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 intoPERFORMANCE
three categories:
 1- Return on Assets (ROA)


 Profitability Ratio Asset Turnover Ratio

 &
 Return On Equity (ROE)
 2 – Profitability in absolute term
 3 - Accounting measure based on index (Score
0 - 10)
 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 Community
Ø Diversity in workplace
Ø Employee relation
Ø Environmental performance
Ø International issues
Ø 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