This paper aims to substantiate the mechanism through which corporate social responsibility (CSR) affects financial performance (FP). Specifically, this paper focuses on the…
Abstract
Purpose
This paper aims to substantiate the mechanism through which corporate social responsibility (CSR) affects financial performance (FP). Specifically, this paper focuses on the moderating effect of visibility and mediating effect of reputation in the relationship.
Design/methodology/approach
This paper investigates 175 Korean firms from 2010 to 2012 that have been listed in the Korean Economic Justice Index for all three years. The hypotheses are tested using various measures of visibility and the Korea’s Most Admired Company index as proxy for reputation. The logistics regression and the ordinary least square are used.
Findings
This paper initially demonstrates that the visibility moderates the correlation between CSR and reputation. On this finding, it further proves that CSR has positive effect on the long-run FP, measured in the Tobin’s Q, both directly and indirectly through reputation. However, the influence is irrelevant in the short run. In sum, visibility moderates the correlation between CSR and reputation, which mediates the CSR-FP relationship in the long run.
Practical implications
This paper argues for the importance of visibility in practicing CSR, especially when reputation building and financial benefit is sought through CSR.
Originality/value
Despite its strategic importance, the visibility of CSR has not been sufficiently studied. Moreover, as scholars have recently suggested that the CSR–FP relationship is rather indirect, there is even more significance in investigating the moderating and mediating variable. Hence, with the intuitive results, this paper lays an integral foundation in the literature.
Details
Keywords
The purpose of this paper is to examine the effects of board composition on the profitability of banks in Tanzania. First, it examines the differences between local and…
Abstract
Purpose
The purpose of this paper is to examine the effects of board composition on the profitability of banks in Tanzania. First, it examines the differences between local and foreign-owned banks in terms of their boards and profitability, and then the contribution of board composition to banks’ profitability.
Design/methodology/approach
The paper utilizes a secondary panel data set of information on the boards, their operations and financial statements of 35 banks. The data were collected between 2009 and 2013. The authors tested the stated hypotheses using descriptive and econometric analyses.
Findings
The results show a significant difference in board composition and profitability between local and foreign-owned banks. Local banks have a higher income and profits. With their contextual knowledge they are able to attract diverse board directors who contribute positively to their performance. The paper also found that large boards and those with women on them were associated with high profitability.
Research limitations/implications
The study focused on three aspects of boards, which are size, foreign directors and women’s representation. The paper is limited in the sense that other aspects of composition that also affect performance are not included in the study.
Practical implications
The paper suggests that in order to maximize profitability, banks should increase the number of directors. Many board members can share skills and knowledge, which can improve performance. Women are underrepresented on boards. With current changes in policy and education in emerging countries, there is a need to increase their representation.
Originality/value
This study contributes to the agency theory by showing that large boards are indeed efficient at monitoring and bringing in profits, especially in an emerging economy where there are multifaceted risks at country and company level. These risks require shareholders and investors to have a much better understanding of the banks and that is where a large board plays a key role.