CSR refers to a firm fulfilling its legal, economic, ethical, and philanthropic responsibilities to society [22].
Generally, CSR is interpreted as a firm’s social contribution. However, CSR and social contribution must
be clearly differentiated: social responsibility refers broadly to a firm’s legal, economic, ethical, and
philanthropic responsibilities, while a firm’s social contribution refers to only one aspect of CSR [23].
Therefore, it is not accurate to simplify the concept of CSR into social responsibility; thus, CSR will be
redefined using the concepts in various CSR studies. Bowen [24] first developed an academic definition
of social responsibility as a concept of CSR; in his book Social Responsibility of Businessmen, he defines
social responsibility as the pursuit of the right policy in terms of social goals or values, describing it as
the duty of businesspeople to follow such decisions and actions [25]. Since then, many definitions have
been suggested, with no single unique definition of CSR. Because discussions about CSR are broad and
comprehensive, it can be defined from many different approaches and perspectives [26].
A company’s financial performance forms the backbone on which a profit seeking entity would continue
to exist. Financial performance relates to the degree to which financial or monetary objectives are been
realized by an entity [43]. It is also the process of gauging the monetary achievements of the business
affairs by implementing polices and strategies in specific point in time. Financial performance is the
overall measure of a company’s ability to maximize its cost of operations, efficiently use its assets and
maximize shareholder value. High performance reflects management effectiveness and efficiency in
making use of company’s resources and this in turn contributes to the economy at large [44]. Financial
performance has been defined as an attempt of an organization to meet its goals or being effective in
productivity [45]. In the same vein, financial performance was described as a measure of an
organization’s earnings, profits and appreciation in its value which is reflected by the rise in price of the
entity’s shares [46]. Financial performance is measured at a given point in time or over a period of time.
It can also be compared with similar firms across the same industry or be used to compare industries or
sectors in aggregation. From the foregoing, financial performance is a measure of an organization’s
earnings, profits and appreciation in its value which are reflected by the rise in price of the entity’s
shares and the degree to which financial objectives are being met or has been accomplished.
Waddock and Graves (1997) observe that three different kinds of associations between CSR and
financial performance have been found in previous research. These associations have been
considered to positive, negative or results where the association cannot be determined (Waddock and
Graves 1997). In their own study, utilizing a sample consisting of firms from Standard & Poor’s 500Index
(an index of 500 large US firms), the researchers observed a positive association between CSR and
financial performance during one observed year(Waddock & Graves, 1997). Similar observations of a
positive association between CSR and financial performance have been found by a number of other
researchers (Rosso & Fouts, 1997; Preston & O’Bannon, 1997; Simpson & Kohers, 2002; Martinez-
Ferraro & Valeriano, 122015). Meanwhile, a significant amount of researchers have generated results in
which it has not been possible to determine whether the association between CSR and financial
performance is positive or negative or if there is an association between the variables at all (Lee et al.,
2009; Peng & Yang, 2014; Brammer et al., 2006; Brammer & Millington, 2008).
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Disabled. Master’s Thesis, University of Konkuk, Seoul, Korea, 2010.
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