CORPORATE SOCIAL AND

FINANCIAL PERFORMANCE : EMPIRICAL EVIDENCE FROM AMERICAN COMPANIES

PRESENTED BY:-

ANUP KUMAR DUBEY ABHINAV SHUKLA ABHINEET SRIVASTAVA ABHISHEK KUMAR RAO ABHISHEK SAKHUJA ABHISHEK SHARMA ANAMIKA VERMA •

HASAN FAUZI
FACULTY OF ECONOMICS, SEBELAS MARET UNIVERSITY

OBJECTIVE
Relation between corporate social performance and Corporate financial performance

INTRODUCTION
Elkington (1987) had developed a concept of Triple Bottom Line. The basic principle underlying the concept of TBL is to accommodate the interest of stakeholders. It has two root phrases: financial or economic performance and social performance.

CORPORATE SOCIAL RESPONSIBILITY / PERFORMANCE

The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large"

CORPORATE FINANCIAL


      

Divided into three categories: PERFORMANCE
1Return on Assets (ROA) Asset Turnover Ratio & Return On Equity (ROE) 2 – Profitability in absolute term 3 - Accounting measure based on index (Score 0 - 10) Profitability Ratio

HYPOTHESIS DEVELOPMENT
There are two key constructs for this study: Corporate Social Responsibility/Performance (CSR/CSP) and Corporate Economic/ Financial Performance (CFP)

WHICH ONE BETWEEN CSP AND CFP COMES FIRST?
Waddock and Graves(1987) and Dean(1999) put forward two theories.

Slack Resource Theory- financial performance comes first Good Management Theory- Social Performance comes first

RELATIONSHIP BETWEEN CSP AND CFP
It could be positive , neutral, and negative. Griffin and Mahon • 1970’s - 16 studies • 1980’s - 27 studies • 1990’s - 8 studies  51 articles  POSITIVE NEGATIVE  1970 12 4  1980 14 13  1990 7 1

HYPOTHESIS FORMULATED
Number of CSR disclosures in Corporate Annual Report does not lead to increased corporate financial performance under “Slack Resource” and “Good Management Theory”.

RESEARCH METHODOLOGY

TYPE OF RESEARCH
 

Descriptive Research

Specific Objective- Relation between CSP and CFP Reports/Results are conclusive

DATA
Corporate Annual Report of the companies listed in New York Stock Exchange (NYSE)

SAMPLE SIZE

3000
companies listed in NYSE

CRITERIA FOR ANNUAL REPORT
Ø They represent types of industry Ø They include the completed financial statement for 2004-2006

MEASURE OF CSP
It was based on six variables namely :Ø Ø Ø Ø Ø Ø Ø Community Diversity in workplace Employee relation Environmental performance International issues Product and business practice

METHOD USED WAS CONTENT ANALYSIS
Ø CAR’s were measured on scale of 0-2 Ø CFP was measure on ROA and ROE Ø If ROA and is broken down there will be two important measures : Ø profitability ratio and asset turnover ratio. Ø

ANALYTICAL MODEL USED
Regression Model was used as it determines strength of relationship between two variables.

STATISTICAL TESTS
Based on result obtained by Regression analysis hypothesis was tested.

CONCLUSION
Testing hypothesis indicates that under Slack Resources and Good Management Theory, there is no effect of CFP for both ROA and ROE on CSR, suggesting that number of CSR disclosures in CAR does not lead to deceased/increased CFP. So, it is reasonable to conclude that relation between CSP and CFP is spurious

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