International Journal of Engineering Technology Science and Research

IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 4, Issue 12
December 2017

A Study on the Impact of CSR on Financial Performance of

Companies in India

Arpit Bafna
BBA H Finance, Christ University

1. Abstract
This Study investigates the impact CSR has on the financial performance of companies using annual data ranging from
2014 to 2016 in India. Correlation analysis and Regression analysis have been used in this study to find the relationship
and the impact on the variables. The results reveal that CSR has a positive significant influence on Net profits of the
company. However, CSR shows only a slight correlation but no significant Influence with Earnings per Share and Return
on Assets of a company.

2. Introduction
UNIDO defines Corporate Social Responsibility as “a management concept whereby companies integrate
social and environmental concerns in their business operations and interactions with their stakeholders.” CSR
is becoming increasingly important in the current scenario. Companies are realising how important it is to
meet the needs of the stakeholders. CSR not only enhances the long term relationship with its stakeholders but
ensures smooth running of its operations. Even the new Companies’ Act of 2013 makes it mandatory for those
companies that meet the criteria to perform CSR activities. Section 135, schedule act VII of the Companies’
Act,2013 states that those companies that have a net worth of 500 crore or more; or turnover of 1000 crore or
more; or net profit of 5 crore or more, have to spend 2% of their average profit of last three years. There are
many studies that attempt to determine the relationship between CSR and the company’s financial
performance. This study has also been undertaken to study the impact CSR has on Financial Performance of a
company.

3. Literature Review
Corporate social responsibility is growing at a rapid pace and is gaining popularity. The demand for reports on
the actions of the firm towards society, economy and environment is increasing. (Malik & Nadeem, 2014).
The impact of corporate social responsibility on the firm’s financial performance is extremely relevant now.
(MADUGBA & OKAFOR, 2016). Various studies have been conducted to find the relationship between CSR
and Financial performance of the companies. The variables considered for Financial Performance include
Total Assets, Net Profits, Return on Assets, Return on Equity, Earnings Per Share, etc (Kamatra &
Kartikaningdyah, 2015). CSR has been considered as an independent variable and the financial variables such
as Net profit (NP), Earnings per Share (EPS), Return on Assets (ROA) and Total Assets have been considered
as independent variables (Bhunia & Das, 2015) (Kanwal, Khanam, Nasreen, & Hameed, 2013). The time
period for the studies range from a few years to over 20 years. (MURTAZA, AKHTAR, IJAZ, & SADIQA,
2014). The studies are widespread in various sectors like Banking to mineral sectors. (Pan, Sha, Zhang, & Ke,
2014) (MADUGBA & OKAFOR, 2016) The data being used is secondary data that have been obtained from
the respective published annual reports. The methodology adopted for the analysis of the data is correlation
and simple regression in many of the cases. (Garai, 2017) . Some studies have shown a significant influence of
CSR on Financial performance (Choongo, 2017) whereas a few studies resulted in CSR not significantly
influencing the firm’s financial performance (Mehar & Rahat, 2007).

325 Arpit Bafna

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 4, Issue 12
December 2017

This paper focuses on the impact Corporate Social Responsibility has on the financial performance of
companies in India taking CSR as the independent variable and Net Profits, Earnings per Share and Return on
Assets as the dependent variables. The data used for the study is secondary data and ranges from 2014-2016.

4. Objectives
1. To know the relationship between corporate social responsibility and financial performance of companies.
2. To know the impact CSR has on the financial performance of companies.

5. Methodology
5.1 Data collection methods
The data used for the study is secondary data. The data has been collected from the sites of the companies
taken for the study. Also data for CSR has been collected from the website of ministry of corporate affairs.
Data for the years 2014-15, 2015-16 and 2016-17 has been taken. 5.2 Population of study
The population considered for the study are banks listed in the National Stock Exchange, India.
The time period taken for the study is 2014-15, 2015-16 and 2016-17.
5.3 Sample of study
The sampling method used is convenience sampling. The study considers data of 7 Banks listed in the
National Stock Exchange.
5.4 Hypothesis
H0: There is no significant relationship between CSR and Net Profits of companies H0: There is no significant
relationship between CSR and Earnings per Share of a company.
H0: There is no significant relationship between CSR and Return on Asset of a company.

6. Analysis
A correlation and regression analysis was done on the data. The following were the findings:
6.1 CSR and NP
Table 1: This table contains the correlation analysis results between CSR and NP

Correlations

CSR NP
Pearson Correlation 1 .992** .000
Sig. (2-tailed)
CSR
N 7 7
**
Pearson Correlation .992 1
Sig. (2-tailed)
NP N .000

7 7
**. Correlation is significant at the 0.01 level (2-tailed).

