The relationship between corporate social responsibility and firm financial performance, and the corporate culture traits associated with corporate social responsibility, in the context of South Africa

Abstract

Corporations are increasingly being held accountable for the impact they are having on society. As a result, Corporate Social Responsibility (CSR) has garnered mainstream attention. However, despite this attention, CSR is often adopted with reluctance, in part, due to the long-standing belief that it is value destructive to shareholders. Mixed results, stemming from the research relating to CSR and its impact on firm financial performance, has not aided the argument for the merits of adopting CSR practises. In addition, importance is placed on integrating CSR into everyday business practices, and when integration is achieved, a CSR-embedded company culture results. However, little research has been done on, and, accordingly, little is known about the details of a CSR culture. This study investigates the relationship between CSR and financial performance of companies listed on the Johannesburg Stock Exchange. The research uses six different financial measures to compare the financial performance of CSR companies to conventional firms over a four-year period, from 2018 to 2021. The data indicates that over this period, the average median performance of CSR companies and conventional firms using the Mann-Whitney U test, does not differ. However, when analysing the performance by year, the median performance of CSR companies performs mostly the same or better than conventional firms. In addition, a survey was disseminated to companies that had demonstrated a CSR track-record. By utilising an Exploratory Factor Analysis, two CSR-embedded culture traits were identified derived from the various company responses to the survey. This research contributes to extant literature by assessing the relationship between CSR and firm financial performance, particularly in a developing country. Further, it uses several financial performance metrics in its analysis to gain a holistic perspective on firm financial performance. Lastly, this study assists in developing the embryonic field of CSR culture by identifying two traits that are present in companies that have integrated CSR practices.