Corporate social responsibility and financial performance linkage: Evidence from commercial banks of Pakistan

Abstract

This study is aimed at achieving the two main objectives. The first, is to investigate the impact of CSR on the financial performance of the firm and the second is to examine what are determinants of CSR investment? For achieving both objectives this study analyzes the data of 14 listed commercial banks from 2012 to 2018 through pooled ordinary least square regression, fixed effect, and random effect models in Eviews 9. Contrary to the findings of previous studies conducted on commercial banks of Pakistan, the results suggest no significant impact of CSR on the financial performance of the commercial banks this means CRS investment does not create any financial payback for the sample banks, however, administrative expense, total deposit to total equity, bank size and inflation have a statistically significant impact on the financial performance of the sample banks.

While exploring the determinants of CSR investment, the findings of this study show that larger return on equity of banks demotivates the CSR investment in the banking sector. The results further evidenced that a larger amount in deposits and advances encourages the sample bank to invest more in CSR, however, results also suggest that larger commercial banks invest less in CSR activities.