CSR as an Investment or an Expense: Evidence from Banking Sector of Pakistan

Fayaz Ali Shah, Shahid Jan, Fazal Haleem


If engaging in Corporate Social Responsibility (CSR) activities costs at least in short run and it is beyond a firm’s legal obligation then why do firms especially financial services firms engage in CSR activities. This question urges us to investigate the role of CSR in Corporate Financial Performance (CFP) in the banking sector of Pakistan.  Therefore, data of 15 banks, listed on Pakistan Stock Exchange, have been collected from annual reports of respective banks’ websites and the State Bank of Pakistan for 6 years from 2009 to 2014. Correlation and regression analysis have been conducted through SPSS software.  Strong correlation between CSR and ROA, Firm Size as well as Firm Age was found out. On the hand, it was revealed that CSR did not have a significant impact on ROA as well as on ROE. The study contributes to the banking sector of Pakistan and gives insights to stakeholders including managers, leaders, investors and general public.


Corporate Social Responsibility (CSR), Corporate Social Performance (CSF), Financial Performance, CSR Investment, CSR Expense, Banking Sector, Financial Sector, Pakistan

Full Text:



Afridi, F. K., Kakakhel, S. J., & Qamer, B. F. (2012). How does Corporate Social Responsibility (CSR) Impact Employee Turnover in Universities of Khyber Pukhtun Khwa?. Abasyn University Journal of Social Sciences, 5(1).

Ali, I., Rehman, K. U., Ali, S. I., Yousaf, J., & Zia, M. (2010). Corporate social responsibility influences, employee commitment and organizational performance. African Journal of Business Management, 4(13), 2796.

Awan, A. G. (2015). Impact of CSR on Firms’ Financial Performance: A Case Study of Ghee and Fertilizer Industry in Southern Punjab-Pakistan.European Journal of Business and Management, 7(7), 375-384.

Awan, A. G., & Iqbal, J. (2014). The role of relationship marketing in building customers’loyalty-a case study of the mobile telecommunication industry in southern punjab-pakistan. British Journal of Marketing Studies, 2(7), 60-79.

Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of business ethics, 97(1), 71-86.

Bolton, B. J. (2013). Corporate Social Responsibility and Bank Performance.Available at SSRN 2277912.

Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of management review, 4(4), 497-505.

Chetty, S., Naidoo, R., & Seetharam, Y. (2015). The Impact of Corporate Social Responsibility on Firms’ Financial Performance in South Africa.Contemporary Economics, 9(2), 193-214

Chih, H.L, Shen, C.H., Kang, F.C (2008). Corporate Social Responsibility, Investor Protection, and Earnings Management: Some International Evidence. Journal of Business Ethics. 79: 197-198. DOI 10.1007/s10551-007-9383-7

Classon, J., and Dahlström, J. (2006). How can CSR affect company performance?: A qualitative study of CSR and its effects.

http://www.diva-portal.org/smash/get/diva2:6476/fulltext01 (Sep 18, 2015)

Dabbas, M., and Al-rawashdeh, S. T. (2012). The effect of corporate social responsibility on the profitability of the industrial companies in Jordan.Canadian social science, 8(3), 32.

Dobers, P., and Halme, M. (2009). Corporate social responsibility and developing countries. Corporate Social Responsibility and Environmental Management, 16, 237-249

Fauzi, H. (2009). Corporate social and financial performance: Empirical evidence from American companies. Globsyn Management Journal, Forthcoming.

Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston, MA: Pitman

Friedman, M. (1970). The Social Responsibility Of Business Is To Increase Its Profits. New York Times, 13, 122–126.

Holme, R., and Watta, P. (2000). Making Good Business Sense. World Business Council for Sustainable Development.

http://www.wbcsd. org/web/publications/csr2000.pdf

Emilsson, L. M., Classon, M., & Bredmar, K. (2012). CSR and the quest for profitability–using Economic Value Added to trace profitability. International Journal of Economics and Management Sciences.

Ioannou, I., & Serafeim, G. (2010, August). THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON INVESTMENT RECOMMENDATIONS. In Academy of Management Proceedings (Vol. 2010, No. 1, pp. 1-6). Academy of Management.

