Journal of Asian Business and Economic Studies (Nov 2020)

Explaining the complexity relationship of CSR and financial performance using neo-institutional theory

  • Golrida Karyawati P,
  • Bambang Subroto,
  • Sutrisno T,
  • Erwin Saraswati

DOI
https://doi.org/10.1108/JABES-10-2019-0106
Journal volume & issue
Vol. 27, no. 3
pp. 227 – 244

Abstract

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Purpose – This study aims to prove the complexity of the relationship between CSR and financial performance (FP) and to decompose the complexity of the relationship using neo-institutional theory. Design/methodology/approach – This research employs a meta-analysis that integrates 55 various contexts studied between 1998 and 2017 using correlation coefficient as the effect size. Findings – This study proves that the nature of the relationship between CSR and FP is complex and suggests that the analysis of the relationship between the two variables includes institutional factors to produce generalizable conclusions. Country characteristics, forms and dimensions of CSR, CSR measurements and FP measurements explain the complexity of the relationship between CSR and FP. Research limitations/implications – Future research is expected to include industry characteristics and the corporate governance model in the analysis of the relationship between CSR and FP. Differences in industry characteristics affect the selection of CSR forms and dimensions, bringing it the potential to influence the relationship between CSR and FP. The corporate governance model adopted by developing countries and developed countries also has the potential to be an institutional factor to influence the relationship between CSR and FP. Originality/value – This research proves that the complexity of the relationship between CSR and FP is nature given. This research explores the factors causing the complexity of the relationship using neo-institutional theory, which, to the author's knowledge, has not been done by other researchers.

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