Asia-Pacific Journal of Business Administration: Article Information

Asia-Pacific Journal of Business Administration
Looking for evidence of the relationship between corporate social responsibility and
corporate financial performance in an emerging market
Mustaruddin Saleh Norhayah Zulkifli Rusnah Muhamad
Article information:
To cite this document:
Mustaruddin Saleh Norhayah Zulkifli Rusnah Muhamad, (2011),"Looking for evidence of the relationship
between corporate social responsibility and corporate financial performance in an emerging market", Asia-
Pacific Journal of Business Administration, Vol. 3 Iss 2 pp. 165 - 190
Downloaded by DIPONEGORO UNIVERSITY At 22:20 14 November 2014 (PT)
Permanent link to this document:

http://dx.doi.org/10.1108/17574321111169849
Downloaded on: 14 November 2014, At: 22:20 (PT)
References: this document contains references to 96 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 2536 times since 2011*
Users who downloaded this article also downloaded:
Vicente Lima Crisóstomo, Fátima de Souza Freire, Felipe Cortes de Vasconcellos, (2011),"Corporate social
responsibility, firm value and financial performance in Brazil", Social Responsibility Journal, Vol. 7 Iss 2 pp.
295-309
Abdifatah Ahmed Haji, (2013),"Corporate social responsibility disclosures over time: evidence from
Malaysia", Managerial Auditing Journal, Vol. 28 Iss 7 pp. 647-676
Güler Aras, Asl# Aybars, Ozlem Kutlu, (2010),"Managing corporate performance: Investigating the
relationship between corporate social responsibility and financial performance in emerging markets",
International Journal of Productivity and Performance Management, Vol. 59 Iss 3 pp. 229-254 http://
dx.doi.org/10.1108/17410401011023573
Access to this document was granted through an Emerald subscription provided by 501757 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for
Authors service information about how to choose which publication to write for and submission guidelines
are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as
providing an extensive range of online products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee
on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive
preservation.
*Related content and download information correct at time of download.

The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1757-4323.htm
CSR and CFP

Looking for evidence of the in an emerging
relationship between corporate market
social responsibility and
165
corporate financial performance
in an emerging market
Mustaruddin Saleh
Tanjungpura University, Pontianak, Indonesia, and

Norhayah Zulkifli and Rusnah Muhamad
University of Malaya, Kuala Lumpur, Malaysia
Abstract
Purpose – The purpose of this paper is to examine the relationship between corporate social
responsibility (CSR) and corporate financial performance (CFP) of Malaysian public listed companies
(PLCs) as an emerging market setting.
Design/methodology/approach – A longitudinal data analysis with a large-sample testing was
carried out from 200 Malaysian PLCs by using panel data analysis during a seven-years period. The
statistical power with fixed effect and random effect model was utilized.
Findings – Results of earlier estimations indicate that there are positive and significant related of the
CSR on CFP. Two of the CSR dimensions, namely employee relations and community involvement,
were found to be positively related to financial performance. This proves that CSR practices can be
considered as effort to enhance the financial performance of PLCs in Malaysia. The results also reveal
that there is limited evidence of the relationship between CSR and CFP in the longterm.
Practical implications – These findings suggest that Malaysian PLCs should be involved
consistently in their CSR practices because CSR has a significant impact on improving financial
performance in Malaysian PLCs.
Originality/value – The majority of studies on CSR in Malaysia pertain to the analysis of such
reporting and motivations of managers toward CSR practices. This study conducts a comprehensive
empirical research on the relationship between CSR and CFP in Malaysian PLCs.
Keywords Malaysia, Corporate social responsibility, Disclosure, Corporate finances,
Financial performance, Fixed effect, Random effect, Bursa Malaysia
Paper type Research paper
1. Introduction
The financial collapse of Enron Corporation, Arthur Anderson, Lehman Brothers, and
accusations of fraud in WorldCom has affected public confidence (Snider et al., 2003).
Continuous business failures and scandals have demonstrated the need for strong
The early version of this paper was presented at the 16th Annual Conference on Pacific Basin Asia-Pacific Journal of Business
Administration
Finance, Economics, Accounting and Management, Queensland University of Technology, Vol. 3 No. 2, 2011
Brisbane, Australia, 2008. The authors wish to thank Associate Professor Dr Carol Tilt, pp. 165-190
q Emerald Group Publishing Limited
Professor Dr Malia Sulaiman, Associate Professor Dr S. Susela Devi, and the anonymous 1757-4323
reviewers for their useful comments and suggestions. DOI 10.1108/17574321111169849
APJBA corporate social responsibility (CSR) practices. CSR activity is a way of changing a bad
3,2 image of a company, especially for companies that have a negative reputation.
Yoon et al. (2006) state that CSR activity can be used to address the social concerns of
customers about a company, as they create a brand image for the company and
develop positive relations with stakeholders.
A high level of involvement in CSR practices does not only improve the financial
166 performance of companies, it also attracts a positive response from institutional
investors (Mahoney and Roberts, 2007). Companies should not perceive CSR as a reason
for the low performance of companies. In fact, CSR and corporate financial performance
(CFP) are two sides of a coin which have a mutually strengthening effect. The better the
financial performance of a company the higher would be the ability to involve in CSR
activities, and the more actively involve a company in CSR activities would in turn
improve its financial performances. Hence, both directions of relationships are found in
the extant literature (Mahoney and Roberts, 2007; Brammer et al., 2006; Murray et al.,
2006; Tsoutsoura, 2004; Simpson and Kohers, 2002; McGuire et al., 1988; Cochran and
Wood, 1984). The Malaysian public listed companies (PLCs) have to consider and
implement CSR activities in their business operations as the awareness and public
demand for good CSR initiatives. It also supports the government aspiration to attract
the foreign direct investment to invest in the capital market by promoting good CSR
practices among the PLCs in Malaysia[1]. Thus, involvement in CSR practices may be
used as a strategy to attract investors and improve financial performance of companies
and therefore the decision on the expenditure relating to CSR activities should be
evaluated and analysed as other investment decisions undertaken by companies
(McWilliams and Siegel, 2001).
In general, the survey confirms a lack of knowledge and awareness of CSR by
Malaysian PLCs (Bursa Malaysia, 2007). It shows that the majority of companies fell far
behind global best CSR practices and there is a need to improve the level of CSR
practices. Even though the number of studies on CSR is high, an empirical examination
of the relationship between CSR and CFP in the emerging markets context is limited. The
lack of empirical studies on this issue could be one of the factors in explaining why
Malaysian PLCs are less concerned or involved in promoting their CSR activities to
various stakeholder groups (Bursa Malaysia, 2007; Williams and Pei, 1999). Thus, by
using CSR disclosure (CSRD) as measurement of CSR practices, this study is an effort to
fill the gap by empirically examining the relationship between CSR and CFP in the
Malaysian context.
The remainder of the paper is organized as follows. In Section 2, CSR practices in
Malaysia are explained; Section 3 presents the theoretical approaches of CSR and CFP;
Section 4 presents CSR and CFP in the Malaysian context. Section 5 presents research
method. Results of the data analysis are explained in Section 8. Section 9 is discussion
and conclusion.
2. CSR practices in Malaysia

There are differences in how CSR activities are carried out in emerging countries
compared to developed countries, in terms of the socio-economic and cultural contexts.
Specifically, CSR in emerging countries has unique characteristics such as:
.
In emerging markets, CSR activities are less formalized in terms of CSR
benchmarks, compared to developed markets.
.
In emerging markets, formal CSR is utilized by big national and multinational CSR and CFP
corporations, and particularly those that have recognized global brands or have in an emerging
international status.
.
In emerging markets, CSR is mainly related with philanthropy or charity
market
(e.g. social investment in education, sport sponsorships, and public health, and
other community services, etc.).
.
An economic contribution is usually assumed as a crucial and practical method 167
for companies to create social effects (e.g. work opportunities, knowledge
transfer, paying taxes, etc.).
.
The motivation and involvement in CSR practices is usually related to traditional
and spiritual values in emerging markets (e.g. harmonious society (xiaokang) in
China, African humanism (ubuntu) in South Africa, mutual cooperation