Irwin, T,G,. (2015). Millennials More Attuned To Corporate Social Responsibilitiy. Online at http://www.mediapost.com/publications/article/259367/millennials-more-attuned-to-corporate-social-respo.html Oct 3, 2015

Jiao, Y., & Xie, W. (2013). How does CSR influence a firm's profitability?:-A case study of Sandvik.

http://hig.diva-portal.org/smash/get/diva2:630572/FULLTEXT01.pdf (Sep 18, 2015)

John, H. (1998). Do corporations have social responsibilities?, Free enterprise creates unique problem-solving opportunities.

http://fee.org/freeman/do-corporations-have-social-responsibilities/ Sep 26, 2015

Lemon, K. N., Roberts, J. H., Raghubir, P., & Winer, R. S. (2011). A stakeholder based approach. Measuring the effects of corporate social responsibility. In The Conference Board, Trusted Insights for Business Worldwide (Vol. 3, No. 7).

Lin, C.-H., Yang, H.-L., &Liou, D.-Y. (2009). The impact of corporate social responsibility on financial performance: Evidence from business in Taiwan. Technology in Society, 31(1), 56-63.

Malik, M. S., & Nadeem, M. (2014). Impact of corporate social responsibility on the financial performance of banks in Pakistan. International Letters of Social and Humanistic Sciences, 10(1), 9-19

McWilliams, A., and D. Siegel (2000). Corporate social responsibility and financial performance: Correlation or misspecification?. Strategic Management Journal, 21 (5): 603-609.

Meehan, J., Meehan, K., & Richards, A. (2006). Corporate social responsibility: the 3C-SR model. International Journal of Social Economics,33(5/6), 386-398.

Miller, M,. (2004). Businesses Don’t Have Social Responsibilities: People Do. Online at

https://cei.org/op-eds-and-articles/businesses-dont-have-social-responsibilities-people-do [24/9/15]

Nadeem, A., & Kakakhel, S. J. (2012). An Investigation into Corporate Social Responsibility (CSR) of Public Sector Universities in KPK. Abasyn University Journal of Social Sciences, 5(2).

Porter, M. E., & Kramer, M. R. (2006). Strategy and Sosciety, The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review, 85(12).

Posnikoff, J. F. (1997). Disinvestment from South Africa: They did well by doing good. Contemporary Economic Policy , 15 (1), 76-86.

Preston, L. E., & O’Bannon, D. P. (1997). The Corporate Social-Financial Performance Relationship: A Typology and Analysis. Business and Society, 36 (4), 419-429.

Raza, A., Ilyas, M. I., Rauf, R., & Qamar, R. (2012). Relationship between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP): Literature review approach. Elixir Financ. Manag, 46, 8404-8409.

Redman, E. (2005). Three models of corporate social responsibility: implications for public policy. Roosevelt Review, 1(1).

Samina, Q. S. (2012). Practice of Corporate Social Responsibility in Islamic Banks of Bangladesh. World Journal of Social Sciences , 2 (6), 1-13.

Shaheer, H., Nadeem, M. E., & Chaudhary, A. A. (2015). Does Corporate Social Responsibility affect Corporate Financial Performance?. Studies, 4(2).

Soana, M. G. (2011). The relationship between corporate social performance and corporate financial performance in the banking sector. Journal of Business Ethics, 104(1), 133-148.

Tsoutsoura, M. (2004). Corporate social responsibility and financial performance. center for responsible business.

Turban, D. B., & Greening, D. W. (1997). Corporate social performance and organizational attractiveness to prospective employees. Academy of management journal, 40(3), 658-672.

Ullman, A. (1985). Data In Search of a Theory: A Critical Examination of the Relationship among Social Performance, Social Disclosure, and Economic Performance. Academy of Management Review, 10 (3), 540–577

Von Arx, U., & Ziegler, A. (2008). The effect of CSR on stock performance: new evidence for the USA and Europe. CER-ETH-Center of Economic Research at ETH Zurich, Working Paper, (08/85).

Watts, P., and Holme, L. (2000). Corporate social responsibility: making good business sense. World Business Council for Sustainable Development (WBCSD).

Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic management journal, 18(4), 303-319


  • There are currently no refbacks.

ISSN 2414-2336 (Print), ISSN 2523-2525 (Online)