the relationship between corporate social responsibility disclosure (CSRD) and financial performance (FP) in Indian firms.Design/methodology/approachData for CSRD is collected by conducting content analysis of CSRD in annual reports of the sampled firms. A multidimensional measure of CSRD is constructed based on the stakeholder theory, consisting of six stakeholder groups – employees, customers, investors, community, environment and others. The aggregate CSRD measure is created by combining disclosure of the six CSR dimensions. Multiple regression analysis is used to examine the CSRD–FP linkage, controlling for the confounding effects of size, risk, age, industry, ownership and period.FindingsThe results of this study indicate that the aggregate CSRD measures, both for quality and quantity, have a positive association with the accounting measures of firms’ FP. However, the market measure of FP is observed to have a statistically insignificant association with aggregate quality and quantity of CSRD of Indian firms.Practical implicationsThe results reveal that adopting transparent and extensive CSRD is relevant for the profitability of firms, and that government interventions are required to promote CSR programs, with a specific focus on the CSR dimensions that provide no apparent financial gains.Social implicationsThis study recommends the adoption and reporting of CSR practices by Indian firms for their stakeholders.Originality/valueThis study contributes to the scarce literature on the CSRD–FP linkage in the context of emerging economies by using a more inclusive data set, creating a reliable measure of CSRD applicable to a large universe of firms and including relevant control variables that affect the CSRD–FP relationship.

Journal

Sustainability Accounting, Management and Policy Journal – Emerald Publishing

Published: Aug 3, 2021

Keywords: CSR disclosure; Content analysis; Financial performance; Emerging economy

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