(gotong-royong) in ASEAN countries) (Visser, 2008).
Malaysia as an emerging market may have a unique culture because its people represent
three large ethnic groups in Asia, namely Malay, Chinese and Indian. The corporate
culture of the Malaysian companies is influenced by these ethnic groups, which have
their own unique characteristics called “work ethos of eastern ethnics”, such as industry,
mutual cooperation and adherence to their religious percepts. Basically, Malaysian
managers of companies have the moral support to engage in CSR and disclose
information about their CSR activities for important interest groups. Recently, external
primary stakeholders, such as the government and capital market authorities, have also
exerted force, through acts and regulations, to be involved on CSR activities (Azlan and
Susela, 2007, 2008; Haniffa and Cooke, 2005). For example, Bursa Malaysia released a
CSR framework for PLCs, and the 2006 Budget speech of Prime Minister of Malaysia
urging all PLCs to disclose their CSR activities (Bursa Malaysia, 2007).
CSR practices in Malaysian companies are still growing and they include seasonal
activities (Mustaruddin, 2009; Haniffa and Cooke, 2005; Thompson and Zurina, 2004;
Nik Ahmad et al., 2003). Gardiner et al. (2003) and Seifert et al. (2003) stated that the size
of business is an important variable in CSR, and acts as a barometer as to why a
company engages in CSR activities. The involvement of the government and the
Security Commission to promote CSR benefits will slowly increase the commitment to
CSR in the Malaysian companies. Some companies are actively involved in CSR
practices, especially in community involvement. Prathaban (2005) recorded that
65 companies registered on Bursa Malaysia contributed RM82.1 million to various
charitable community programmes.
Norhayah and Azlan (2006) observed that CSR activity trends in Malaysian
companies are usually carried out in fields similar to their business activities.
For example, Maxis Corporation promotes social development involving advances in
information technology, bringing about direct advantages to communities. Maxis
focuses on education, adolescents and Information and communication technology
under the Maxis Bridging Communities programme. The Telekom Malaysia Group is
another large donor that is serious about its social responsibility. It helps to provide the
digital bridge between rural communities and urban areas, and moves the nation into
the digital era, thereby helping place Malaysia on the world map. Whereas Puncak
Niaga company has introduce and promote public awareness regarding the
conservation and protection of the environment. The Public Bank Group strongly
APJBA believes that meeting its CSR will increase its reputation and branding, and that this is
3,2 important for the industry services.
Ethnicity and religion are also influencing factors for CSR activities in Malaysian
companies (Norhayah and Azlan, 2006). For instance, many companies spread their
magnanimity by distributing contributions to the old and poor communities as well as
orphans during Aidil Fitri, Deepavali, and Chinese New Year celebrations. Tay Kay
168 Luan, who is the Director of ACCA, Association of Southeast Asian Nations, and
Australia, states that most local companies have a narrow view of the definition of CSR
(Tam, 2007). From the viewpoint of the Malaysian companies and leaders of the
government, CSR is restricted to doing of good for the society through contributions,
philanthropy, and the development of sports, or participation in good deeds. Therefore,
CSR activities tend to focus more on programmes that have a direct impact on the
company’s performance.
Prior studies found that Malaysian companies are involved in CSR because of the
pressure from the government (Azlan and Susela, 2007, 2008; Haniffa and Cooke, 2005;
Abdul Hamid, 2004). The influence on foreign business partners was also seen as a
contributory factor for engaging in CSR (Azlan and Susela, 2008). Although, some
pressure exists, the involvement of CSR for the Malaysian PLCs has still not been
translated into a higher level of social activity and disclosure (Bursa Malaysia, 2007;
Williams and Pei, 1999). Although stakeholders pressure companies to be more
actively involved in CSR practices, the additional numbers of companies involved in
CSR practices still do not provide satisfaction to the stakeholders (Bursa Malaysia,
2007; Williams and Pei, 1999). At the same time studies concerning the relationship
between CSR activities and financial performance are still limited.
3. The theoretical approaches of CSR and CFP

Utilization of several different theoretical approaches explains the findings of the
relationship between CSR and CFP, as various studies have shown globally. Notably,
there are four postulates of the theoretical relationships between CSR and CFP, namely,
the trade-off hypothesis; the supply and demand theory of the company; the social
impact of hypothesis; and the theory of modern corporate stakeholder (Laan et al., 2008;
Salzmann et al., 2005; Preston and O’Bannon, 1997). All these theories broadly
investigate the impact of CSR on CFP.
The trade-off hypothesis, introduced by Friedman (1970) argues that the only social
responsibility of a company is to enhance its profits. Furthermore, when companies
become involved in social and environmental activities, it incurs extra expenses and
decreases the earnings of the companies. Hence, according to this theory, the higher a
company’s CSR level, the lower the CFP (Salzmann et al., 2005). Consequently,
increasing the involvement of companies in social activities could increase the amount
of resources spent by the company, and, as a result, reduces the profitability of the
company. Thus, this places the company in a disadvantageous position compared to a
company which is not involved in CSR activities. In this regard, CSR has a negative
impact on CFP (Moore, 2001; Vance, 1975).
The supply and demand theory of the company was introduced by McWilliams and
Siegel (2001). According to this theory, the demand for the involvement of a company
in CSR activities maximizes a company’s profits. Steger et al. (2007) state that in an
equilibrium condition, the level of CSR may be different; however, profit may
be maximized or not changed. Hence, there is no relationship between CSR and CFP. CSR and CFP
This theory is supported by empirical findings of previous studies (Mahoney and in an emerging
Roberts, 2007; Patten, 1990; Freedman and Jaggi, 1988; Alexander and Buchholz, 1978)
that found no relationship between CSR and CFP. market
The social impact hypothesis constructed by Cornell and Shapiro (1987) assumes
that the improvement of a company’s CSR activities will improve CFP. Hence, the
expected benefits of carrying out CSR activities will exceed the expenses of doing so 169
(Steger et al., 2007). This theory supports that a positive relationship exists between CSR
and CFP. There are several reasons to improve the level of CSR activities as suggested,
as they would improve the reputation of the business, improve the relationship with
financial institutions, and reduce the risks of the company. The empirical examination
reveals that CSR has a positive impact on CFP (Simpson and Kohers, 2002; Waddock
and Graves, 1997; Roberts, 1992).

The theory of stakeholder could explain the relationship between CSR and CFP
(Barnett, 2007; Jones, 1995; McGuire et al., 1988; Cornell and Shapiro, 1987; Freeman,
1984). According to the stakeholder theory, the value of a company is related to the cost
of both “explicit claims” and “implicit claims” on a company’s resources. Stakeholders
have an explicit claim on a company including owner-lenders, employees, and the
government. There are numerous claims on the management of the company from the
external stakeholders, which are referred to as implicit claims. Cornell and Shapiro
(1987) state that some implicit claims consist of the continuity of supplies, on-time
delivery, the increase in the quality of products, work safety, as well as involvement in
social and environmental activities. The price that must be paid by stakeholders for
this claim depends on the company’s situation, including the financial policy applicable
to the company.
The main idea in this section is based on previous arguments and the theoretical
relationships between CSR and CFP. Previous researchers realise that a company is no
longer only simply oriented in the interests of the company, but is also more likely to be
active in efforts to increase the company’s overall performance. According to
the arguments of the theories in the preceding section, those theories concur that the
relationship exists between CSR and CFP. For instance, the trade-off theory supports
the existence of the relationship between CSR and CFP, but it is an indirect relationship.
In addition, the stakeholder theory is more acceptable and relevant in explaining the
relationship between CSR and CFP. In this theory, the interests of various stakeholders
are taken account by a company actively involved in CSR activities.
4. CSR and CFP in Malaysian context

