Corporate social responsibility and financial performance linkage evidence from Indian companies

Abstract

This study aims at examining the relationship between corporate social responsibility (CSR) and business performance of Indian companies. Business performance is measured using both accounting and market based measures. Accounting based measures are ROA (return on assets), ROE(return on equity) and sales whereas market based measures are PE ratio and Beta. CSR is measured by ESG(environment, social & governance) scores developed by CRISIL India Ltd. Data is obtained for a sample of 100 companies classified into two sets; first represent in the designated socially responsible companies, called as “experiment group” and second the rest, called as “control group”. Data for the first portfolio corresponds to top 50 companies having highest ESG scores. Second portfolio represents bottom 50 companies having lowest ESG scores. Data is analysed using t-test to find out if there is any statistically significant difference between business performance of experiment group and control group. The results revealed that sales of the experiment group i.e companies having high ESG score is higher as compared to that of the control group i.e. companies having low ESG score, while ROA, ROE, PE ratio and BETA of experiment group is not significantly different from that of control group.