Examining the Relationship between Corporate Social Responsibility and Financial Performance of Companies: A Case of Multinational Companies in Pakistan

Abstract

This study examines the relationship between Corporate Social Responsibility and Financial Performance of firms. Investment in CSR activities has immense importance in this competitive world because every company tries to develop those strategies, which are useful for enhancing their monitory value. The correlation analysis revealed that there is a significant positive association between CSR and firm performance. Further to establish cause and effect between two variables, the relationship between CSR and Financial Performance is examined using OLS (ordinary least square) estimator of consecutive three years to better understand the relationship but in this article give the result of one year. The results of the study suggest that CSR has a weaker relationship and evidence to affect financial performance. Multinationals companies with a good number of financial resources available can contribute to social performance either in citizenship, workplace and environment protection. The study further shows that a company’s financial performance is driven by firm’s other characteristics like company’s size (assets and sales) rather than only by corporate social responsibility, companies with having more resources available to engage in CSR activities mostly drives more benefit for them as compared to those companies having less investment funds for CSR.