Review on the association between corporate social responsibility and financial performance of firms in emerging markets
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Introduction
This literature review examines and discusses the relationship between corporate social responsibility (CSR) and financial performance of firms in emerging markets through analysis made in relation to developing countries especially Malaysia,
Indonesia, Turkey, Dubai, China and Brazil.
Most of the studies examining the financial performance case for CSR show a positive association between CSR practices and financial performance (63 percent) whilst 15 percent present a negative association and 22 percent present neutral or mixed relationship (Peloza, 2009). Further, Orlitzky, Schmidt and Rynes (2003) cited in Arafat (2012) did a meta-analysis on 52 earlier studies and reported that most results concluded that CSR had a positive influence on financial performance.
According to Dahlsrud (2008) cited in Crisostomo, Souza Freire and Vasconcellos
(2011) the most used definition of CSR is the one by Commission of the European
Communities in 2001 which defines CSR as a notion where firms voluntarily decide to contribute to a better community and a cleaner environment by consolidating concern on social and environment in the firms operations and communication with stakeholders. Generally, the perception is that CSR is seen as philanthropy instead of a core business practices that would generate economic benefits to the firms
(Jones, Comfort and Hiller, 2007 cited in Arafat et al., 2012).
In year 1970, economist Milton Friedman in a New York Times column argued that the social responsibility of a firm is to make more profits. (Saleh, Zulkifli and
Muhamad, 2011 and Lagoarde-Segot, 2011). If managers were to use shareholders capital to pursue the interest of society and get involve in CSR activities, that would be similar to stealing (Friedman, 1970 cited in Chen and Wang, 2011). LagoardeSegot (2011) commented that this view may be valid now except that firms benefit from responsible business practices, not despite them.
Introduction
This literature review examines and discusses the relationship between corporate social responsibility (CSR) and financial performance of firms in emerging markets through analysis made in relation to developing countries especially Malaysia,
Indonesia, Turkey, Dubai, China and Brazil.
Most of the studies examining the financial performance case for CSR show a positive association between CSR practices and financial performance (63 percent) whilst 15 percent present a negative association and 22 percent present neutral or mixed relationship (Peloza, 2009). Further, Orlitzky, Schmidt and Rynes (2003) cited in Arafat (2012) did a meta-analysis on 52 earlier studies and reported that most results concluded that CSR had a positive influence on financial performance.
According to Dahlsrud (2008) cited in Crisostomo, Souza Freire and Vasconcellos
(2011) the most used definition of CSR is the one by Commission of the European
Communities in 2001 which defines CSR as a notion where firms voluntarily decide to contribute to a better community and a cleaner environment by consolidating concern on social and environment in the firms operations and communication with stakeholders. Generally, the perception is that CSR is seen as philanthropy instead of a core business practices that would generate economic benefits to the firms
(Jones, Comfort and Hiller, 2007 cited in Arafat et al., 2012).
In year 1970, economist Milton Friedman in a New York Times column argued that the social responsibility of a firm is to make more profits. (Saleh, Zulkifli and
Muhamad, 2011 and Lagoarde-Segot, 2011). If managers were to use shareholders capital to pursue the interest of society and get involve in CSR activities, that would be similar to stealing (Friedman, 1970 cited in Chen and Wang, 2011). LagoardeSegot (2011) commented that this view may be valid now except that firms benefit from responsible business practices, not despite them.
Bibliography: Arafat, M.Y., Warokka, A., Abdullah, H.H. & Septian, R.R. (2012) The triple bottom line effect on emerging market companies : A test of corporate social responsibility and firm value relationship. Journal of Southern Asian Research, 2012(2012), 15 pages Aras, G., Aybars, A. & Kutlu, O. (2012) Managing corporate performance : Investigating the relationship between corporate social responsibility and financial performance in emerging markets. International Journal of Productivity and Performance Management, 59(3), 2010, pp Brik, A.B., Rettab, B. & Mellahi, K. (2011) Market orientation, corporate social responsibility and business performance Chen, H. & Wang, X. (2011) Corporate social responsibility and corporate financial performance in China : An empirical research from Chinese firms Lagoarde-Segot, T. (2011) Corporate social responsibility as a bolster for economic performance : Evidence from emerging markets Peloza, J. (2009) The challenge of measuring financial impacts from investments in corporate social performance Saleh, M., Zulkifli, N. & Muhamad, R. (2011) Looking for evidence of the relationship between corporate social responsibility and corporate financial performance in an emerging market. Asia-Pacific Journal of Business Administration, 3(2), 2011, pp Sun, L. (2112) Further evidence on the association between corporate social responsibility and financial performance