Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Corporate Social Responsibility and Financial Performance:Evidence from the Ethiopian Leather Industry


Affiliations
1 College of Business and Economics, Bahir Dar University, Bahir Dar, Ethiopia
     

   Subscribe/Renew Journal


Corporate Social Responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits to all stakeholders. The effect of corporate social responsibilities of a business on their financial performance has been a subject of intense argument and its empirical analysis result shows inconsistent findings. This study aims to examine the effects of CSR and the financial performance of Ethiopian leather industries. A theoretical framework is proposed based on a stakeholder approach by defining five stakeholders (i.e., employee, customer, supplier, community & environment) and taken as the independent variables. This study uses a questionnaire survey for the measurement of CSR and a three consecutive (2014-2016) years’ average return on the asset enables us to measure firms’ financial performance data, analyzed using a multiple regression models. Finally, this study reveals that a statistically significant positive effect of employee CSR, supplier CSR, environment CSR and aggregate CSR on financial performance whereas customer and community CSR factors are negatively related to return on asset.

Keywords

CSR, Stakeholder Approach, Leather Industry, Ethiopia.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Alomari, M., & Ibraheem, A. (2019). Environmental performance measurement review of indicators and obstacles. International Journal of Financial Management, 9(3), 1-8.

  • Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. (1985). An empirical examination of the relationship between corporate social responsibility and profitability. The Academy of Management Journal, 28(2), 446-463.

  • Becchetti, L., Giacomo, S. D., & Damiano, P. (2008). Corporate social responsibility and corporate performance: Evidence from a panel of US listed company. Applied Economics, 40(5), 541-567.

  • Bimir, M. N. (2015). Corporate social responsibility learning in the Ethiopian leather and footwear industry. International Institute of Social Studies, 1-50.

  • Brammer, S., Jackson, G., & Matten, D. (2012). Corporate social responsibility and institutional theory: New Perspectives on private governance. Socio-Economic Review Journal, 10, 3-28.

  • Bryman, A., & Bell, E. (2011). Business research method (3rd ed.). London: Oxford University Press Inc.

  • Busch, T., & Hoffmann, V. H. (2011, March 17). How hot is your bottom line? Linking carbon and financial performance. Business Society, 50(2), 233-265.

  • Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. The Academy of Management Review, 4(4), 497-505.

  • Carroll, A. B. (1991). The pyramid of corporate social responsibility: Towards the moral management of organizational stakeholder. Business Horizons Journal, 1-20.

  • Chen, H., & Wang, X. (2011). Corporate social responsibility and corporate financial performance in China: An empirical research. The International Journal of Business in Society, 11(4), 361-370.

  • Cheng, B., Ioannous, I., & Serafeim, G. (2014). Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), 1-23.

  • Creswell, J. W. (2009). Research design; Qualitative, quantitative and mixed methods approaches (3rd ed.). United States of America: Sage Publications, Inc.

  • D’Agostino, R., & Pearson, E. (1973). Testing for departure from normality: Empirical result for the distribution of b2 and Öb1. Biometrika, 60(3), 613-622.

  • Dawkins, C. E., & Fraas, J. W. (2008). An exploratory analysis of corporate social responsibility and disclosure. Journal of Business Society, 52(2), 245-281.

  • Deng, X., Kang, J.-K., & Low, B. S. (2012). Corporate social responsibility and stakeholders value maximization: Evidence from mergers. Journal of Financial Economics, 1-23.

  • Deyassa, K. (2016). Corporate social responsibility from Ethiopian perspective. International Journal of Scientific & Technology Research, 5(4), 299-328.

  • Dhaliwal, D., Li, O. Z., Tsang, A., & Yang, Y. G. (2014). Corporate social responsibility disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency. Journal of Accounting and Public Policy, 33(4), 328-355.

  • Elouidani, A., & Zoubir, F. (2015). Corporate social responsibility and financial. African J. Accounting, Auditing and Finance, 4(1), 74-85.

  • Freeman, R. E. (1984). A stakeholder theory of the modern corporation. General Issues in Business Ethics, 38-48.

  • Friedman, M. (1970, September 13). The social responsibility of business is to increase its profit. New York Times Magazine.

  • Ganescu, M. C. (2012). Assessing corporate social performance from a contingency theory perspective. Procedia Economics and Finance, 999-1004.

  • Gandhi, T., & Dalvadi, Y. (2017). Social performance reporting practices: A comparative study of selected index based Indian and Australian companies. Journal of Commerce and Accounting, 6(2), 25-27.

  • Gbadamosi, W. A. (2016). Corporate social responsibility and financial performance of banks in the United States. Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management, Walden University.

  • Ghoul, S. E., Guedhami, O., Kwok, C. C., & Mishra, D. (2011). Does corporate social responsibility affected the cost of capital? Journal of Banking & Finance, 35(9), 2388-2406.

  • Godfrey, P. C., & Hatch, N. W. (2007). Researching corporate social responsibility: An agenda for the 21st century. Journal of Business Ethics, 70, 87-98.