Study of CSR in the Malaysian context raises a theoretical issue. The awareness level
of CSR among Malaysian managers is high but is not followed through with CSR
activities and disclosures. Abdul Hamid (2004) argues that managers’ awareness is a
result of public pressure and thus should be reflected in the companies’ reports in order
to appear legitimate. The regulatory and political pressure on the company is believed
to be one of the most important factors that will influence the level of CSR activities
(Azlan and Susela, 2007).
This study attempts to discover evidence of CSR activities which are represented by
CSRD in the Malaysian PLCs. It can be explained by utilizing the stakeholder theory,
as it is useful to explain voluntary CSRD for two reasons. First, it distinguishes
APJBA between the social and stakeholder issues. Clarkson (1995) argued that managers deal
3,2 with their company stakeholders and not with the public as whole. Second, the
stakeholder theory is considered to be more appropriate to develop a testable
hypothesis (Elijido-Ten, 2004). Hence, this theory is considered useful and applicable
for the interpretation of the analysis in this study as the stakeholder theory can
be utilized as a framework to test empirically the association between CSR and CFP
170 (Ruf et al., 2001). So, it is important to know the impact of information concerning CSR
on the level of financial performance as empirical evidence. In the Malaysian
companies, CSRD is still unregulated (Bursa Malaysia, 2007; Elijido-Ten, 2004; Nik
Ahmad and Malia, 2004). Hence, the stakeholder theory offers a practical framework to
assess CSR by using information from CSRD (Snider et al., 2003).
Prior studies revealed that besides the stakeholder theory, many studies in CSRD, is
utilizing the legitimacy theory, especially in the Malaysian context (Azlan and Susela,
2007, 2008; Abdul Hamid, 2004; Nik Ahmad and Malia, 2004; Nik Ahmad et al., 2003).
Basically, both theories are coming from the political economy theory (Moerman and
Laan, 2005). These theories are not competing or separating each other, but are often be
interpreted using the overlapping perspectives based on the political economy approach
(Abdul Hamid, 2004). Although there are differences between these two theories, but the
focus of these two theories is the relationship between the company and the environment
in which it operates (Neu et al., 1998). In the business and academic literature,
stakeholder theory has gained prevalence in recent years as it is applicable both from the
perspective of managers and researchers ( Jamali, 2008).
Azlan and Susela (2008) assert that the pressure of the government is a dominant factor
in motivating the involvement of the Malaysian PLCs in CSR practices. As the market is
highly competitive, companies should take initiative to improve their involvement in CSR
activities as a strategy to sustain their businesses. Furthermore, the involvement in CSR
practices would add advantage to companies if they are considering going global,
as consumers in developed markets usually are much concerned with CSR issues.
In addition, the owners of capital in global markets, particularly socially responsible
investors (SRIs) are looking at CSR as key criteria in their investment decision. Thus, the
involvement of the Malaysian PLCs in CSR practices is an entry requirement on the global
market and as a strategy to attract funding from institutional investors.
Additionally, the educational level of the local consumers has also improved and are
playing more active role in ensuring high commitment from companies (Haniffa and
Cooke, 2005). The activists and environmental NGOs’ are also putting more pressures
towards companies to be more concern with social responsibility and the environment
in which they operates (Haniffa and Cooke, 2005; Nik Ahmad et al., 2003). NGOs are
increasingly playing as important role to urge companies to be more socially
responsible and in lobbying the government agencies with regard the CSR issues
(Othman and Ameer, 2010; Abdul Hamid, 2004; Nik Ahmad et al., 2003).
In line with the increasing pressures, companies are more selective to employ and
retain the best employees, and pursuing a continuous innovation and product
development, thus, improving the level of companies competitiveness in the local and
global markets. Therefore, the involvement in CSR activities should be treated as part of
companies’ investment in improving their competitiveness and in attracting
institutional investors as well as to improve their financial performance. The high
involvement of companies in CSR activities is also inline with the Malaysian
Government aspiration of Vision 2020, namely to transform Malaysia into a high-income CSR and CFP
and developed country. Hence, the stakeholder theory can be used to clarify the CSRD in an emerging
practices in the Malaysian PLCs (Othman and Ameer, 2010; Nik Ahmad et al., 2003) and
in this study is utilized as a framework to further analysis of the relations between CSR market
and CFP in the Malaysian PLCs context.
5. Research method 171

Data and sample size which is used in this paper and the measurement of CSR as well
as CFP are described in this section.
5.1 Data and sample size

The initial sample utilized for this paper consists of the 200 largest companies, which
are taken out of 474 companies listed on the main board of Bursa Malaysia during the
period 1999-2005. The selection is based on their highest market capitalisation ranking.
According to Tsang (1998) a higher proportion of large and medium-sized companies
disclosed social information compared to small companies as companies wishing to
increase business have larger responsibilities and principles (Gardiner et al., 2003).
In this paper, the sample of the companies was collected for the years 1999-2005.
This time span is selected because this is the recovery period from the financial crisis
that hit Asian countries and particularly the Malaysian capital market. It is perceived
that when the financial crisis is over, most companies could then allocate their
spending on CSR activities including CSRD which are non-mandatory. Data are
collected from the companies’ annual reports, through the Bursa Malaysia web site,
Hydra database, and the Central Bank of Malaysia. Companies’ annual reports
constitute the main data for this paper and were chosen because the annual report is
the primary source of CSRD, and, in Malaysia, annual reports of listed companies are
the most accessible source of information, either in hard copies or electronic formats
(Sumiani et al., 2007; Christopher et al., 1997).
5.2 Measurements of CSR

