Received: 23 July 2020 Revised: 13 August 2020 Accepted: 28 August 2020

DOI: 10.1002/csr.2048

RESEARCH ARTICLE

Corporate social responsibility and financial performance of

companies: The puzzle of concepts, definitions and assessment
methods

Gerda Barauskaite1 | Dalia Streimikiene2

1
Kaunas Faculty, Vilnius University,
Muitines 8, LT 44280, Kaunas, Lithuania
2
Mykolas Romeris University, Ateities 20,
Vilnius, LT-08303, Lithuania
Correspondence
Dalia Streimikiene, Faculty of Public
Governance and Business, Mykolas Romeris
University, Ateities g. 20 LT-08303 Vilnius,
Lithuania.
Email: dalia@mail.lei.lt
Abstract
The definition of corporate social responsibility (CSR) states that companies must not
only pursue their main goal—to maximize profits, but also contribute to the well-
being of society through voluntary efforts. The importance of CSR in today's global
world is growing. It is becoming mandatory for companies to engage in socially
responsible activities to support the growth of their business. It is argued that compa-
nies pursuing CSR initiatives can gain a competitive advantage over other competi-
tors due to creation of a good public image or reputation and generate higher profits
and a return on investment however some authors disagree with this. The aim of this
article is to analyse the benefits and drawbacks of CSR based on systematic literature
review and to develop the conceptual framework for linking CSR with the financial
performance of companies. The conducted analysis revealed that in most studies the
positive or neutral relationship between CSR and financial results were claimed.
Though the negative and alternative connections between these issues are less fre-
quently identified in scientific articles, they cannot be excluded from the analysis and
require certain attention and further consideration.

KEYWORDS

corporate social responsibility, financial performance, relationship, sustainable development

1 | I N T RO DU CT I O N Sarnacchiaro, 2017). There is no doubt that the long-term success of a

In the recent years of fast changes and major global risks, in order to
successfully maintain a credible image of the organization, it is very
important to maintain a balance between the financial benefits to the
organization, public welfare and the preservation of the environment
(Griffin, 2010; Lu, Ren, Qiao, Lin, & He, 2019; Park, Lee, & Kim, 2014).
To function successfully, organizations must inevitably adapt to the
process of globalization and the changing values of society: from
working relationships to partnerships, from quick and easy profits to
long-term sustainable business development, from self-interest to
responsibility to society and nature (Matten & Moon, 2008). All this
dictates the need for companies to undertake socially responsible
activities, as sustainable, responsible and ethical activities can provide
the greatest value of every organization (Boccia
business depends on the company's ability to integrate successfully
into its environment. Therefore, the modern business environment
increasingly encourages the application or implementation of the con-
cept of corporate social responsibility (CSR), which would encourage
the company to operate transparently, protect the environment and
focus on public welfare (Eckert, 2017). According to Chen, Liu, and
Qin (2019), the implementation of CSR concepts in companies
strengthens competitive advantage, improves reputation, reduces
employee turnover, ensures customer and investor friendliness and
brings economic benefits, that is, can positively affect the company's
financial condition and market value (Castaldo, Perrini, Misani, &
Tencati, 2009; Rindova, Williamson, & Petkova, 2010; Werder, 2008).
CSR is becoming a part of a successful business strategy and it is even
& an inevitable necessity today. The impact of CSR on the financial

