The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach
This study is an attempt to model the bidirectional linkages between corporate social responsibility (CSR) and corporate financial performance (CFP) by using the prospective and retrospective approaches. A panel data set for 100 of the Fortune Most Admired Companies was used to study the relationshi...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2019
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| Online Access: | http://psasir.upm.edu.my/id/eprint/82367/ http://psasir.upm.edu.my/id/eprint/82367/1/The%20causality%20direction%20of%20the%20corporate%20social%20responsibility%20%E2%80%93corporate%20financial%20performance%20nexus.pdf |
| _version_ | 1848859280492462080 |
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| author | Lin, Woon Leong Law, Siong Hook Ho, Jo Ann Sambasivan, Murali |
| author_facet | Lin, Woon Leong Law, Siong Hook Ho, Jo Ann Sambasivan, Murali |
| author_sort | Lin, Woon Leong |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This study is an attempt to model the bidirectional linkages between corporate social responsibility (CSR) and corporate financial performance (CFP) by using the prospective and retrospective approaches. A panel data set for 100 of the Fortune Most Admired Companies was used to study the relationships. Moreover, 1000 firm-year observations were examined between the sample periods of 2007 and 2016. A new methodology known as Panel Vector Autoregression (Panel VAR) approach using the Generalised Method of Moments (GMM) was used in this study. The salient findings are: (1) better financial performance of firms lead to a better CSR engagement and (2) better CSR need not necessarily lead to superior CFP. A strong and substantial negative impact has been observed on CSR and the three CFP measures, namely, return on equity, return on assets, and return on invested capital. This finding has consistency with the trade-off hypothesis. This hypothesis posits that when firms are ‘‘being socially responsible’’, they will have a tendency to experience minimised shareholder wealth and lower profits, which restricts the socially responsible investments. |
| first_indexed | 2025-11-15T12:26:50Z |
| format | Article |
| id | upm-82367 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T12:26:50Z |
| publishDate | 2019 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-823672021-08-25T05:59:34Z http://psasir.upm.edu.my/id/eprint/82367/ The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach Lin, Woon Leong Law, Siong Hook Ho, Jo Ann Sambasivan, Murali This study is an attempt to model the bidirectional linkages between corporate social responsibility (CSR) and corporate financial performance (CFP) by using the prospective and retrospective approaches. A panel data set for 100 of the Fortune Most Admired Companies was used to study the relationships. Moreover, 1000 firm-year observations were examined between the sample periods of 2007 and 2016. A new methodology known as Panel Vector Autoregression (Panel VAR) approach using the Generalised Method of Moments (GMM) was used in this study. The salient findings are: (1) better financial performance of firms lead to a better CSR engagement and (2) better CSR need not necessarily lead to superior CFP. A strong and substantial negative impact has been observed on CSR and the three CFP measures, namely, return on equity, return on assets, and return on invested capital. This finding has consistency with the trade-off hypothesis. This hypothesis posits that when firms are ‘‘being socially responsible’’, they will have a tendency to experience minimised shareholder wealth and lower profits, which restricts the socially responsible investments. Elsevier 2019-04 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/82367/1/The%20causality%20direction%20of%20the%20corporate%20social%20responsibility%20%E2%80%93corporate%20financial%20performance%20nexus.pdf Lin, Woon Leong and Law, Siong Hook and Ho, Jo Ann and Sambasivan, Murali (2019) The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach. North American Journal of Economics and Finance, 48. pp. 401-418. ISSN 1062-9408 https://www.sciencedirect.com/science/article/abs/pii/S1062940818301840 10.1016/j.najef.2019.03.004 |
| spellingShingle | Lin, Woon Leong Law, Siong Hook Ho, Jo Ann Sambasivan, Murali The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach |
| title | The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach |
| title_full | The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach |
| title_fullStr | The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach |
| title_full_unstemmed | The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach |
| title_short | The causality direction of the corporate social responsibility –corporate financial performance nexus: application of Panel Vector Autoregression approach |
| title_sort | causality direction of the corporate social responsibility –corporate financial performance nexus: application of panel vector autoregression approach |
| url | http://psasir.upm.edu.my/id/eprint/82367/ http://psasir.upm.edu.my/id/eprint/82367/ http://psasir.upm.edu.my/id/eprint/82367/ http://psasir.upm.edu.my/id/eprint/82367/1/The%20causality%20direction%20of%20the%20corporate%20social%20responsibility%20%E2%80%93corporate%20financial%20performance%20nexus.pdf |