  • Goss, A., & Roberts, G. S. (2011). The impact of corporate social responsibility on the cost bank loans. Journal of Baking and Finance, 35(7), 1794-1810.

  • Gujarati, D. N. (2004). Basic econometrics (4th ed.). McGraw-Hill Companies.

  • Hair Jr., J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2009). Multivariate data analysis (7th ed.). Pearson Education, Inc.

  • Hart, S. L. (1995). A natural-resource-based view of the firm. The Academy of Management Reveiw Journal, 20(4), 986-1014.

  • Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues: What’s the bottom line? Strategic Management Journal, 22(2), 125-139.

  • Ibrahim, S. A., & Bambale, J. A. (2016). The effect of corporate social responsibility on firms financial performance in Kano metropolis: A conceptual model. International Journal of Management and Commerce Innovations, 4(1), 64-72.

  • Jensen, M. C. (2002). Value maximization, stakeholder theory, and the corporate objective function. Journal of Business Ethics Quaterly, 12(2), 235-256.

  • Jiao, Y. (2010). Stakeholder welfare and firm value. Journal of Banking and Finance, 34(1), 2549-2561.

  • Kaushal, & Priya. (2018). Convergence of corporate governance and CSR: A view from the boardroom of Indian commercial banks. Journal of Commerce and Accounting Research, 7(3), 26-34.

  • Khwaja, M. A. (2000). Environmental impact of tanning and leather products manufacturing industry in NWFP (Pakistan). Working Paper Series.

  • Krishan, N. (2012). Impact of corporate social responsibility on the financial and non financial performance of select BSE listed companies (Thesis submitted), Padmashree Dr. D.Y. Patil University.

  • Lange, D., & Washburn, N. T. (2012). Understanding attributions of corporate social responsibility. Academy of Management Review, 37(2), 300-326.

  • Lantos, G. P. (2001). The boundarie of strategic corporate social responsibility. Journal of Consumer Marketing, 18(7), 595-632.

  • LIDI. (2016). Retrieved from http://www.elidi.org/ (Accessed on December 27, 2016).

  • Lioui, A., & Sharma, Z. (2012). Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects. Ecological Economics, 78(C), 100-111.

  • Maignan, I., & Ferrell, O. (2001). Antecedents and benefits of corporate citizenship: An investigation of French businesses. Journal of Business Research, 51(1), 37-51.

  • Mc Williams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management, 21(5), 603-609.

  • Gujarati, D. N. (2004). Basic econometrics (4th ed.). McGraw-Hill Companies.

  • Hair Jr., J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2009). Multivariate data analysis (7th ed.). Pearson Education, Inc.

  • Hart, S. L. (1995). A natural-resource-based view of the firm. The Academy of Management Reveiw Journal, 20(4), 986-1014.

  • Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues: What’s the bottom line? Strategic Management Journal, 22(2), 125-139.

  • Ibrahim, S. A., & Bambale, J. A. (2016). The effect of corporate social responsibility on firms financial performance in Kano metropolis: A conceptual model. International Journal of Management and Commerce Innovations, 4(1), 64-72.

  • Jensen, M. C. (2002). Value maximization, stakeholder theory, and the corporate objective function. Journal of Business Ethics Quaterly, 12(2), 235-256.

  • Jiao, Y. (2010). Stakeholder welfare and firm value. Journal of Banking and Finance, 34(1), 2549-2561.

  • Kaushal, & Priya. (2018). Convergence of corporate governance and CSR: A view from the boardroom of Indian commercial banks. Journal of Commerce and Accounting Research, 7(3), 26-34.

  • Khwaja, M. A. (2000). Environmental impact of tanning and leather products manufacturing industry in NWFP (Pakistan). Working Paper Series.

  • Krishan, N. (2012). Impact of corporate social responsibility on the financial and non financial performance of select BSE listed companies (Thesis submitted), Padmashree Dr. D.Y. Patil University.

  • Lange, D., & Washburn, N. T. (2012). Understanding attributions

  • of corporate social responsibility. Academy of Management Review, 37(2), 300-326.

  • Lantos, G. P. (2001). The boundarie of strategic corporate social responsibility. Journal of Consumer Marketing, 18(7), 595-632.

  • LIDI. (2016). Retrieved from http://www.elidi.org/ (Accessed on December 27, 2016).

  • Lioui, A., & Sharma, Z. (2012). Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects. Ecological Economics, 78(C), 100-111.

  • Maignan, I., & Ferrell, O. (2001). Antecedents and benefits of corporate citizenship: An investigation of French businesses. Journal of Business Research, 51(1), 37-51.

  • Mc Williams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification? Strategic Management, 21(5), 603-609.

  • McGuire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate social responsibility and firm financial performance. The Academy of Management Journal, 31(4), 854-872.

  • Ghrmay, T. M. (2014). The nature of corporate social responsibility in Ethiopian business context. Retrieved from https://ssrn.com/abstract=2462800

  • Mishra, S., & Suar, D. (2010). Does corporate social responsibility influence firm performance of Indian companies? Journal of Business Ethics, 95(4), 571-601.

