The relationship between Corporate Social Responsibility and Corporate Financial Performance in developing countries. Case of Egypt

Abstract

This study explores and tests the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) in developing countries, focusing mainly to examine the financial aspects of high vs low-ranked firms in the CSR Index in Egypt for eight consecutive years (excluding 2011 because of its special situation due to instability caused by the revolution). Moreover, this study empirically examines different financial ratios for 18 firms listed in Egyp-tian Stock Exchange EGX 30 for eight years, 2007 – 2015. Using the Standard and Poor’s index (S&P/EGX ESG Index) to measure the CSR, and using accounting based measures (from Egypt for information Dissemination (EGID) database and the Cairo and Alexandria Stock Exchange Disclosure book). This study’s purpose is to find the suitable measures of the CFP along with CSR, as well as, the relationship between them, to conclude whether CSR is beneficial for compa-nies or not. The main question here is: What is the type and significance of the relationship be-tween CSR and the CFP in Egypt? the ANOVA analysis was chosen and used on both compa-ny’s CSR and CFP variables, also constructed a Pearson Correlation between CSR and CFP va-riables and examined the multiple regression model to discriminate between the CFP of high and low-ranked firms in the CSR Index and recognize the type and significance of the relationship be-tween CSR and CFP. The results show that CSR has a positive significant relation with the CFP. The paper has implications for enhancing the understanding of performance management by understanding the relationship between CSR and CFP.