As explained in earlier section that CSR practices is represented by CSRD which
disclosed in the company’s annual reports. Measurement of CSRD in this paper adopts
a similar disclosure-scoring methodology based on content analysis. Items selected for
inclusions were based on their relevance to the Malaysian context, and these were
classified into four indicators of CSRD. Prior studies used five categories of content
analysis but with different themes (Haniffa and Cooke, 2005; Thompson and Zurina,
2004). Abdul Hamid (2004) used four categories and Nik Ahmad et al. (2003) identify
six types of CSRD. The number of companies that have reported on the energy theme is
very rare and less than 1 percent (Thompson and Zurina, 2004; Nik Ahmad et al., 2003).
Thus, in this paper, energy is combined into the environment theme. Therefore, this
paper identifies four categories of CSRD, namely, employee relations, community
involvement, product dimension, and environmental dimension. Each category has
sub-item of CSRD (see Appendix, for number of CSRD items) and adjusted based on
whether the items are disclosed or not. These categories are consistent with recent
studies (Branco and Rodrigues, 2008; Abdul Hamid, 2004).
Al-Tuwaijri et al. (2004) and Hughes et al. (2001) propose that the process may be
achieved using quantitative disclosure measures with denoted weights for different
APJBA disclosure types, based on the perceived importance of each item to various user
3,2 categories. The disclosing value of each item is assigned into three quality of
classifications of quantitative disclosing is as following statements.
(1) Quantitative disclosure classification. This classification refers to the greatest
weight which has an assigned value of 3. It classify as the financial disclosures. For
instance, the CSR practices disclosed in the company’s annual report are as follows:
172 In the performing arts, The Star and Artistry by Amway, supported by the Culture, Arts and
Heritage Ministry, presented the Wild Zebra dance drama, a performance by the Shanghai Oriental
City Dance troupe, at Istana Budaya in Kuala Lumpur. Nett proceeds of RM 730,000 from the sale of
the tickets were donated to Bethany Home (RM230,000), Tasputra Perkim Daycare (RM 100,000),
The Paediatric Institute (RM 110,000), The Salvation Army (RM 110,000), Shelter Home (RM
110,000) and Asrama Darul Falah (RM 70,000). (Star Publication Malaysia Berhad, 2005, p. 75).
(2) Qualitative specific disclosure classification. This classification refers to the next
highest weight which is the non-quantitative disclosing but with particular
information and it has an assigned value of 2. It classify as the non-financial
disclosures. For instance, the CSR practices which are disclosed in the company’s
annual report are as follows:
The IJMP Group has set the goal of “zero waste” for its palm oil mills. Palm oil mill effluent
(POME) is applied to the land principally as irrigation after going through the normal process
of treatment. As a result of this practice, the pollution load on the land where the POME is
applied is minimized. The areas in the estates where irrigation with the treated POME can be
carried out are carefully selected, based on site suitability assessments conducted by
qualified professional consultants (IJM Corporation Berhad, 2005, p. 77).
(3) Qualitative specific disclosure classification. This classification refers to the lowest
weighted value due to its qualitative disclosing in which the description is in general, thus it is
assigned as the quantitative value of 1. It classify as non-financial disclosures. For example,
the CSR practices which are disclosed in the company’s annual report are as follows:
Public Bank Group has always displayed a readiness to invest in its staff right from the onset
of their career with the Group, equipping them with knowledge, skills, and attitudes that will
enable them to make their mark in the organization. Strong induction and orientation
programmes are among the training lined up for staff from day one to inculcate the right
corporate values and a sense of belonging (Public Bank Berhad, 2005, p. 171).
Companies that do not disclose any kind of information for the given categorises obtain
a score of 0. The objective for the utilization of the technique is because throughout this
procedure the researcher has to re-evaluate the quality of disclosing based on the three
criteria of quantitative disclosing (Al-Tuwaijri et al., 2004). The overall CSRD scores
were the summation of the scores for all the CSRD items. The method to scoring is
additive of un-weighted indexes that is calculated to the sum of the final CSRD score:
Pn
j xij t¼1
CSRD scorej ¼
nj
where:
CSRD scorej, is corporate social responsibility disclosure score for jth company; nj,
is total number of CSRD items estimated for jth company; Xij, is 3 if ith item is
quantitative disclosed, 2 if ith item is non-quantitative but specific information
disclosed, 1 if ith item is common qualitative disclosed, and 0 if ith item does not CSR and CFP
disclosed any information. in an emerging
5.3 Measurements of CFP
market
Most previous studies used accounting data and variables to achieve this (Tsoutsoura,
2004; Cochran and Wood, 1984). For example, three accounting variables have been
used; return on assets (ROA), return on equity, and return on sales (Waddock and 173
Graves, 1997). Simpson and Kohers (2002) used ROA and loan losses, whereas
Berman et al. (1999) only used ROA. Three accounting return measures were employed
initially: the ratio of operating earnings to assets, the ratio of operating earnings to
sales, and excess market valuation.
Some prior studies (Murray et al., 2006; Abbort and Monsen, 1979; Alexander and
Buchholz, 1978) used forms of investors’ returns as proxies for CFP. Furthermore, Han
and Suk (1998) used stock returns as a dependent variable to measure CFP and their
model adopted the asset pricing framework. According to McGuire et al. (1988), both
accounting and market variables look for different aspects of performance, and each is
subjected to a particular bias. The usage of accounting data raises the possibility of
distortions from inflation (Demsetz and Villalonga (2001). While short-term stock
returns are very volatile for a reliable measure of corporate performance, longterm
returns will capture corporate performance (Han and Suk, 1998).
Previous studies focus on Tobin’s q ratio (Q ratio) as a measure of a firm’s
performance, especially to measure the relationship between ownership structure and
financial performance. Q ratio is the market value of a company’s assets divided by their
replacement value which is the current cost of replacing the firm’s assets. Elsayed and
Paton (2005) also used Q ratio to examine the environmental disclosure on the firm’s
financial performance. Nevertheless, Q ratio is said to have a noisy measure, and it is
significantly affected by industrial organization (Lindenberg and Ross, 1981). Stock
returns have more important implications for the business community than Q ratio
(Han and Suk, 1998). In this regards, some authors have used both accounting and stock
market return (R 2 i) data to measure financial performance (e.g. Yoshikawa and Phan,
2003; McGuire et al., 1988). Although there are still arguments about these measures, this
paper uses three alternative measures of financial performance as dependent variables,
ROA, Ri, and Q ratio.
In summary this paper employs the following variables: three dependent variables,
namely ROA, Ri, and Q ratio. The independent variables include CSRD, employee
relation disclosures (EMPD), community involvement disclosures (COMD), product
disclosures (PROD), and environmental disclosures (ENVD). The control of the effects
of the firm-specific variables is as follows: systematic risk (BETA), financial leverage
(LEV), firm’s size (SIZE), asset turn over (ATR), and earnings per share (EPS).
6. Hypothesis development
The prior studies have hypothesized and gave rational theoretical justifications for
negative, positive and neutral relationships between CSR and CFP. The conceptual
explanation of these relationships are presented by Waddock and Graves (1997) and
Preston and O’Bannon (1997). The rational for a negative relationship is named
“managerial opportunism hypothesis, proposing that when CSR is strong, the
managers will reduce the social activities, because they can increase the short-term
APJBA profit and increase employee compensation” (Preston and O’Bannon, 1997). On the
3,2 contrary, the managers will try to divert attention by spending on the social
programmes if CFP is poor.
A neutral relationship is supported by the argument that the environment, wherever
firms and community undertake their respective activities, is so complex that a simple,
direct, relationship between CSR and CFP does not exist (Waddock and Graves, 1997).
174 Again, McWilliams and Siegel (2001) argued that a nonexistent relationship exists based
on the supply and demand of the firm theory. They assumed that a shareholder’s wealth
is maximized when a firm produces a level of profit-maximization, including producing
social achievement. As a result, the company will provide a different number of respective
social actions based on the unique request for CSR in each of the company’s experiences.
The largest number of investigations found a positive relationship (Simpson and
Kohers, 2002; Waddock and Graves, 1997; McGuire et al., 1988). There is no single
established theoretical foundation with a clear empirical prediction appearing for a CSR
and CFP relationship. Therefore, this paper is similar to the theoretical and empirical
evidence of the majority of earlier studies that predicted a directional positive relationship
impact of CSR on CFP (Tsoutsoura, 2004; Simpson and Kohers, 2002; Ruf et al., 2001;
Roman et al., 1999; Waddock and Graves, 1997). Thus, hypotheses mergers are:
H1. CSR will be positive, significantly related to CFP.
A company that has a solid CSR commitment can increase the capacity to attract and
maintain its workers, which plays an important role in reducing turnover, recruiting
and the cost of training. Further, workers often judge a company’s performance and
take note if their personal values are compatible with the company in which they work
(Turban and Greening, 1997). Improving working conditions and employee practices
increases productivity and reduces the rate of mistakes. These practices need financing
and the productivity improvement of employees, together with the increase of the
quality of products, causes a positive cash flow, which covers the associated costs. In
this respect, a company may actually benefit from socially responsible actions in terms
of employee morale and productivity (Tsoutsoura, 2004; Parket and Eibert, 1975).
Therefore, improving worker satisfaction levels and retaining employees creates the
optimal contribution to the aim of companies and has significant implications for the
human area of CSR. The majority of results from empirical studies demonstrate a
positive relationship between human relations and CFP (Gittell et al., 2004; Tsoutsoura,
2004; Delaney and Huselid, 1996; Huselid, 1995). Thus, based on the discussion above,
this study proposes the following hypothesis:
H2. There is a positive relationship between employee relations dimension and
CFP.
In the highly competitive atmosphere of business, growth, stability, existence of
economics and social orientation strongly depend on a company’s capacity to behave
socially responsible towards their communities (Chahal and Sharma, 2006). If
companies allocate donations, they hand over some of the funds that rightly belong to
the shareholders. Academicians argue that when the community permits companies to
continue their operations, the companies have an ethical and moral obligation to share
the pleasure with their community. This reality is the reason for the variation in
philanthropic activities among companies.
Researchers and theoreticians do not concur as to whether being honourable does CSR and CFP
well or whether doing well allows being honourable (Seifert et al., 2003). According to in an emerging
philanthropy and social responsiveness is conducted by companies voluntarily, using
the company’s resources and is always likely to reduce the profits of the company. market
Several writers have proven that doing good leads to doing well and that the effective
management of social responsibilities and stakeholders increases a company’s profit
(Waddock and Graves, 1997; Ullmann, 1985). Hence, on the basis of the discussion 175
above, this study proposes the following hypothesis:
H3. There is a positive relationship between community involvement dimension
and CFP.
A study by Pauwels et al. (2004) discerns that product information has a positive
impact in both the short- and longterm financial performance and that the value of the
company is sustained longer. Other specific results by Dunk (2005) reveal that the
information of product innovation influences financial performance.
Further, the recent research clarifies that attention to a new product and product
development with the technological and marketing capacity shows a significant
influence on financial performance (Matsui et al., 2007). However, a study by Mahoney
and Roberts (2007) found a positive but not significant impact of product dimension on
the financial performance of Canadian listed companies. In this regard, a crucial
question remains as to the measures that should be used to capture the various criteria.
Hence, on the basis of the discussion above, this study proposes the following
hypothesis:
H4. There is a positive relationship between product dimension and CFP.
The research to establish the connection between environmental and financial
performance is not only the key to engagement in the business and finance sector in
sustainability, it also plays an important role in helping to identify areas for potential
shifts in government policy (Moffat and Auer, 2006). Freedman and Jaggi (1988) found
no statistical evidence to refuse the null hypothesis that there is no relationship.
Likewise, more recently, Richardson and Welker (2001) observe that social and
environmental disclosure behave differently from general financial disclosure in the
tests of association with the company’s cost of capital. They found that the relationship
between social disclosing and the capital cost to be significantly positive. Nevertheless,
Shane and Spicer (1983) using the event study method document a negative reaction of
the market for two days preceding the issue of the environment reports.
As conclusion that disclosing of the relationship between environment and financial
performance did not produce consistent results. There are several studies that provide
proof of negative relations ( Jaggi and Freedman, 1992; Chen and Metcalf, 1980) and
neutral relations (Elsayed and Paton, 2004) between the disclosing of environment and
financial performance. Nevertheless, most studies report positive relations between the
social business/environmental responsibility and the financial performance (Mahoney
and Roberts, 2007; Salama, 2005; Griffin and Mahon, 1997; Pava and Krausz, 1996;
Ullmann, 1985). So, the basis of the discussion above, this study proposes the following
hypothesis:
H5. There is a positive relationship between environment dimension and CFP.
APJBA 7. The models
3,2 This paper utilizes a one-year lag for independent variable (for example year 2000 data
for dependent variable, whilst year 1999 data for independent variables). Using time
lag is in accordance with prior studies (Mahoney and Roberts, 2007) which explore the
relationship between socially responsible practices and financial performance in
the future when a company is involved in CSR activities.
176 In this paper, generalized least squares (GLS) is used as it is a more appropriate
method compared to ordinary least squares (OLS) for panel data analysis. According to
Johnston and DiNardo (1997), ignoring the panel structure of the data in the OLS model
can be problematic for two reasons. First, even though the pooled OLS model yields
consistent estimates of the regression coefficients, standard errors will be understated
and significance levels are consequently overstated. Second, compared to the GLS
model, the use of OLS as an estimation method does not result in efficient estimates of
the regression coefficients.
To address these problems, two well-established models, the fixed effects (FE) and
random effects (RE) models are conducted in this paper. The difference between the FE
and the RE models is based on whether the unobserved individual effects that are
correlated with the regressors, which is the case for the FE, or not in the models, as in
the case of the RE model. (Greene, 2008; Wagner, 2005) In the FE model, the intercept in
the regression model is allowed to differ among individuals in recognition of the fact
that each individual or cross section unit may have some special characteristics of its
own. In conclusion, the FE model is represented by the following equation:
gi;t ¼ xi;t21 b þ vi þ mi;t21 ð1Þ
Where gi,t is the dependent variable (in this paper it refers to financial performance
measures, namely, ROA, Ri, and Q ratio; x represents the one-year lag of the independent
variables (in this paper it refers to the variables; CSRD, dimensions of CSRD, namely,
employee relation disclosure (EMPD), community involvement disclosure (COMD),
product disclosure (PROD), environment disclosure (ENVD), and all of the control
variables including companies’ systematic risk (BETA), leverage (LEV), LogSize
(LSIZE), LogSales (LSALES), asset turnover (ATR), earning per share (EPS); and
industrial dummy; b is the coefficient of the independent variables; m represents the error
term; v is the unobserved firm effect; i indicates a firm number; and t represents time.
To choose which of the two models between the fixed or RE model is more precise,
the Hausman test is employed. This test evaluates the significance level between
estimators, in case, FE or RE models. The error term (mi,t) for the RE model using
equation (1) can be defined as:
mi;t21 ¼ ei þ vi;t21 ð2Þ
In equation (2), ei is the cross-section error component and ni,t2 1, combines the
cross-section and time series error component.
As additional analysis, this paper also seeks to explore whether there is any relation
on the longterm between CSR and CFP. In this regard, the dynamic function that can be
used to determine the long-run relationship between CSR and CFP is performed and it is
derived from econometric or statistical theory. According to Munoz (2005). an advantage
of using a dynamic model is that both short- and longterm elasticities are obtained.
The solution provided in this paper uses the generalized method of moments (GMM) of CSR and CFP
Arellano and Bond (1991) procedure. The Arellano-Bond estimator is now broadly used in an emerging
in short dynamic panels (Smith, 2006). Hence, the dynamic regression model will be
written as follows: market
yi;t ¼ b0 þ b1 yi;t21 þ b2 xi;t21 þ mi;t21 ð3Þ
177
when lagged dependent variables are included as explanatory variables, both the
“within groups” and “RE” estimators are biased and inconsistent, except when the
number of time periods is large (Munoz, 2005; Baltagi, 1995).To solve this problem,
the dependent variable lags (yi,t2 1) are used as instruments for independent variable.
8. Results
8.1 Descriptive statistics and correlation matrix of the variables
The results of descriptive statistics and correlation matrix are reported in Table I.
Column two and three in Table I report the findings of the descriptive statistics of mean
and standard deviation. Except stock return market (Ri) variable, all of variables have
positive mean value and standard deviation. For instance, seven variables have median
value below than one, whereas, three of the variables have median value of above one.
Another observation is the mean (average) value of ROA of companies which is the case
of this sample, it is 4.58 percent and with standard deviation, it is 16.62 percent.
Correlation matrix results revealed that leverage (LEV) and earnings per share (EPS)
are positively correlated with ROA which is represented as financial performance.
All three of these variables are significant in explaining the relationship with formation
of financial performance. When using stock market return (Ri ) as a measure of financial
performance, four variables: CSRD score, size of company (SIZE), assets turnover (ATR)
and EPS, are positive and significant in explaining a firm’s financial performance.
Last, a firm’s financial performance is represented by Tobin’s q which shows a positive
CSRD
Mean SD ROA Ri Q score BETA LEV LSIZE ATR EPS
ROA 0.0458 0.1662 1.00