Corp Soc Responsib Environ Manag. 2020;1–10. wileyonlinelibrary.com/journal/csr © 2020 ERP Environment and John Wiley & Sons Ltd 1
2 BARAUSKAITE AND STREIMIKIENE
results of an organization is a relevant part of the management pro-
cesses of modern organizations (Melo & Galan, 2011).
Various authors provided different descriptions of the CSR con-
cept and its implications to the society (Han, Yu, & Kim, 2019;
Lindgreen & Swaen, 2010; Riera & Iborra, 2017; Weber, 2008), also
various advantages and disadvantages of CSR were discussed in the
scientific literature (Stanaland, Lwin, & Murphy, 2011;
Windsor, 2013); while others just showed how CSR concepts could
be comprehended and implemented as a business strategy for long-
term sustainable growth and competitive advantage (Bhattacharya &
Sen, 2004; Sen & Bhattacharya, 2001. Xuan and Teal (2011)
suggested the complete definition of Carroll. The definition of CSR
given by Carroll is still the most-generally acknowledged and utilized
in practical and academic studies (Han et al., 2019; Weber, 2008),
despite the fact there are still ongoing questions and confusions on
it. However, the authors have provided contradicting explanations
about linkages between CSR and financial performance of companies
though the positive impact of CSR on corporate reputation and cus-
tomers loyalty was acknowledged by the majority of scientific studies
(Li, Sun, & Li, 2018; Lorena, 2018; Loveman, 1998; Roberts &
Dowling, 2002). Also, there are various methods of measuring CSR
and financial results applied in the scientific literature (Barnett, 2007;
Chua & Lin, 2013; Du, Bhattacharya, & Sen, 2010; Husted &
Allen, 2007; Lai, Chiu, Yang, & Pai, 2010; Lamberti & Lettieri, 2009).
There are no commonly accepted frameworks linking CSR with finan-
cial performance of companies due to wide variation of assessment
techniques and applied methods for assessment of CSR and financial
performance of companies.
The study aims to close this gap and to develop a framework for
systematization of CSR and financial performance assessment
methods based on systematic literature review.
The rest of the paper is structured in the following way: in Sec-
tion 2 methods and data collection are provided; in Section 3 based
on systematic literature review CSR and its outcomes to sustainable
development are delineated; in Section 4 the main tools for analysis
of CSR impacts on financial performance of companies are analysed
to determine the extent of relationships and applied research
methods; in Section 5 synthesis of review results are provided by set-
ting the relationships between CSR and financial performance mea-
surements; Section 6 concludes.
2 | METHODS AND DATA
The main research approach applied in this paper is to analyse the
theoretical aspects of CSR and financial results by comparative analy-
sis of scientific literature and synthesis. The method of comparative
analysis can be used to solve various methodological problems:
descriptive (identification of similarity or difference) or analytical
(interpretation, prediction, practical recommendations). These circum-
stances determine the realization of comparison methods and analysis
conducted in this study.
In order to find out the most relevant publications in the scope of
this study, the following search terms and their combinations are
used: “Corporate Social Responsibility”, “Influence of Corporate Social
Responsibility on Financial Results”; “Financial Results”. The following
main research databases, published between 1990 and 2020, were
analysed to provide an overview of key scientific articles:
ScienceDirect, ResearchGate. After reading the publications in data-
bases and online sources, the main topics were singled out and the
publications were grouped into three main areas: the concepts and
definitions of CSR and its impact on sustainable development, the
main tools for analysing the impact of CSR on corporate finance and
the relationship between CSR and financial performance of
companies.
3 | D E L I N E A T I N G CS R A N D I T S
O U T C O M E S A N D I M P L I C A T I O NS TO
SUSTAINABLE DEVELOPMENT
The concept of CSR has existed for more than 60 years. CSR theory is
being examined and is being implemented in practice all around the
world, though to date there is no universally accepted definition of
CSR. CSR can be understood in a broad context and it includes many
concepts and ideas known by different names such as corporate
responsibility, corporate accountability, business ethics, corporate citi-
zenship, responsible entrepreneurship, sustainable development and
the environment etc. (Lu, Ren, He, Lin, & Streimikis, 2019). Some
authors argue that CSR concepts could be comprehended as a busi-
ness strategy for long-term sustainable growth and competitive
advantage. Xuan and Teal (2011) suggested the complete definition of
Carroll (2008). The definition of CSR given by Carroll is still the most-
generally acknowledged in academic studies (Han et al., 2019;
Weber, 2008), despite the fact there are still ongoing questions and
confusions on it. The various definitions of CSR are presented in
Table 1.
Ismail (2009) and Hediger (2010) are following the same approach
to CSR. They argue that this is the responsibility of companies for the
impact of their activities and the creation of well-being for the stake-
holders. According to Kotler and Lee (2007), CSR is a commitment to
increase the well-being of society. Fontaine (2013) also shares this
view that CSR is a business commitment to behave appropriately and
fairly in improving the lives of society as a whole.
Analysing CSR, it is noticeable that not only the benefits but also
the disadvantages of CSR are highlighted in scientific studies.
According to various researches and sources, the main advantages of
CSR are reduced costs and risks, maximizing profits and gaining a
competitive advantage, maintaining reputation and legitimacy, and
synergistic value creation. It is easier for a well-managed and socially
responsible company to assess potential risks, reduce costs and
improve financial performance. Meanwhile, some companies that do
not implement social responsibility suffer from scandals, management
inconsistencies, employee strikes and fraud (Cismas et al., 2019).
BARAUSKAITE AND STREIMIKIENE
TABLE 1 CSR concepts and definitions
Authors Year CSR definition
Carroll 2008 CSR refers to “the commitments of
business firms to seek those
strategies, to settle on those
decisions, or to pursue those lines
of activity that are according to
societal values and expectations"
McWilliams et al. 2006 A situation where a company goes
beyond the requirements imposed
on it and includes in its activities
actions that create a social good
that goes beyond the interests of
the company
Kotler and Lee 2007 A company's commitment to increase
the well-being of society through
independent business practices and
by usage of company resources
Ismail 2009 The concept that business
organizations take into account the
public interest by taking
responsibility for the impact of their
activities on customers, suppliers,
employees, shareholders,
communities and other
stakeholders, as well as their
environment
Hediger 2010 Programmes in which companies not
only seek to increase profits but
also contribute to the well-being of
stakeholders
Fontaine 2013 A continuing commitment by
businesses to behave appropriately,
fairly and responsibly and to
contribute to economic
development by improving the lives
of workers and their families, as
well as the local community and
society as a whole
European 2014 The company's responsibility for its
Commission impact on the environment and
society
Source: Created by authors.
Socially responsible business is first and foremost a smart business
that can not only ensure the continuity of the company in the long
run, but also bring quick and tangible benefits. In Table 2 the multifac-
eted benefits of CSR implementation are generalized.
Though statements, provided by various authors in Table 2
encourage companies to adopt socially responsible business concepts,
there are also authors who disagree with this view, arguing why and
how the implementation of CSR may be useless for companies
(Table 3).
As one can see from Table 3, there are several disadvantages of
CSR identified by scholars. The most recent Corporate Hypocrisy phe-
nomena can be observed. Corporate Hypocrisy is linked to the suspi-
cions of customers resulted from the company's declared social
3
T A B L E 2 Advantages and benefits of corporate social
responsibility
Authors Year CSR benefits
Kuo et al. 2009 CSR helps reduce costs by
saving resources; helps
attract and retain the best
employees; helps to improve
the company's image in
society; allows to develop
new products; facilitates the
opening of new markets;
reduces legal risk and
insurance costs; helps to
ensure a better quality of life
Juscius 2007 CSR provides feedback
between the company and
the environment; encourages
the search for ways to
resolve problems by
discussing emerging
objections with stakeholders;
in long-term CSR increases
the company's opportunities
for sustainable development
Hejase, Farha, Haddad, 2012 CSR provides for better
and Hamdar business risk management;
improved image of the
organization; improved
innovation, competitiveness
and market position; higher
operational efficiency and
cost savings; creating
corporate social capital in the
community; better access to
capital; improved relations
with regulators
Dyck et al. 2018 CSR provides for creating
business-friendly long-term
prospects; changing societal
needs and expectations;
allocating resources to solve
social problems; moral
commitment to socially
responsible activities;
strengthening human
resources and intellectual
capital; ensuring reputation
and security. The
organizational innovation and
social performance of a firm,
they concluded that CSR is
important for long-term
sustainable growth and
competitive advantage of
company
Source: Created by authors.
responsibility and the actions actually taken (Arli, van Esch, Northey,
Lee, & Dimitriu, 2019; Kim, Hur, & Yeo, 2015). Various authors dis-
cussed the negative outcomes of recent scandals linked to the irre-
sponsible behaviour of companies announced themself as
4 BARAUSKAITE AND STREIMIKIENE

