Corporate Social Responsibility and its Nexus with Firm Performance and Institutional Ownership: An Emerging Market Context

Abstract

Either corporate social responsibility (CSR) is paramount for the firms or not, is a matter of question since long. The present study analyzes this relationship in the context of moderating role of Institutional ownership (IO). Firm performance is measured through accounting and market value measures. Leverage, firm age, firm size, and log of sales revenue used as a control variables. Through applying panel data techniques, findings demonstrate insignificant positive association between CSR and firm performance. It shows that stakeholder could not assign value to firms spending as a CSR. This could be the reason that customers are not much aware about firms CSR activities hence, firms fail to capitalize their spending as an investment. Institutional Ownership (IO) reveals negative insignificant association with all profitability measures except Tobin’s Q where this relationship is significant. This significant negative relationship supports the agency theory and presence of strategic alliance hypotheses between influential institutional owners and internal management that leads to lower firm performance. The interaction variable of CSR and IO show positive but insignificant relationship with firm performance by all means.

Keywords

• Corporate social responsibility, firm performance, Pakistan stock exchange, Institutional ownership