Ri 2 0.0859 0.2246 0.18 * * 1.00
Q 0.8380 0.8797 0.31 * * 0.13 * * 1.00
CSRD
score 1.3608 1.3671 0.06 0.17 * * 0.07 * 1.00
BETA 0.9768 0.4175 2 0.08 * 2 0.10 * * 2 0.16 * * 2 0.02 1.00
LEV 0.4320 0.3374 0.13 * * 2 0.04 0.18 * * 0.10 * * 0.14 * * 1.00
LSIZE 13.1463 1.3174 0.07 0.11 * * 0.32 * * 0.41 * * 2 0.04 0.23 * * 1.00
ATR 0.5632 0.5581 0.05 0.17 * * 0.30 * * 0.11 * * 2 0.19 * * 0.02 0.03 1.00
EPS 0.2648 0.6107 0.18 * * 0.22 * * 0.17 * * 0.13 * * 2 0.21 * * 2 0.06 0.06 0.11 1.00
Notes: Correlation is significance at: *0.05 and * *0.01 levels (two-tailed); ROA, net operating income divided by
total assets for firm j period t; Ri, the stock price firm j period t minus stock price firm j period t 2 1 to stock price
firm j period t 2 1; Q, [(year 2 end market value of common stock þ year-end book value of preferred
stock þ year-end book value of debt) to year-end book value of total assets]; CSRD score, total scores of corporate
social responsibility disclosure score for firm j period t; BETA, systematic risk estimated over the 48 months prior Table I.
the sample period of firm j at period t; LEV, ratio total debt to total assets for firm j period t; SIZE ¼ natural Descriptive statistics and
logarithm of the total assets for firm j period t; ATR, total sales of firm j period t divided by their total assets for firm Pearson’s correlation
j period t; EPS, net earning divided by number of share outstanding of the firm j period t matrix
APJBA and significant correlation to five control variables, namely CSRD, LEV, SIZE, ATR,
3,2 and EPS, respectively. It is found that firm’s systematic risk (BETA) which measures
the risk level of companies are consistently negative and significantly correlated to the
financial performance. These results support the previous studies by Waddock and
Graves (1997) and McGuire et al. (1988). As such, these findings provide evidence that
the variables are important instruments in explaining the CFP.
178 Referring to the correlation between CSR and the three alternative measures of a
company’s financial performance it was found that both Ri and Tobin’s q variables are
positive and the significant difference from zero indicates the higher the level a
company’s CSRD, the higher its concurrent and subsequent financial performance. The
bivariate correlation matrix of the variables used in this paper show that all variables
have low correlation coefficients with each other, that is; none of the variables shows
serious multicollearity.
8.2 Relationship between CSR and CFP