TABLE 3 Disadvantages and costs of implementing corporate social responsibility

Authors Year CSR negative issues

Pruskus 2002 Denial of the principle of profit maximization;
Expenditure on social inclusion;
Insufficient level of accountability to society;
Lack of ability to solve social problems.
Hopkins and Cowe 2003 Increased costs for reporting and transparency;
The price of products or services may increase in the short term;
Requires constant interaction with the community;
Requires to report on social responsibility;
Requires the monitoring of internal activities;
Requires to pursue a human rights policy;
Investments are necessary in the prevention of environmental damage.
Yoon et al. 2006 CSR can hurt the company's image when motives are perceived as insincere. Variables affecting perceived
sincerity include the benefit salience of the cause, the source through which consumers learn about CSR,
and the ratio of CSR contributions and CSR-related advertising, therefore, it is necessary to spend more
on CSR activities than on advertising that features CSR.
Armstrong and Kesten 2013 CSR can provide firms with opportunities for profit, but changes are likely to increase total welfare only if
firms adopt them freely and without taxpayer subsidies. Mandated CSR circumvents people's own plans
and preferences, distorts the allocation of resources, and increases the likelihood of irresponsible
decisions.
Arli et al. 2019 Consumer scepticism is the often reaction of consumers to a company's messages by questioning their
accuracy as many customers do not believe in a company's advertising in which it advertises its CSR
activities.

