Academic journal article Asian Social Science

Influence of Corporate Social Responsibility (CSR) on Financial Efficiency of Company

Academic journal article Asian Social Science

Influence of Corporate Social Responsibility (CSR) on Financial Efficiency of Company

Article excerpt

Abstract

Corporate social responsibility is becoming a significant activity to businesses. There are a lot of theoretical studies examining corporate social responsibility's effect on company's operations. This article is devoted to study of dependence between corporate social responsibility and company's financial efficiency by means of statistical methods of analysis. The survey of this study is conducted on 10 large companies operating in oil and gas industry in Russia, between the years of 2009-2011. The obtained data from the base of the rating agency are analyzed through the Microsoft Office Excel statistical software. Analyses results revealed that that corporate social policy affects the financial efficiency of Russian oil-and-gas companies.

Keywords: corporate social responsibility, financial efficiency of company, stakeholder theory

1. Introduction

World community pays a lot of attention to corporate social responsibility today. Many companies conduct corporate social policy, realizing that ethical conduct of business opens new horizons for their further development. Spending funds on social and philanthropic programs companies reduce their current profit and create favorable social environment. Consequently holding to such stance promotes steady profit earnings in future and upholds their positions in terms of sustainable development of business. On the other hand Agency theory supposes that responsible business management primarily has positive impact on managers' profile raising, while shareholders bear expenses of corporate social responsibility (Blagov, 2004). Accordingly it if to regard maximization of shareholder utility function as primary objective of the company's activity management concept of corporate social responsibility becomes unnecessary, furthermore, it begins to do more harm than good (Blagov, 2006).

These disputes determined study of managerial nature of corporate social responsibility. In addition to social and environmental aspects of CSR attention started to be paid to managerial aspects, particularly the way by which the use of CSR instruments in purposes of harmonizing the interests of stakeholders and establishment of effective relations with them will allow the company to increase the efficiency of its activities, to maximize its value in the long term.

Companies are increasingly interested in how it is possible to measure the economic effect from implementation of CSR and what financial indicators are the subject of the impact of CSR. The main problem is the complexity in the analysis of the effect on company efficiency. There is a large number of diverse and contradictory studies of how social responsibility exercises influence over the company's financial performance. Nevertheless, common conclusions about the relation of CSR and performance results of the company haven't been received yet: some works deduced that it is a strictly positive correlation among these factors. Other researches revealed exceptionally negative relation. Third authors do deny the existence of such dependence (Nagomov & Solntseva, 2007). ft should also be noted that majority of studies may be disputable because of the difficulty in the search for the original data for the quantitative measurement of the economic effect of CSR.

In this paper we intend to define if implementation of corporate social policy actually impacts on financial efficiency of company. Besides that we will attempt to formulate recommendations relating to improvement of corporate governance and increase of financial efficiency of company.

Within the framework of corporate social responsibility, our study focuses on the notion that corporate social responsibility influences on financial efficiency of the company. In this context, the study begins by a literature review of relevant studies of corporate social responsibility impact on company efficiency, then will go on to development of hypotheses. …

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