326 Arpit Bafna

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 4, Issue 12
December 2017

Table 2, 3, 4 and 5: These tables contain the regression analysis results between CSR and NP
Table 2
Variables Entered/Removeda

Model Variables Variables Method

Entered Removed

1 CSRb . Enter
a. Dependent Variable: NP
b. All requested variables entered.

Table 3
Model Summary

Model R R Square Std. Error of

Adjusted R the
Square Estimate

1 .992a .984 .981 690.61331

a. Predictors: (Constant), CSR

Table 4
ANOVAa
Model Sum of Squares df Mean Square F Sig.
150684870.743 1 150684870.743 315.936 .000b
Regression
2384733.717 5 476946.743
Residual
1 Total 153069604.460 6
a. Dependent Variable: NP
b. Predictors: (Constant), CSR

Table 5
Coefficientsa
Model Unstandardized Coefficients Standardized t Sig.
Coefficients
B Std. Error Beta
202.059 361.614 .559 .600
(Constant)
1 CSR 56.821 3.197 .992 17.775 .000
a. Dependent Variable: NP

327 Arpit Bafna

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 4, Issue 12
December 2017

A strong positive correlation of 0.992 was observed between CSR and Net Profit. The regression analysis
resulted in a significant influence between the two variables as a significant value of p=0.000 which is less
than 0.05. This means the model is a good fit. It was noticed that the company’s net profits increased by
56.821Cr for every 1Cr increase in CSR expenditure.
6.2 CSR and EPS
Table 6: This table contains the correlation analysis results between CSR and EPS
Correlations
CSR EPS
1 .552
Pearson Correlation .199
Sig. (2-tailed)
CSR 7 7
N
.552 1
Pearson Correlation
Sig. (2-tailed) .199
EPS N 7 7
Table 7, 8, 9 and 10: These tables contain the regression analysis results between CSR and EPS
Table 7
Variables Entered/Removeda

Model Variables Variables Method

Entered Removed

1 CSRb . Enter
a. Dependent Variable: EPS
b. All requested variables entered.
Table 8
Model Summary

Model R R Square Adjusted R Std. Error of the

Square Estimate

1 .552a .304 .165 15.38662

a. Predictors: (Constant), CSR
Table 9
ANOVAa
Model Sum of Squares df Mean Square F Sig.
517.553 1 517.553 2.186 .199b
Regression
1183.741 5 236.748
Residual
1 Total 1701.294 6
a. Dependent Variable: EPS
b. Predictors: (Constant), CSR

328 Arpit Bafna

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 4, Issue 12
December 2017

Table 10
Coefficientsa
Model Unstandardized Coefficients Standardized t Sig.
Coefficients
B Std. Error Beta

(Constant) 15.528 8.057 1.927 .112

1 CSR .105 .071 .552 1.479 .199
a. Dependent Variable: EPS
The correlation analysis between the variables EPS and CSR resulted in a moderate positive correlation of
0.552. The results of the regression show that CSR does not influence EPS significantly.
6.3 CSR and ROA
Table 11: This table contains the correlation analysis results between CSR and ROA
Correlations
CSR ROA
Pearson Correlation 1 .534
Sig. (2-tailed) .217
N
CSR 7 7
Pearson Correlation
.534
Sig. (2-tailed) 1
.217
ROA
N 7 7
Table 12, 13, 14 and 15: These tables contain the regression analysis results between CSR and NP
Table 12
Variables Entered/Removeda

Model Variables Variables Method

Entered Removed

1 CSRb . Enter
a. Dependent Variable: ROA
b. All requested variables entered.
Table 13
Model Summary

Model R R Square Adjusted R Std. Error of the

Square Estimate

1 .534a .285 .142 96.14179

a. Predictors: (Constant), CSR

329 Arpit Bafna

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 4, Issue 12
December 2017

Table 14
ANOVAa
Model Sum of Squares df Mean Square F Sig.
18393.597 1 18393.597 1.990 .217b
Regression
46216.217 5 9243.243
Residual
1 Total 64609.814 6
a. Dependent Variable: ROA
b. Predictors: (Constant), CSR

Table 15
Coefficientsa
Model Unstandardized Coefficients Standardized t Sig.
Coefficients
B Std. Error Beta
123.783 50.341 2.459 .057
(Constant)
1 CSR .628 .445 .534 1.411 .217
a. Dependent Variable: ROA

The variables ROA and CSR are moderately correlated. A value of 0.534 is seen between the two variables
which signifies a slight positive correlation. No significant relationship can be observed between CSR and
ROA in the regression analysis.

Conclusion
The study observes the relationship between corporate social responsibility and financial performance of
companies. Three variables are considered for financial performance: Net profits, Earnings per share and
Return on Assets. A correlation and regression analysis between the variables is done. CSR had a significant
positive influence on the Net profits of the company but no significant influence was observed with EPS and
ROA. Thus, from the results, CSR does have a positive impact on the Net profits of the company which is
why the companies tend to spend over the required limit for CSR. But CSR does not impact EPS and ROA
though a slight positive correlation is seen between the variables.

Bibliography
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 Garai, S. (2017). Impact of corporate social responsibility on firm’s financial performance with a special reference of
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 Kamatra, N., & Kartikaningdyah, E. (2015). Effect Corporate Social Responsibility on Financial Performance.
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 Kanwal, M., Khanam, F., Nasreen, S., & Hameed, S. (2013). Impact of corporate social responsibility on the firm’s
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330 Arpit Bafna

 International Journal of Engineering Technology Science and Research
IJETSR
www.ijetsr.com
ISSN 2394 – 3386
Volume 4, Issue 12
December 2017

 MADUGBA, J. U., & OKAFOR, M. C. (2016). Impact of Corporate Social Responsibility on Financial
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331 Arpit Bafna