The estimation results of the relationship between CSR and CFP are presented in
Table II. Three dependent variables which are used to measure financial performance
are as follows: ROAs, stock market return (Ri) and Tobin’s q ratio (Q ratio). As shown for
Model 1 when ROA as the dependent variable is utilized to measure financial
performance, the FE model is more precise than the RE model since the Hausman test is
significant. These indicate that unobserved individual effects are correlated with
the regressors in any companies. This means that in the FE model, the intercept in the
regression model is allowed to differ between individuals in recognition of the fact that
every company, or cross sectional unit may have specific characteristics of its own. All of
independent variables are significantly different from zero at least at ( p-value , 0.10),
whereas signs of independent variables have mixed findings. Adjusted R 2 shows that
financial performance is robustly explained by the CSRD score and other explanatory
variables in which the overall estimation is good at 36.86 percent.
In Model 2, when stock market return (Ri ) is used as a measure of financial
performance, it is found that the FE model is also more appropriate than the RE model,
since the results of the Hausman test rejected the hypothesis. In general, CSR is
positive and significantly related to financial performance for Models 1 and 2 at least at
10 percent from zero. For Model 1, all of the t-statistics are significant at 1 percent level.
Overall, the signs explanatory variables are also consistent with the theory. Adjusted
R 2 shows that financial performance is explained by the CSRD score and other
explanatory variables in which the overall estimation is good at 61.87 percent.
At the same time, there is no evidence of positive first-order serial correlation. As can
be seen in Model 3, when Q ratio is used as a measure of financial performance it is
shown that the FE model has an advantage over the RE model. Except for CSRD score
variable, overall t statistics related to financial performance ( p-value , 0.01) are
significant and Adjusted R2 value is 39.08 percent. In conclusion, comparing the two
models the FE model is more precise than the RE model, since the result of the
Hausman test rejects the hypothesis that all mit are equal to zero. It is also found that
the signs of systematic risk of companies (BETA) and leverage level (LEV) have
negative and significantly influenced to financial performance of companies.
The detailed analysis which is based on the dimension of CSRD score is reported in
Table III. Again, overall, with three alternate dependent variables, as measures
CSR and CFP
Model 1 ROA Model 2 Ri Model 3 Q
Variable FE model RE model FE model RE model FE model RE model in an emerging
market
C 2 0.0996 * * * 2 0.1060 * 23.8894 * * * 23.1166 * * * 20.2522 * * * 2 1.4461 * * *
(0.0167) (0.0446) (0.1554) (0.3768) (0.0633) (0.3132)
CSRD score 0.0007 * 0.0019 0.0207 * * * 0.0407 * * * 20.0008 2 0.0107
(0.0008) (0.0012) (0.0062) (0.0045) (0.0028) (0.0081) 179
BETA 2 0.0083 * * * 2 0.0107 20.3534 * * * 20.3183 * * * 20.0352 * * * 2 0.1132 * * *
(0.0018) (0.0085) (0.0291) (0.0486) (0.0104) (0.0249)
LEV 2 0.0202 * * * 2 0.0109 20.3400 * * * 20.2439 * * * 20.0621 * * * 2 0.1406 * *
(0.0060) (0.0081) (0.0638) (0.0650) (0.0091) (0.0640)
LSIZE 0.0105 * * * 0.0095 * * * 0.3036 * * * 0.2639 * * * 0.0852 * * * 0.1876 * * *
(0.0012 (0.0037) (0.0140) (0.0354) (0.0045) (0.0280)

ATR 0.0198 * * * 0.0143 0.2667 * * * 0.2036 * * * 0.0668 * * * 0.1887 * * *
(0.0020) (0.0130) (0.0115) (0.0206) (0.0216) (0.0486)
EPS 0.0002 * * * 0.0004 * * * 0.0050 * * * 0.0045 * * * 0.0007 * * * 0.0017 * * *
(0.0000) (0.0001) (0.0002) (0.0004) (0.0001) (0.0003)
Industrial No Yes No Yes No Yes
dummy
Adjusted R 2 0.3686 0.0604 0.6187 0.3954 0.3908 0.2068
F-statistic 4.3578 * * * 6.8365 * * * 10.3329 * * * 60.3192 * * * 4.6879 * * * 24.6459 * * *
DW-statistic 2.4194 2.1518 2.3414 1.9574 2.4577 1.7000
Hausman
test x 2 35.9985 * * * 63.7720 * * * 16.0157 * * *
Notes: Significance at: *p , 0.10, * *p , 0.05 and * * *p , 0.01; figures in parentheses are standard
errors robust to heteroscedasticity; DW statistic is Durbin-Watson d test for autocorrelation; number
of observation is 1,180; ROA, net operating income divided by total assets for firm j period t; Ri, the
stock price firm j period t minus stock price firm j period t 2 1 to stock price firm j period t 2 1;
Tobin’s Q, [(year-end market value of common stock þ year-end book value of preferred stock þ year-
end book value of debt) to year-end book value of total assets]; CSRD score, total scores of corporate
social responsibility disclosure score form firm j period t; BETA, systematic risk estimated over the 48
months prior the sample period of firm j at period t; LEV, ratio total debt to total assets for firm j period Table II.
t; LSIZE, natural logarithm of the total assets for firm j period t; ATR, total sales of firm j period t The relationship between
divided by their total assets period t; EPS, net earning divided by number of share outstanding of the CSR and CFP using
firm j period t unbalanced panel data
of financial performance, the FE model is more appropriate compared to the RE model.

The Hausman test results support the hypothesis that the individual effect is related to
the independent variables. In summary, the FE are decisively more precise in the
estimation process than the random effects which in this case, the results of the
Hausman test reject the hypothesis. At the same time there are no unobserved
individual effects which are related with regressors in any companies.
Referring to the results of the dimensions of CSRD score and using the FE model,
only employee relation dimensions (EMPD) is positive and significantly related to
financial performance for all three models, whilst, community involvement (COMD) is
positive and significantly related to financial performance for Model 2 only.
Furthermore, both product dimension (PROD) and environment dimension (ENVD) are
negative and significant for Models 2 and 3. It was found that the overall t tests
of explanatory variables are significant at least at p-value , 0.01. Adjusted R 2 shows
APJBA
Model 1 ROA Model 2 Ri Model 3 Q
3,2 Variables FE model RE model FE model RE model FE model RE model
C 2 0.1018 * * * 2 0.1033 * * 23.8868 * * * 23.0675 * * * 2 0.2762 * * * 2 1.2463 * * *

(0.0181) (0.0568) (0.2078) (0.2803) (0.0974) (0.2647)
EMPD 0.0040 * * 0.0049 0.0328 * * 0.0549 * * 0.0227 * * 2 0.0566 * *
180 (0.0017) (0.0051) (0.0168) (0.0248) (0.0108) (0.0232)
COMD 0.0005 0.0074 0.0507 * * * 0.0963 * * * 0.0116 0.0715 * * *
(0.0008) (0.0057) (0.0195) (0.0277) (0.0174) (0.0259)
PROD 2 0.0011 2 0.0024 0.0274 0.0177 2 0.0183 * * * 2 0.0403
(0.0013) (0.0055) (0.0171) (0.0269) (0.0056) (0.0252)
ENVD 2 0.0006 2 0.0031 20.0471 * 20.0200 2 0.0202 * * * 2 0.0287
(0.0007) (0.0066) (0.0264) (0.0325) (0.0058) (0.0304)
BETA 2 0.0086 * * * 2 0.0110 20.3593 * * * 20.0323 * * * 2 0.0368 * * * 2 0.1277 * * *

