Managing corporate performance Investigating the relationship between corporate social responsibility and financial performance in emerging markets

Abstract

Purpose - Corporate social responsibility is important and fundamental to the sustainable operations of corporations. Similarly financial performance is undoubtedly fundamental to the continuing operating of any corporation. This paper aims to investigate the relationship between corporate social responsibility and firm financial performance. Design/methodology/approach - The main part of this paper is based upon an exploration of the relationship between corporate social responsibility and financial performance in developing countries. The authors do this by investigating the Istanbul Stock Exchange (ISE) 100 index companies and their social responsibility policy and financial indicators. The relationship between CSR and financial performance is empirically examined between 2005 and 2007 with different approaches and measurement methods. The authors show that some causality is related to lagging between periods for financial performance and CSR. Based upon previous empirical studies, this study conducts the analysis based on the assumption that there may be a relationship between firm size, profitability, risk level and CSR. Findings - In doing this analysis the authors found a relationship between firm size and corporate social responsibility. However the authors were not able to find any significant relationship between corporate social responsibility and financial performance/profitability. Research limitations/implications - The paper has implications in enhancing the understanding of performance management through understanding the relationship between corporate social responsibility and financial performance particularly in a developing country, although it is necessarily limited by the size of the sample. Originality/value - This paper increases the understanding of the relationship between corporate social responsibility and financial performance. This research is also the first research that has examined Turkish companies.