Corporate social responsibility (CSR) and firm's financial performance (FP) have been studied

for decades. Though many studies have been conducted, however, the direct impact of CSR on
firm's FP remained the focus of researchers. However, the findings of these studies are
inconsistent and inconclusive (Alafi & Hasoneh, 2012; Galbreath & Shum, 2012). Most of the
studies highlighted the positive impact of CSR on FP (Abu Bakar & Ameer, 2011; Van Beurden
& Gössling, 2008; Wu, Tsai, Cheng, & Lai, 2006). Few researchers have also reported negative
or no association between CSR and firm's FP (Smith, Yahya, & Marzuki Amiruddin, 2007;
Crisóstomo, Freire, & Vasconcellos, 2011). According to Wu (2006) and Van Beurden and
Gössling (2008), omitting intervening or moderating variables in CSR and FP association is one
of the important reasons for these inconclusive results in past studies. Further, a number of
scholars (i.e., Alafi & Hasoneh, 2012; Galbreath & Shum, 2012; Surroca, Tribó, & Waddock,
2010) have disparaged the methods used to examine the direct effect of CSR on FP. They argued
that results of direct influence of CSR on FP are not reliable due to possible mediation or
moderation mechanism, which is neglected in most of the studies. Neglecting intervening or
moderating factors leads towards biased results by overestimating the effect of CSR on FP
(Margolis & Walsh, 2003; McWilliams & Siegel, 2000). Additionally, a review of the literature
indicates that actual results are more complicated than the reported ones in different studies.

References

(Abu Bakar & Ameer, 2011; Alafi Assistant Professor & Jamiel Husain Al sufy Assistant
professor, 2012; Galbreath & Shum, 2012; Lima Crisóstomo, de Souza Freire, & Cortes de
Vasconcellos, 2011; Margolis & Walsh, 2003; McWilliams & Siegel, 2000; Smith, Yahya, &
Marzuki Amiruddin, 2007; Surroca, Tribó, & Waddock, 2010; Van Beurden & Gössling, 2008)

Bibliography

Abu Bakar, A. S., & Ameer, R. (2011). Readability of corporate social responsibility
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Alafi Assistant Professor, K., & Jamiel Husain Al sufy Assistant professor, F. (2012). Corporate
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Galbreath, J., & Shum, P. (2012). Do customer satisfaction and reputation mediate the CSR–FP
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Lima Crisóstomo, V., de Souza Freire, F., & Cortes de Vasconcellos, F. (2011). Corporate social
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