(0.0020) (0.0092) (0.0257) (0.0451) 0.0099 (0.0422)
LEV 2 0.0439 * * * 2 0.0120 20.3465 * * * 20.2552 * * * 2 0.0636 * * * 2 0.1606 * *
(0.0022) (0.0143) (0.0635) (0.0700) (0.0111) (0.0654)
LSIZE 0.0206 * * * 0.0090 * * 0.3028 * * * 0.2592 * * * 0.0845 * * * 0.1795 * * *
(0.0056) (0.0040) (0.0164) (0.0194) (0.0041) (0.0181)
ATR 0.0197 * * * 0.0140 0.2609 * * * 0.1982 * * * 0.0791 * * * 0.1721 * * *
(0.0020) (0.0100) (0.0128) (0.0488) (0.0217) (0.0456)
EPS 0.0002 * * * 0.0004 * * * 0.0050 * * * 0.0045 * * * 0.0006 * * * 0.0017 * * *
(0.0000) (0.0001) (0.0002) (0.0004) (0.0001) (0.0004)
Industry
dummy No Yes No Yes No Yes
Adjusted R 2 0.3840 0.0597 0.6144 0.3973 0.3945 0.2126
F-statistic 4.5345 * * * 5.6804 * * * 10.0349 * * * 49.5875 * * * 4.6940 * * * 20.9051 * * *
DW-statistic 2.4154 2.1511 2.3528 1.9640 2.4464 1.7086
Hausman test
(x 2 ) 35.0375 * * * 59.6000 * * * 15.7522
Notes: Siginificance at: *p , 0.10, * *p , 0.05, and * * *p , 0.001; figures in parentheses are standard
errors robust to heteroscedasticity; DW statistic is Durbin-Watson d test for autocorrelation; number
of observation is 1,182; ROA, net operating income divided by total assets for firm j period t; Ri, the
stock price firm j period t minus stock price firm j period t 2 1 to stock price firm j period t 2 1; Q,
[(year-end market value of common stock þ year-end book value of preferred stock þ year-end book
value of debt) to year-end book value of total assets]; EMPD, total scores of employee relation
disclosure index for firm j period t; COMD, total scores of community involvement disclosure index for
Table III. firm j period t; PROD, total scores of product disclosure index for firm j period t; ENVD, total scores of
The relationship between environment disclosure index for firm j period t; BETA, systematic risk estimated over the 48 months
CSR dimensions and CFP prior the sample period of firm j at period t; LEV, ratio total debt to total assets; LSIZE, natural
using unbalanced logarithm of the total assets for firm j period t; ATR, total sales of firm j period t divided by their total
panel data assets period t; EPS, net earning divided by number of share outstanding of the firm j period t
that financial performance is also explained by the dimension of CSRD score and other
explanatory variables for all three models in which the overall estimation ranges
between 38.40 and 61.44 percent.
8.3 Dynamic impacts of CSR on CFP

In addition to the statistical approach, this section also tests for dynamic effects in the
model. According to Elsayed and Paton (2005), the general approach in financial
performance studies, and in the area of industrial organization, the dynamic effects
in panel data models are used. This section attempts to explore any dynamic relation CSR and CFP
between CSR and CFP. in an emerging
Table IV presents the dynamic panel data estimates for CSR on CFP. It shows that
for statistical consistency, this procedure requires the absence of first order serial market
correlation for both Models 2 and 3. The J-statistic tests, of over identifying restrictions,
provide support for the choice of instrument set for overall dependent variables. Under
the null hypothesis, the over identifying restrictions are satisfied, since the J-statistic 181
computed value is lower than x 2 ¼ 20.0902 at 1 percent level of significant and eight
degrees of freedom for Models 1 and 2.
Overall the first lag of dependent variables is significant at least at 5 percent. This
means that the long-run impact of financial performance has occurred. In addition, the
first lag of CSR variable is only positively significant related to financial performance
as represented by market based measures (Ri). However, for Models 1 and 3, with the
ROA and Tobin’s q as the measures for financial performance, neither of the lag
coefficients is significant. There are only two controlled variables, namely lag EPS
which are significant at 10 percent and 1 percent level for Model 2. There are three
control variables, namely lag BETA, lag SIZE, and lag ATR which are significantly
related to financial performance for Model 3 at least at 10 percent levels, whereas, for
Model 1, neither of the lag coefficients of controlled variables are significant.
Results of the detailed analysis based on dimensions of CSRD are also shown in
Table IV. It can be seen that only two dimensions of CSRD are significant, lag EMPD
(employee relation disclosure dimension) and lag COMD (community involvement
disclosure dimension) which are negatively significant at p-value , 0.05 level when
ROA and Ri represent dependent variables.
Except for lag ROA, both lag Ri and lag Q are significantly related to the longterm
relationships. In general, there are limited numbers of control variables with a
significant influence on financial performance. In other words, although dynamic
effects may be important in models of a company’s performance, these results support
the research conducted by Elsayed and Paton (2005). In this paper, there is no empirical
evidence to suggest that the relationship between the dimensions of CSRD and a
company’s financial performance is affected in the long-run.
9. Discussion and conclusion

Based on the findings presented in Section 8, this paper is designed to answer the
question of whether the results present robust and generally acceptable findings on the
relationship between CSR and CFP for Malaysian public companies. Various studies
about CSR practices in a Malaysian context have been conducted (Abdul Hamid, 2004;
Thompson and Zurina, 2004; Nik Ahmad et al., 2003; Rashid and Ibrahim, 2002;
Williams and Pei, 1999). However, the studies which examine the association between
CSR and CFP in the Malaysian PLCs context are scant. Therefore, by using CSRD as a
proxy for the measurement of CSR activities, this paper provides an empirical paper of
the impact of CSR on CFP. The sample size is based on 200 companies, with the highest
market capitalisation, listed on the main board of the Bursa Malaysia during the period
of 1999-2005. The results from the evaluation yield the following discussions.
In general, there are positive and significant related of CSRD and dimensions of CSRD
variables on CFP. This result support H1 and indicates that CSR is positive
and significant related to CFP. The companies which invest more in their CSR practices
APJBA
Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
3,2 Variables (ROA) (Ri) (Q) (ROA) (Ri) (Q)
Lag DV 2.0693 * * 21.1751 * * * 0.6440 * * * 0.5315 2 1.1177 * * * 0.8662 * *

(0.9115) (0.1047) (0.1186) (1.0130) (0.1014) (0.3611)
Lag CSRD 20.7435 0.3795 * * 20.0298 – – –
182 (1.0774) (0.1735) (0.0589)
Lag EMPD – – – 20.4926 * * 0.4118 2 0.0399
(0.2470) (0.2679) (0.1549)
Lag COMD – – – 0.7785 2 0.6413 * * 0.0022
(1.0123) (0.2994) (0.1480)
Lag PROD – – – 20.7490 2 0.2803 2 0.3611
(0.8251) (0.5279) (0.3013)

