Effect of Corporate Social Responsibility on Financial Performance in Asian Firms - A Historical Empirical Analysis
Dam Thanh Huyen *
Thai Nguyen University of Economics and Business Administration, Tan Thinh Ward, Thai Nguyen City, Thai Nguyen, Vietnam.
Pham Minh Huong
Thai Nguyen University of Economics and Business Administration, Tan Thinh Ward, Thai Nguyen City, Thai Nguyen, Vietnam.
*Author to whom correspondence should be addressed.
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.
Keywords: Corporate social responsibility, Tobin’s Q, return on assets, Asian markets, financial performance, corporate governance, CLSA ratings