Impact of corporate social performance on financial performance of manufacturing companies (IMC) listed on the Tehran Stock Exchange

Abstract

Purpose

This study aims to investigate the impact of corporate social performance (CSP) on financial performance of manufacturing companies listed on the Tehran Stock Exchange and thus contributes to understanding the significance of socially responsible investments for companies.

Design/methodology/approach

The CSP was measured by a questionnaire composed of 53 items related to customers’ social performance of the firm, workers and environmental and community dimensions. Besides, corporate financial performance was measured by two measures, return on equity (ROE) and return on assets (ROA). In this study, 74 observations were investigated from 2006 to 2012. The data were analyzed using the multiple regression method.

Findings

The results of the study revealed that customers’ social performance of the firm has a negative impact on ROA of the firm. Besides, social performance of the workers dimension of the firm has a positive impact on ROA. The results, also, showed that none of the CSP dimensions affected the ROE of the firms.

Originality/value

The present study is useful for managers to develop future social performance policies that may lead to better financial performance in the long-term. The paper, also, contributes to the corporate social responsibility literature, as it presents empirical evidence of the effects of CSP on the financial performance in the manufacturing sector of developing countries.

Citation

Sadeghi, G., Arabsalehi, M. and Hamavandi, M. (2016), "Impact of corporate social performance on financial performance of manufacturing companies (IMC) listed on the Tehran Stock Exchange", International Journal of Law and Management, Vol. 58 No. 6, pp. 634-659. https://doi.org/10.1108/IJLMA-06-2015-0029