Source: Created by authors.

implementing various CSR initiatives (Armstrong & Kesten, 2013;
Kyujin Shim & Kim, 2017; Yoon, Gürhan-Canli, & Schwarz, 2006).
The concept of sustainable development obliges the private sec-
tor to change their behaviour and implement CSR practices
(Kyriakopoulos, 2011; Neculaesei et al., 2019). Therefore, the respon-
sibility for the future should be shared between business, govern-
ments and society, but in this age when business has gained most
power, CSR is about directing resources and capabilities towards a
harmonious symbiosis between economics, ecology and societal
recovery.
So, the concept of CSR should be treated as a broad-spectrum
process that covers the entire production/development cycle of a
product/service and the related environmental, social, financial and
ethical aspects (Neculaesei et al., 2019).
Therefore, CSR is often considered an essential condition for sus-
tainable development in business—from fast profits to long-term, bal-
anced prosperity, because sustainable business is a socially
responsible business that is scientifically formed by balancing social
humanistic (ethical) values and economic achievements as well ecolog-
ical trends and encounters 3P principle.
In order to achieve CSR to be fully implemented, it is necessary to
follow these three components in parallel—to harmonize and balance
them, that is, to achieve economic goals while ensuring the sustain-
able development of the ecological and social environment (Ntanos
et al., 2018). For a company, sustainable development means applying
business strategies and actions that meet the needs of the company
and its stakeholders today without compromising future generations
to meet their needs (Akben-Selcuk, 2019; Kooskora, Juottonen, &
Cundiff, 2019).
All of this protects, strengthens and expands the human and natu-
ral resources that will be needed in the future. The issue of CSR is
considered as a matter of strategic importance for companies and
how to integrate environmental and social aspects into the company's
strategy and daily practice is crucial issue. Sustainable business cre-
ates new opportunities for suppliers of green products, developers of
environmentally friendly materials and processes, companies investing
in eco-efficiency and those involved in creating public welfare
(Akisik & Gal, 2014, 2017; Karagiorgos, 2010).
Hence, CSR is an opportunity to put sustainable development
into practice. Responsible business practices can help a company cre-
ate competitive advantages, open up innovative opportunities and
simply help reduce operating costs (Hoque, Rahman, Molla, Noman, &
Bhuiyan, 2018).
4 | T H E M A I N TO O L S F O R A N A L Y S I S OF
CSR IMPACTS ON FINANCIAL
PERFORMANCE O F COMP A NI ES
Assessing CSR performance is a very difficult task due to the lack of a
unified approach to the meaning of CSR and slid theoretical basis for
this concept. According to the frequency of use, four methods are
BARAUSKAITE AND STREIMIKIENE 5

distinguished in the literature, based on which CSR can be assessed: TABLE 4 Advantages and disadvantages of CSR assessment
reputation indices, content analysis, questionnaire survey, one- methods

dimensional measures (Barron & Rolfe, 2011; Nizamuddin, 2018; Assessment

Soana, 2009). The most commonly used method to measure CSR is methods Benefits Shortages
reputation indices, which cover the multifaceted nature of CSR. The Reputation Easily accessible data Has no scientific basis
main indices used in the research are the Dow Jones Sustainability indices
Index, the Fortune Magazine Reputation Index, the “MSCI KLD 400” Companies can be Set up by private
social Index and the Vigeo Index. Many authors agree that the Dow compared with each agencies
other
Jones Sustainability Index is one of the best because it covers all
Multiple benefits Adaptable just to a
aspects of industry and CSR (Nizamuddin, 2018; Soana, 2009).
limited number of
The second most commonly used method for assessing CSR is companies
content analysis. Content analysis includes an assessment of the area
Content Flexible selection of Absence of units of
of social responsibility in the company's annual reports and other pub- analysis available data calculation
lications that includes the aspects of CSR. The essence of this method (indicators) and their
is to distinguish certain semantic units in the text of the document, selection criteria