  • Montiel, I., & Delgado-Ceballos, J. (2014). Defining and measuring corporate sustainability: Are we there yet? Organization Environment, 27(2), 113-139.

  • Mouly Potluri, R., & Temesgen, Z. (2008). Corporate social responsibility: An attitude of Ethiopian corporates. Social Responsibility Journal, 4(4), 456-463.

  • Murtaza, I. A., Akhtra, N., Ijaz, A., & Sadiqa, A. (2014). Impact of corporate social responsibility on firm financial performance: A case study of Pakistan. International Review of Management and Business Research Journal, 3(4), 1914-1927.

  • Mustafaa, S. A., Othmana, A. R., & Perumala, S. (2012). Corporate social responsibility and company performance in the Malaysian context. International Congress on Interdisciplinary Business and Social Science, 65(2012), 897-905.

  • Naila, D. L. (2013). The effect of environmental regulations on financial performance in Tanzania: A study of manufacturing companies quoted on the Dar Es Salaam stock exchange. International Journal of Economics and Financial Issues, 3(1), 99-112.

  • Okoye, A. (2009). Theorising corporate social responsibility as an essentially contested concept: Is a definition necessary? Journal of Business Ethics, 89(4), 613-627.

  • Orlitzky, M. (2013). Corporate social responsibility, noise, and stock market volatility. The Acdemy of Management Perspective Journal, 27(3), 238-254.

  • Osborne, J. W., & Walters, E. (2002). Four assumptions of multiple regression that researchers should always test. Practical Assessment, Research, and Evaluation, 8(2).

  • Parsa, H., Lord, K. R., Putrevu, S., & Kreeger, J. (2015). Corporate social and environmental responsibility in services: Will consumers pay for it? Journal of Retailing and Consumer Services, 22(1), 1-14.

  • Russo, M. V., & Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. The Academy of Management Journal, 40(3), 534-559.

  • Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role. of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), 341-350.

  • Servaes, H., & Tamayo, A. (2012). The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science, 59(5), 1-32.

  • Soana, M.-G. (2011). The relationship between corporate social performance and corporate financial performance in the banking sector. Business Ethics, 104(1), 133-148.

  • Sun, W., & Cui, K. (2014). Linking corporate social responsibility to firm default risk. European Management Journal, 32(2), 275-287.

  • Sunders, M., Lewis, P., & Thornhill, A. (2009). Research methods for business students (5th ed.). Rotolito Lombarda, Italy: Pearson Education Limited.

  • Tripathi, V., & Bhandari, V. (2015). Performance of socially responsible portfolios - Do economic conditions matter? Journal of Commerce and Acounting Research, 4(1), 14-30.

  • Turban, D. B., & Greening, D. W. (1996). Corporate social performance and organizational attractiveness to prospective employees. Academy of Management Journal, 40(3), 658-672.

  • Uadiale, O. M., & Fagbemi, T. O. (2012). Corporate social responsibility and financial performance in developing economics: The Nigerian experience. Journal of Economics and Sustainable Development, 3(4), 44-54.

  • Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4), 303-319.

  • White, H., & Macdonald, G. M. (1980). Some large - Sample test for nonnormality in the linear regression model. Journal of the American Statistical Association, 75(369), 16-28.

  • Williams, M. N., Grajales, C. A. G. G., & Kurkiewicz, D. (2013). Assumptions of multiple regressions correcting two misconceptions. Practical Assessment, Research and Evaluation, 18(11), 1-14.

  • Zali, R., & Sheydayaee, J. (2013). Determinants of corporate social responsibility, dynamic capability and financial performance (Cases study: Accepted firms in Tehran stock exchange market). International Journal of Financial Management, 3(2), 29-37.


Abstract Views: 350

PDF Views: 1




  • Corporate Social Responsibility and Financial Performance:Evidence from the Ethiopian Leather Industry

Abstract Views: 350  |  PDF Views: 1

Authors

Mulualem Getahun Abebe
College of Business and Economics, Bahir Dar University, Bahir Dar, Ethiopia

Abstract


Corporate Social Responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits to all stakeholders. The effect of corporate social responsibilities of a business on their financial performance has been a subject of intense argument and its empirical analysis result shows inconsistent findings. This study aims to examine the effects of CSR and the financial performance of Ethiopian leather industries. A theoretical framework is proposed based on a stakeholder approach by defining five stakeholders (i.e., employee, customer, supplier, community & environment) and taken as the independent variables. This study uses a questionnaire survey for the measurement of CSR and a three consecutive (2014-2016) years’ average return on the asset enables us to measure firms’ financial performance data, analyzed using a multiple regression models. Finally, this study reveals that a statistically significant positive effect of employee CSR, supplier CSR, environment CSR and aggregate CSR on financial performance whereas customer and community CSR factors are negatively related to return on asset.

Keywords


CSR, Stakeholder Approach, Leather Industry, Ethiopia.

References