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FIN921 Impact of CSR on Corporate Performance Assignment Sample

Task requirements:

1. Must be completed as a group work (2 people) to produce one report.

2. You must build up your own argument from reading the relevant journal articles.

3. You should search for 8 key journal articles, which is relevant to the pre-assigned 4 journal articles provided above.

4. The maximum length of the report (including the title page, abstract, body text, in- text citation and reference list) is 2,000 words. Report outside the scope of word limit of +/- 5% will be penalised with 5% penalty.

5. An abstract of no more than 150 words is to preface thereport.

6. The report should follow the structure including Abstract, Introduction, Body text, Conclusion and the Reference List.

7. Referencing and in-text citation must follow an acceptable academic format using the Journal of Finance referencing style. Please follow the guidelines ("Referencing Guide - Journal of Finance") uploaded on the FIN 921 Moodle site. All sourced material, including direct quotations, must be appropriately acknowledged.

8. Use your own words. Reference wherever necessary. Do NOT plagiarise. 9. Each group makes ONE soft-copy TURNITIN submission only.



Over the last decades, significant research has been conducted on the impacts and challenges of corporate social responsibility (CSR). A growing body of finance research shows that there are several social and economic benefits of conducting CSR activities such as gaining customer loyalty, increasing brand competitiveness and earning better social perception in front of their consumers. Although existing studies offer evidence to support these benefits, it fails to fully explain how these activities directly impact corporate performance in terms of financial stability. Thus, the underlying research question for this review is that is there a direct positive or negative impact of CSR on financial performance of a corporation.


Economic benefits

Several studies find direct evidence of benefits of being engaged in corporate social responsibilities. One of them is that CSR inspires brand loyalty among customers. For example, in the study conducted by Moon et al. (2015), stated that earlier studies on consumers’ corporate association significantly influence the responses for consumer products. According to their findings, customers' perceptions of a company's corporate competence were favourably and substantially linked to their own personal self-concept. The following is their conceptual framework.

Figure 1: Conceptual framework of Moon et al. (2015)

According to the results of their survey for assignment help , there was a favourable and substantial correlation between consumer CSR affiliations and their social self-concept. In addition, research seems that customers' loyalty to a company's brand is favourably and strongly linked to their personal and social self-concepts. These findings are in accordance with earlier studies.

Similar research was conducted by Huang et al. (2017) which aimed to investigate how service quality and CSR has an impact on customer-company identification (CCI) and what consequences it has on customer loyalty. It is because, as per customer perception, the companies involved in CSR activities offer its customers a feeling of self-enhancement. This research studied how service quality and CSR affect CCI over time to assist managers enhance the efficacy of their efforts to improve CCI (figure 2). In this longitudinal research of restaurant consumers, the researchers used latent growth curve modelling and found that the predictions were supported by the data.

Figure 2: Conceptual framework developed by Huang et al. (2017)

An identical study by Ajina et al. (2019) identifies the gap in the literature of CSR. Ajina et al. (2019) mentioned that earlier studies on CSR were limited to the study of consumer behaviour; there are limited studies on the measure of consumers’ awareness level and perception on CSR. As stated by Ajina et al. (2019), previous studies majorly assumed that customers are well aware of CSR, however, the research discovered that the awareness among customers is quite low. According to their findings, even though CSR awareness and perception positively impacts CSR expectation, it does not impact loyalty positively. However, customer’s support is positively impacted by CSR expectations which in turn impacts loyalty positively (Figure 3).

Figure 3: Findings of Ajina et al. (2019)

On the other hand, the study conducted by Boulouta and Pitelis (2014), argues that companies are under growing pressure to adopt or enhance their socially responsible business practices (CSR). There is a moral as well as a strategic necessity to this pressure. According to the moral imperative, corporations have a responsibility to their shareholders, but also to various stakeholders, including the general public, and so they have a role to play in alleviating some of the "ills of globalisation." This idea has been extensively addressed in the literature. A claim that CSR may help companies be more competitive is at the heart of this strategic imperative. Their findings imply that national CSR performance may significantly contribute to increased national competitiveness, which is about equivalent to GDPC in the first instance. Even in nations with a modest level of innovation, it seems to have a greater influence on the economy and society. These nations may be able to make up for a lack of strong national innovation records by using CSR-based differentiating methods. Their findings seem to be in line with other studies in this field.

The research by Moon et al. (2015) used the primary data collection method, the researcher conducted a survey to collect data and to assess the relationship between consumer corporate association and corporate brand loyalty. However, the method was limited due to the fact the participants in the survey had to rely on their memory regarding products and the manufacturer of those products. Huang et al. (2017) research collected data from customers of reputed chain restaurants in Taiwan. Huang et al. (2017) justifies the selection of restaurants for the research by stating that customers can easily develop a personal identification with restaurants as they facilitate characteristics such as design, idiosyncrasy and atmosphere. Similarly, the findings of the investigation by Ajina et al. (2019) confirmed that customers’ awareness regarding CSR activities have a positive impact on the perception of CSR in the customers of Saudi Arabia.

Social benefits

Apart from economic benefits several authors have found evidence of social benefits to conduct CSR activities as well. According to Barnett et al. (2020), it is the obligation of businesses to contribute to the well-being of society as a whole, and this is what corporate social responsibility (CSR) is all about. Companies often take part in a wide range of CSR projects, many of which claim to have a positive impact on society as a whole. Companies, for example, help social change agents by providing them with technology and knowledge. He conducted a cluster analysis of studies conducted on CSR and firm performance and found out that major emphasis has been provided on topics of business ethics, challenges and government.