then to calculate the frequency of their use, to study the connections Dimensions are The selected indicator
selected according to may be understood
of various text elements both with each other and with the entire
the study being differently by
scope of information. To use this method, one must agree with the performed individual authors
hypothesis that social disclosure is a good indicator of a company's
The data received may
social performance (Nizamuddin, 2018; Soana, 2009). be inaccurate and
The questionnaire-based survey method is generally used in cases unverifiable
where the company is not rated by any rating agency. In such cases, Questionnaires Flexible selection of Subjectivity of research
researchers must collect primary data on CSR by sending question- available data

naires to company managers, CEOs, CSR directors or conducting per- Dimensions are Possible measurement
selected according to errors
sonal interviews with them. The collected survey data are
the study being
systematized and the social results achieved by companies are evalu-
performed
ated. The assessment of CSR by the survey method is by its nature
Incorrect answers may
only internal and mainly reflects the orientation and perception of occur
managers on the topic of social responsibility (Nizamuddin, 2018; Respondents can hide
Soana, 2009). important
The one-dimensional measurement approach focuses on only one information
dimension of CSR, such as environmental management or philan- One- Easily accessible data Provides biased
thropy. Environmental activities may include investments in pollution dimensional assessment
measures
control, the use of a carbon reduction strategy, the adoption of global
Companies can be
environmental standards, the use of ecological controls, environmen-
compared with each
tal activity, the ratio of recycled to generated toxic waste, and philan- other
thropic activities in donations, public health and politics, charitable
Source: Created by authors based on Nizamuddin (2018).
contributions (Nizamuddin, 2018; Soana, 2009). All of these listed
methods, which are used to measure social responsibility, have their
advantages and disadvantages, which are presented in Table 4. Market-based instruments include Return on Shares, Company
Both when investing in a company and when financing it, it is market Value, Change in Return on Shares, earnings per share (EPS),
always expected that the result will be profitable. However, when it share price to earnings ratio (P/E) and other market-based instru-
comes to CSR, assessing financial benefits has always been a major ments. Securities market participants determine the price and market
challenge for researchers and companies themselves (Hoque value of a company's stock, and then base their decisions on past, pre-
et al., 2018). sent, and future stock returns. Accounting measures include profitabil-
Although financial performance is easier to measure than social ity, asset utilization, such as asset returns, asset turnover etc.
responsibility, there may also be many questions about which method Accounting-based measures reflect an organization's internal effec-
to choose and which indicators to analyse. There are two main tiveness, which is influenced by the organization's performance
methods in the scientific literature applied for measuring financial per- (Beurden & Goessling, 2008). Each of the listed indicators has positive
formance of companies: the market-based approach and the and negative features in assessing the company's financial perfor-
accounting-based approach. Some authors use market-based tools, mance. On the positive side, accounting tools are available to all com-
others use accounting-based tools, and others combine both panies and are fairly easily comparable. The main advantage of
(Table 5); (Soana, 2009). market-based instruments is their modernity. This means that they
6 BARAUSKAITE AND STREIMIKIENE

T A B L E 5 The most commonly used methods of assessing the

financial performance of companies

Accounting based Market based Both types

measures measures measures
• ROA • Return on shares • Tobin's Q
• ROE • Company market • MVA
value
• ROCE • Change in return on
shares F I G U R E 1 Alternative links between social responsibility and
• ROS • EPS financial performance
• ROI • P/E

