Impact of corporate social responsibility on corporate financial performance: Evidence from the Maldives stock exchange

Abstract

BACKGROUND: Although CSR has been studied extensively based on developed countries, very few studies has been done on developing economies. Likewise, the field of CSR is still uncovered ground, at an early stage of development in the Maldives. OBJECTIVE: The objective of this study is to examine the impact of overall CSR ranking, and individual CSR dimensions on the financial performance of the listed companies in the Maldives. METHODOLOGY: Secondary data related to CSR, financial variables have been collected from the Maldives Stock Exchange, and through content analysis, a CSR index was developed. RESULTS: Findings demonstrated a significant relationship between overall CSR ranking and financial. However, among the dimensions of CSR, only the community and governance have a significant positive association with financial measures, where else the dimensions of employees and environment do not have any significance with financial performance. CONCLUSION: The paper includes implications to control the effect of CSR on company performance strategically and to revise their business philosophies to a socially responsible approach. It also contributes to helping the decision-makers to come up with concepts to initiate and provide a social performance rating for the Maldives listed companies.