Figure 4: Cluster analysis conducted by Barnett et al. (2020)

On the other hand, Murshed et al. (2021) opines that academics and best practices place a high importance on CSR efforts. Its conceptual underpinning focuses on the processes and initial conditions that underlie how workers' knowledge and attitudes about a company's CSR activities impact their job satisfaction. The following are the tenets of their philosophy: (i) workers' opinions of a company's social responsibility activities and their job happiness, and (ii) procedural justice—how a person perceives the fairness of the methods by which choices are made or allocations are established. Procedural justice is a fairness-based approach that the authors believe will have a greater impact on the workers' views of CSR and CSR value to the employee. The study by Murshed et al. (2021) supports its assertions with a survey. The conceptual model was tested using a cross-sectional survey approach. One of their primary goals was to choose a broad group of employees from a variety of sectors, job titles and company sizes. This helps in justifying and substantiating their hypotheses.

In a separate context, it has been observed that gender representation has also impacted firms and it is considered as a significant CSR activity to promote diversity. In the study conducted by Cabeza?García et al. (2018), it was evidenced that only 23% of the board members of the top publicly listed firms are women, according to current statistics, and that number drops to 20% in Spain. There is still a long way to go, but since the European Commission first placed this problem on the political agenda in 2010, there has been a considerable gain of 11 percentage points.

Impact on firm performance

There is multiple evidence that show that there is a direct financial challenge for engaging with CSR activities. Consistent with the findings of the prior study, Rhou et al. (2016) argues that A growing number of businesses are concerned about corporate social responsibility (CSR) since they are judged not just on their financial success but also on their social impact. Consumers in the 20- to 35-year-old age bracket, known as "millennials," frequent restaurants in greater numbers than any other demographic. These diners base their choice of restaurant on more than just the quality of the food; rather, they base it on how they feel about the restaurant's social responsibility as well. The authors support their data with secondary sources such as restaurants’ annual reports and CSR statistics. According to their findings, CSR initiatives have a favourable financial impact on restaurants only if they are well publicised, according to the research. Positive CSR operations will not provide financial rewards if firms fail to interact with stakeholders. There are 0-10 levels of positive CSR, with a mean of 1.507, whereas there are 0-13 levels of negative CSR, with an average of 1.640. The number of articles that mention a company's CSR efforts positively has a mean value of 2.604, with a range of 0–41 (Figure 5).


Figure 5: Findings of Rhou et al. (2016)

In their study, Alikaj et al. (2017) state that CSR and financial success have not been conclusively linked. When it comes to financial success, for example, there is evidence that social responsibility might have an adverse effect. A study of the paper industry indicated that companies with pollution controls performed worse in terms of ROE and ROC than those who didn't apply pollution controls. Several studies have indicated a negative correlation between the two. The authors back up this argument by demonstrating that the additional costs associated with being socially responsible might place a company at a financial disadvantage when compared to companies that do not take such measures. KLD social responsibility metrics were shown in this study to be connected with greater ROE, ROA, and ROS for 469 of the Fortune 500 businesses analysed by the authors of this study.

In this aspect, it becomes essential to underline that providing profits to investors is imperative for any firm. Greenwood and Van Buren III (2010), argue that the moral treatment of stakeholders depends on the trustworthiness of the connection between the firm and its stakeholders. Once a stakeholder accepts a financial investment, the company has an obligation to do all in its power to maximise that shareholder's gains (or limit their losses). The phrase "investment" is used here to refer to everything that is useful to the company's operations, including personnel, financial resources, and a place to operate. Because the corporation has more power than the stakeholder, it can't be relied on to deliver the aforementioned advantage to that stakeholder consistently. The moral quality of trustworthiness has a direct correlation to the degree to which a company's actions may be relied upon. With the help of these findings, they develop a split trust continuum. According to the authors, there is a qualitative difference between the existence of mistrust and the lack of trust. In contrast to a single trust continuum, shown in Figure 6, a divided trust continuum is shown. This finding suggests that in order to calculate the "distrust-lack of distrust" scale, both the agent's behaviour predictability and the principal's degree of suspicion must be considered.

Figure 6: Split trust continuum developed by Greenwood and Van Buren III (2010)

Contrary to popular belief, the work of Pope and Lim (2017) suggest that the structure of CSR has a direct connection with firm performance. In their work, they suggest that the mobilising structures of international organisations impact the spread of knowledge and the subsequent perception of its performance. On the basis of empirical evidence, we concentrate on company engagement in international business organisations that promote corporate social responsibility (CSR). The authors speculate on how these global CSR organisations affect both corporate participation in CSR frameworks and public perceptions of the quality of CSR activities.

Su et al. (2020) has raised the question of whether CSR improves corporate financial performance (CFP) has significant effects on how a company decides to prioritise CSR. as stated by Su et al. (2020) academics and the business world are becoming more interested in CSR in growing economies like China. Su et al. (2020) mentioned that organisational behaviours differ across companies in developed markets and emerging nations. As a result, it may not be appropriate to mechanically extrapolate CSR findings from developed economies to emerging markets.


After conducting a thorough literature review and developing common themes such as social and economic benefits of CSR along with the impact of corporate performance, it can be concluded that there is no disagreement among the authors that CSR significantly influences the perception of not only consumers but also employees as they feel more motivated to work for a firm whose value and ethics are aligned with their personal ethical standpoint. However, there is still a significant gap in literature regarding the impact of CSR on firm performance and there is further scope of research in the area where financial ratio analysis can be done to identify the ROI and cost of CSR for an organisation.  


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