Abbreviations: EPS, earnings per share; MVA, market value added; P/E,
share price to earnings ratio; ROA, return on assets; ROCE, return on capi-
tal employed; ROE, return on equity; ROI, return on investment; ROS,
return on sales.
Source: Created by authors based on Galant and Cadez (2017).
reflect changes in CSR faster than accounting tools. In terms of short-
comings, accounting-based measures are historic. In addition,
although the size of the enterprise is not taken into account in the cal-
culation of the indicators in all categories, accounting-based measures
such as return on assets (ROA) may still be biased if the survey sample
consists of enterprises from different industries. The biggest negative
aspect of market-based instruments is that they are only available to
publicly listed companies. In addition, market instruments inevitably
involve systemic (non-firm) market risk (economic downturn), while
accounting instruments are more sensitive to non-systemic market
risk (Galbreath, 2010). As mentioned, harmonized indicators for both
types can also be found in some sources, that is, Tobin's Q (market
value/total assets) and market value − book value of equity and debt
(MVA) indicators can be also used to measure the company's financial
performance.
5 | S Y N T H E S I S OF RE V I E W R E S U L T S :
SETTING THE RELATIONSHIPS BETWEEN
CSR AND FINANCIAL RESULTS
CSR and its benefits are often measured in terms of a company's
financial performance. One of the most important scientific questions
is what links these two things—whether financial results affect CSR or
whether CSR affects financial results. A wide variety of studies can be
found in the scientific literature dealing with the impact of CSR on
financial performance.
There is no consensus on the relationship between CSR and
financial performance (Galbreath, 2010; Oh & Park, 2015; Saeidi,
Sofian, Saeidi, Saeidi, & Saaeidi, 2015; Mikołajek-Gocejna, 2016;
Pradhan, 2016; Lu, Ren, Qiao, et al., 2019.) the relationship between
these variables can be:
• positive,
• negative,
• neutral.
The negative link was found as by some economists CSR commit-
ment is being perceived as an unfavourable competitive aspect, as the
costs incurred by companies can negatively affect their product
prices, employee wages, corporate profits and dividends. Thus, organi-
zations should be inclined to reduce the costs associated with CSR in
order to increase short-term profits (Giannarakis, Konteos, Zafeiriou, &
Partalidou, 2016).
Positive link was obtained in many studies. Stakeholder theory
confirms the positive link between CSR and financial performance.
Meeting the expectations of indirect stakeholders improves the comp-
any's reputation within community and citizens and has a positive
impact on its financial performance, attracting the interest of investors
and other stakeholder bodies, which in turn can increase the organiza-
tion's profits. Meanwhile, stakeholder frustration can have a negative
impact on financial performance (Giannarakis et al., 2016).
Neutral relationship or no link was also obtained in several stud-
ies. According to Soana (2009), there is no direct link between CSR
and financial performance due to the complex links between financial
institutions and society. Alternative links were indicated by Brammer
and Millington (2008) study which found that there are also alterna-
tive links between CSR and financial performance, which are
nonlinear. They can be represented by U-shaped or inverted U-
shaped curves (Figure 1).
The first model in Figure 1 shows a positive relationship between
CSR and financial performance. The impact of CSR on financial results
is positive and CSR provides higher income to a certain point, from
which the impact of CSR becomes negative. The second model is the
opposite of the first model. It shows that the impact of CSR is nega-
tive and a company's revenue declines to some point when it starts to
grow positively and CSR starts to have a positive impact on financial
results.
Maintaining or improving shareholder returns is the goal of every
company. Companies are looking for a strategy that would increase
their profits. Over time, many approaches have been taken to achieve
this key goal, and today CSR is being used as a strategic tool to
improve the economic condition of a business. Numerous studies
have been conducted in this area, but their results are mixed
(Maqbool, 2017; Maqbool & Nasir, 2018).
Margolis and Walsh (2001) analysed 95 scientific sources, of
which 42 studies (53%) found a positive relationship between CSR
and financial performance, 19 studies (24%) found no link between
BARAUSKAITE AND STREIMIKIENE 7

TABLE 6 Review of research on the relationship between social responsibility and financial performance

Authors Year Relationship CSR measure A measure of financial performance

Guidry and Patten 2010 Neutral Published sustainability reports Shares price
Ahmed, Islam, and Hasan 2012 Positive CSR index created based on surveys Yield of assets, earnings per share, share price
to earnings ratio
Babalola 2012 Negative Investments in CSR Profit after tax
Barnett and Salomon 2012 Alternative “KLD” index Return on assets, net income
Kanwal, Khanam, Nasreen, 2013 Positive Social expenditures Return on assets, net income
and Hameed
Mentor 2016 Negative “ESG” index Company market value, change in stock
return
Han, Kim, and Yu 2016 Alternative “ESG” index based on various issues Return on equity, Tobin Q, return on equity
Zakari 2017 Positive Social expenditures Earnings, earnings after tax, earnings per
share
Selcuk and Kiymaz 2017 Negative Content analysis based on number of Return on assets
pages, sentences etc.
Resmi, Begum, and Hassan 2018 Neutral Investments in CSR Return on assets, earnings per share
Menezes 2019 Neutral Expenditures for sustainability and CSR Return on assets, earnings per share
financing

Source: Created by authors.

