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Despite scads research on the relationship between corporate social responsibility and financial performance, literature is still inconclusive. This study attempts to examine the relationship between corporate social responsibility and financial performance in the Indian context. Secondary data has been collected for 28 Indian commercial banks listed in Bombay stock exchange (BSE), for the period of 10 years (2007–16). The results indicate that CSR exerts positive impact on financial performance of the Indian banks. The finding of this study provides great insights for management, to integrate the CSR with strategic intent of the business, and renovate their business philosophy from traditional profit-oriented to socially responsible approach.
Despite the plethora of research to exemplify the relationship between CSR and firm value, literature fails to provide conclusive evidence. Thus, this study provides some empirical evidence, which may help in explaining divergence in prior work. Using an improved and distinctive method, to verify the impact of CSR on both profitability and market returns in the Indian context. The study employed a panel data set of 28 Indian commercial banks for 10 years. Likewise, Size, risk, capital intensity and age were incorporated as control variables. The result shows CSR positively impacts profitability and stock returns. There by evincing that it pays to be socially responsible. It makes clear from the finding that CSR, as valuable and rear resource, can be exploited to create a competitive advantage for the firm The findings specifically validate the results of previous studies (e.g., Mishra and Suar, 2010; Cochran & Wood, 1984; Simpson & Kohers, 2002; Waddock & Graves, 1997).
The results of this study have an important implication for strategic managers. First, considering the impact of CSR on firm's performance, companies should give adequate concern to their social responsibilities. CSR should not be treated as an optional activity rather it should be integrated with long-term business strategy. When CSR is aptly integrated into the business operations, both social and financial target becomes easier and resulting in better financial performance. Therefore, managers of the companies that do not practice CSR must treat it as one of their core business functions for long-term business performance. Second, the financial base of CSR gives it a strategic position in the corporate world. Yielding positive results, CSR will be taken as voluntary initiative rather than taken under legislative compulsions. In fact, forcing business organization does not actually signify that they will respond and go beyond legislation requirements. Therefore the underlying premises of financial outcome will be useful in the long run, to move business organizations beyond legislative compliance.