Corporate Social Responsibility versus Financial Performance: an Indian Banking Perspective

Mahua Bhattacharya1 & Leenapriya De2

1Associate Professor, Department of Business Management, University of Calcutta.

2Lecturer, Department of Commerce, Sarsuna College, Kolkata. Research Scholar, Department of Business Management, University of Calcutta. Email: leenapriyade@gmail.com

 Volume 4, Number 1 I Full Text PDF

Abstract

Corporate Social Responsibility (CSR) creates an obligation on the firm to be aware of social values and well being of the society while discharging its core business functions. Socially responsible business practices leads to use of additional financial and non financial resources by the firms. Different experts and researchers have responded to the controversy regarding the impact of CSR performance of the firms on its financial performance and whether resources  spent on CSR activities is an investment for reaping future profit or its is an added expenditure on the firm pushing it towards an economically disadvantaged position. In this paper attempt is made to provide a fresh perspective of relationship between Corporate Social Responsibility (CSR) and corporate financial performance (CFP) in Indian banking sector. In this paper unbalanced panel data regression analysis is used to study the bilateral relationship between corporate social responsibility of commercial banks in India and their financial performance. The study reveal a mixed result .CSR has a positive impact on market related performance measure and market related performance measures also have a positive impact on CSR, although the results are not that significant. The total business of banks significantly influences the CSR and is also influenced by CSR activities of banks. But CSR has a negative relationship with accounting based measures of financial performance, the ROA and RONW.

Keywords: Corporate Social Responsibility (CSR), Corporate Financial Performance (CFP), Commercial Banks, Bilateral relationship, Unbalanced Panel data.