Financial Performance of Socially Responsible Firms: A Comparative Study of MNCs and Non-MNCs

Abstract

The relationship between CSR and firm performance has been widely studied in the context of developed nations; however, empirical work on this issue is limited in case of developing nations like India. In this paper, we test the relationship between corporate social responsibility and different firm characteristics for MNC and Non-MNC Indian firms. We have tried to make a comparison between MNCs and Non-MNCs in their CSR activities. The empirical analysis was conducted using different parametric and non-parametric estimation techniques. The results show that CSR does not have significant relationship with firm performance measures of the sampled firms. These results are contradictory to the accumulating body of empirical studies which support positive impact of CSR on financial performance. Further, the results indicate positive relationship of CSR with size but negative relation with leverage and firm age confirming that larger, younger and less levered firms are highly active towards CSR in India than their counterparts.

Keywords: Corporate Social Responsibility, Multinational Corporations, Firm Performance, Firm Size