CSR and financial performance, and 4 studies (5%) found that CSR has
a negative impact on companies' financial performance and the
remaining 15 studies revealed a mixed relationship. Table 6 provides
an overview of empirical studies analysed.
Summarizing the described CSR and financial performance mea-
surement methodologies, it can be stated that there is no uniform
application of the CSR and financial performance assessment methods
and the linkages between CSR and financial performance in the scien-
tific literature. The methods are chosen at random, according to the
available data or according to the possibilities. However, reputation
indices are most commonly used to measure CSR, which are the most
useful and cover the multifaceted nature of CSR, while market-based
or accounting-based instruments are most commonly used to measure
financial performance. Regarding the impact of CSR on financial
results, four existing relationships can be distinguished between the
above components—positive, negative, neutral and alternative. The
conducted analysis revealed that in most cases the results are domi-
nated by a positive relationship between CSR and financial results or
neutral. Negative and alternative connections are less frequently iden-
tified in scientific articles, however, also cannot be excluded from the
further analysis.
6 | C O N CL U S I O N S
Due to the global commitment to sustainable development CSR
concept has become a relevant component of modern business
management, as allows it to ensure the successful functionality of a
company. As nowadays the organizations must adapt to the process
of globalization and the changing values of society, applying the
concept of CSR in companies can strengthen competitive
advantage, improve reputation, reduce employee turnover, ensure
customer loyalty and investor friendliness and bring economic bene-
fits by affecting positively the company's financial performance and
market value.
There are many definitions of CSR, however, the main idea of
CSR is that socially responsible companies take into account all their
activities, reconcile their interests with the interests of shareholders,
employees, consumers, the environment, their community and other
stakeholders, as well as take responsibility for their impact on the
environment.
It should be noted that CSR initiatives lead to both additional
benefits and additional costs for business, stakeholders and society as
a whole. The authors, who have anticipated the shortcomings of CSR,
argue that CSR requires high financial costs, but the benefits of CSR
are not always noticeable in the short term. These investments can
give more benefits for a company long-term by strengthening its com-
petitive advantage. The declaration of social responsibility helps com-
panies to build a reputation, which is an important factor in increasing
the organization's attractiveness to consumers and ensuring its secu-
rity in the market.
However, there is no uniform application of the CSR and financial
performance assessment methods and the established linkages
between CSR and financial performance in the scientific literature.
The methods for CSR and financial performance assessment and
addressing the linkages are chosen at random basis based on the avail-
able data. The reputation indices are most commonly used to measure
CSR performance. At the same time market-based or accounting-
based instruments are most commonly used to measure financial per-
formance. Regarding impact of CSR on financial results, four existing
relationships can be distinguished between the above components—
positive, negative, neutral and alternative.
8 BARAUSKAITE AND STREIMIKIENE
The conducted analysis showed that positive relationship
between CSR and financial results or neutral were obtained in major
studies. Negative and alternative connections are less frequently iden-
tified in scientific articles, however, also cannot be excluded from the
further analysis.
The paper has limitations and further research is necessary for
the establishment of uniform CSR assessment tools and indicators to
measures CSR performance of the company. Just having uniformly set
indicators system to measure CSR performance it is possible to assess
the link between CSR and financial results of the companies. Though
analysis of the linkages between CSR and various financial perfor-
mance indicators can provide for contradicting results and the time
frame of assessment is very important the main obstacles for defining
firm relationships between CSR and financial performance of compa-
nies is the lack of uniformly agreed CSR assessment tools.
The main practical implications of the conducted study are prepa-
ration of uniform CSR assessment tools and guidelines by interna-
tional institutions dealing with CSR in order to popularize CSR
initiatives and to have effective tools to monitor the advancement of
companies in CSR performance as well to assess the impact of CSR
performance on financial and other important indicators of business
development.
ORCID
Dalia Streimikiene https://orcid.org/0000-0002-3247-9912
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How to cite this article: Barauskaite G, Streimikiene D.
Corporate social responsibility and financial performance of
companies: The puzzle of concepts, definitions and
assessment methods. Corp Soc Responsib Environ Manag. 2020;
1–10. https://doi.org/10.1002/csr.2048