Academic journal article Management & Marketing

Corporate Social Responsibility and Corporate Performance: Empirical Evidence from a Panel of the Bucharest Stock Exchange Listed Companies

Academic journal article Management & Marketing

Corporate Social Responsibility and Corporate Performance: Empirical Evidence from a Panel of the Bucharest Stock Exchange Listed Companies

Article excerpt

Introduction

Social issues have been the center of debates for centuries, but only recently researchers, academicians, and practitioners started to consider these social issues important aspects for a company strategy associated with the responsible management system (Wood, 1991). Philanthropy and social impact are considered the heart and soul of a corporation (Levy, 1999). Through social impact, companies must be in line with both their business objectives but also with earning profit (heart), as well as expressing the business ethics of serving society (soul).

In recent years, organizations and societies increased their attention towards companies' social practices (Margolis and Walsh, 2001) and identified these practices as corporate social responsibility (hereinafter 'CSR') practices (Carroll, 1979). Companies which clearly understood the importance of CSR, and their impact on society, as well as the benefits on the long term, integrated CSR practices into their core business strategies on a voluntary basis. The benefits arising from implementing CSR into the company's strategies are the following: a source of leverage for the company, a dynamic and important resource for competitive advantage (Porter and Kramer, 2006), a proactive strategy for business, and an important financial and effective marketing instrument to generate and to maintain a competitive advantage (Maignan and Ferrell, 2001; Drumwright, 1994). Thus, corporations became fully aware of their interrelationship with the society in which they operate. In other words, corporations' survival and competitiveness depends on their acceptance to understand that 'doing well' is not enough anymore and that 'doing better' is expected more frequently from the business decision makers as companies managers and shareholders who take part at a company social capital (Stroup and Newbert, 1987).

Companies' managers and shareholders have been often criticized for their goals/ambitions in maximizing companies' profits regardless of the effects of the corporate strategy on a wide range of stakeholders (e.g. suppliers, environment, customers, employees, etc.) in order to meet the companies' objectives. However, some companies' managers have underlined that CSR is a necessary investment which responds to the companies' objectives and also adds societal value, while others considered CSR an inconsistent effort which can affect the companies' shareholders' wealth (Friedman, 1970). As Jenkins (2005) argued, companies only focus should no longer be on maximizing profits or increasing market share, but to become conscious and to make a prime objective in allocating the company's resources efficiently in such a way that the company value is maximized (e.g. brand value, image value, market value, etc.) which is actually a CSR strategy.

In the last two decades there has been noticed an adjustment and increased attention regarding the link between the companies' affects and decisions, state, and society (Edenkamp, 2002). These turns of events have constrained many companies to engage in an extensive range of CSR practices. Thus, the CSR movement is spreading fast all over the world and many companies nowadays have adopted CSR. For these reasons, researchers developed, in recent years, a large amount of methods and frameworks in order to examine the magnitude and the value of CSR in relation with the companies' performance. Researchers, scholars and academicians still continue to debate the legitimacy of CSR, its benefits, and the relation with the company's financial performance (hereinafter 'CFP') (Tsoutsoura, 2004; McWilliams and Siegel, 2000). This is actually the point of tension in the CSR literature because of the lack of an accepted framework and methodology of studying CSR. This divergence has prompted many researchers to examine whether there is or not a relation between CSR and CFP. Whether an active involvement in CSR practices leads to an increased CFP, a shadow of doubt persists to exist (Dusuki and Dar, 2005). …

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