Effect of Corporate Social Responsibility on Financial Performance in Asian Firms - A Historical Empirical Analysis

Abstract

Aims: This study aims to examine whether corporate social responsibility (CSR) has a positive influence on a firm’s financial performance in Asian emerging markets. Specifically, it investigates the relationship between CSR and two financial performance indicators: market valuation (Tobin’s Q) and operating performance (ROA). Study Design: This is a quantitative cross-sectional study using regression-based statistical modeling to evaluate CSR’s impact on financial outcomes. Place and Duration of Study: The study analyzes secondary data from 50 companies across 11 Asian countries, using fiscal year 2009 reports evaluated by Credit Lyonnais Securities Asia (CLSA). Methodology: CSR scores (1–5) were assigned by CLSA based on five dimensions: environmental impact, social impact, governance, transparency, and disclosure quality. Financial data, including Tobin’s Q and ROA, were collected from COMPUSTAT. Regression models were used to test the direct effect of CSR on financial performance and the moderating effect of country-level corporate governance on the effect of CSR on Tobin’s Q and ROA. Control variables included corporate governance score, firm size (log sales), debt-to-equity ratio, and sales growth. Results: CSR scores were found to be significantly and positively associated with both Tobin’s Q (β = 0.21, P = .05) and ROA (β = 0.02, P = .05). This means that the integration of CSR into enterprises’ activities can bring substantial benefits for their market valuation and operating performance. The interaction between CSR and country-level corporate governance was not statistically significant, indicating no moderating effect and implying that CSR effectiveness are not affected by institutional distance between countries.