Lag ENVD – – – 1.1811 0.5436 0.2957
(0.9038) (0.4383) (0.2521)
Lag BETA 21.3731 0.1224 0.1029 * 20.2880 0.0354 0.1688 * *
(1.3254) (0.1575) (0.0551) (0.2243) (0.1607) (0.0740)
Lag LEV 20.6881 0.0549 0.1228 20.2677 0.2392 0.1546 * *
(1.1997) (0.1521) (0.0779) (0.3107) (0.1586) (0.0769)
Lag SIZE 2.3193 0.0065 0.5514 * * * 20.3129 0.1372 0.7753 * *
(2.1561) (0.1681) (0.1746) (0.3018) (0.1496) (0.3106)
Lag ATR 20.9578 0.1291 0.5504 * * * 20.2738 0.1906 0.6917 * *
(1.0105) (0.1668) (0.1615) (0.3941) (0.1721) (0.2981)
Lag EPS 21.1160 1.0533 * * * 0.1076 20.2346 1.1613 * * * 2 0.1303
(0.7911) (0.1995) (0.0709) (0.5473) (0.2145) (0.1205)
AR(1) 1.6180 0.9921 20.3302 3.2410 * * * 0.5010 0.3455
AR(2) 0.5907 211.2938 * * * 25.1209 * * * 21.6210 2 10.5948 * * * 2 5.3277 * * *
J-statistic 1.6272 9.2560 52.2400 * * * 2.3400 13.5104 18.8048
Notes: Significance at: *p , 0.10, * *p , 0.05, and * * *p , 0.01; figures in parentheses are standard
errors robust to heteroscedasticity; number of observations is 1,182; ROA, net operating income
divided by total assets for firm j period t; Ri, the stock price firm j period t minus stock price firm j
period t 2 1 to stock price firm j period t 2 1; Q, [(year 2 end market value of common stock þ year-
end book value of preferred stock þ year 2 end book value of debt) to year-end book value of total
assets]; Lag DV, value of each dependent variables firm j period t 2 1; Lag CSRD, total scores of
corporate social responsibility disclosure index for firm j period t 2 1; Lag EMPD, total scores of
employee dimension disclosure index for firm j period t 2 1; Lag COMD, total scores of community
involvement disclosure index for firm j period t 2 1; Lag PROD, total scores of product disclosure
index for firm j period t 2 1; Lag ENVD, total scores of environment disclosure index for firm j period
t 2 1; Lag BETA, systematic risk estimated over the 48 months prior the sample period of firm j at
period t 2 1; Lag LEV, ratio total debt to total assets for firm j period t 2 1; Lag LSIZE, natural
Table IV. logarithm of the total assets for firm j period t 2 1; Lag ATR, total sales of firm j period t divided by
Dynamic impacts of CSR their total assets for firm j period t 2 1; Lag EPS, net earning divided by number of share outstanding
on CFP using unbalanced of the firm j period t 2 1; AR(1)and AR(2) are tests for first- and second-order autocorrelation in the
panel data differenced residual; J-statistic is the test for the validity of overidentifying restriction
will enhance their financial performance. Thus, the Malaysian PLCs which are actively
involved in CSR activities are also able to create customer loyalty in the longterm. This
may also improve earnings and market value of companies which are represented by a
strong financial performance. This finding is in line with prior studies by Simpson and
Kohers (2002), Balabanis et al. (1998), Waddock and Graves (1997), Roberts (1992)
and Cochran and Wood (1984) that found significant and positive relationships between CSR and CFP
CSR and CFP. in an emerging
The better social performance of companies would ensure greater financial
performance due to these companies utilizing their financial resources, manpower market
commitment and other interested groups efficiently (Waddock and Graves, 1997). CSR
must be appreciated as a set of actions that companies manage with harmony, when
stakeholders have good responses to their CSR practices. The positive relation of CSR 183
information towards CFP indicates that companies could increase their external
reputation. Furthermore, companies are able to increase the morale of employees and
enhance relations with investors (Waddock and Graves, 1997).
For detailed analysis; it is found that two dimensions of CSRD variable support H2
and H3, namely employee relation (EMPD) and community involvement (COMD) are
positive and significantly related to CFP. This result supports prior studies (Gittell et al.,
2004; Tsoutsoura, 2004; Delaney and Huselid, 1996; Huselid, 1995) that found a positive
relationship between employee relations and CFP. It reveals that through a human
relations approach, CFP is advanced when the managers have good relationship with
the employees. These findings suggest that managers have to improve various
approaches on their employee relationship, and that the impact of these approaches may
increase their CFP.
There are many activities which are related to employee relations. For instance, some
activities which have commonly been applied by companies include training and
development programmes for employees, providing welfare support such as housing for
employees, workers’ day for all employees, concern for health and safety, equal
opportunities for all operating units and long service employee awards. The community
involvement dimension variable is positive and significantly related to CFP. It also
support H3 and reveals that there is no negative reaction from stakeholders when
companies spend some financial resources to support the development of society. This
result is contrary with prior research by Balabanis et al. (1998) who found that
community involvement was negatively related to economic performance. This result
reveals that Malaysian managers believe that it is essential to recognize and support
community programmes and events.
There are some community activities in which companies are involved such as
philanthropic activities exhibited by the company, donations, sponsorships for sports
events, education, and activities related to national pride. Local companies show
community support by enriching the quality of life of their community and staff. More
importantly, companies should disclose all their community activities in the annual
reports as it also enhances CFP when they are involved in community programmes.
In addition, the environmental disclosure dimension, which are assumed to have a
higher cost as well as product development disclosure, were found to be negatively
significant related to subsequent financial performance. The findings indicate that
involvement in environmental activities and product development of companies, with its
pressure on how money is spent rather than made, fails to add sufficient value to the
reputation of the company among stakeholders. The reason behind this is that in order to
implement environmental management plans, some companies have been investing this
related project as capital expenditure. These investments influence the companies’ cash
flow during financial reporting. Hence, companies can improve their social performance
through proactive promotion and recruiting of managers who are concerned
APJBA with environmental scanning (Simerly, 2003). Furthermore, these results consistently
3,2 support prior studies by Balabanis et al. (1998), Mahoney and Roberts (2007) and
Wagner (2005). They found that environmental dimension have negative influence to
CFP, whereas, the results of product dimension is contrary from Mahoney and Roberts
(2007) who found positive and significant relationship on financial performance of
Canadian companies.
184 Finally, reported results of a dynamic model between the CSR and CFP have been
made. In general, the findings confirm that there is limited evidence of a significant
relationship between CSR and CFP in a long-term relationship. These results suggest
that allowing company heterogeneity is much more crucial than dynamic effects. This
finding revealed that there is still limited number of local companies consistently
disclosing CSR activities in their annual reports. Hence, it appears that there is no
impact of CSR on CFP in long-term period. However, this result partially support the
prior research in developed market by Elsayed and Paton (2005), which found that
there was no existence between environmental disclosures on company performance in
the long-term relationship.
In conclusion, as a result of hypotheses testing, it can be inferred that CSR and its
dimensions appear to be significantly related to CFP. This indicates that the
involvement of companies in CSR practices possibly match with stakeholder theory
claim. These results show that actively in some level CSR initiative could enhance the
financial performance of companies. Therefore, the objectives of companies such as
profit maximization could be achieved through active involvement of managers in CSR
practices. These results can be used as important piece of information to the companies
which have to be more active in involving themselves in CSR activities and also disclose
them. This is because all these practices could improve their financial performances.
The government agencies also support through the regulations and laws to impose the
Malaysian PLCs to be active in CSR practices (Bursa Malaysia, 2007).
There are many capital markets outside Malaysia which already have social
performance index or rating such as; Kinder, Lydenberg, Domini Index, Canadian
Social Investment Database rating, Ethical Investment Research Services score, Dow
Jones Sustainability Index, Dow Jones Islamic Index, etc. Therefore, it is timely that
Securities Commission and Bursa Malaysia also provides social performance rating for
the Malaysian PLCs. By using this rating, it is easier to measure the general standard
of CSR practices in the Malaysian context. The present researcher believes that the
empirical study about this issue could be improved in the future.
Some limitations of the paper and suggestions on how to overcome them are
elaborated in the following arguments. The First, limitation is the inconsistency of
results obtained using various financial performances. This problem can be solved by
future research paying more attention to the selection of measures for the company’s
financial performance used in the CSR research. Last, the sample size in this paper, taken
from the 200 highest market capitalisations of companies listed in Bursa Malaysia, is
also a limitation for the generalization of the findings. The inclusion of medium-sized
companies and industry characteristics in the future might improve the results.
Note
1. Please refer to CSR and SRI: the Way Forward for Malaysia, available at: www.treasury.gov.
my/index.php? (accessed 25 April 2010).
References CSR and CFP
Abbort, W.F. and Monsen, R.J. (1979), “On the measurement of corporate social responsibility: in an emerging
self-report disclosure as a method of measuring social involvement”, Academy of
Management Journal, Vol. 22, pp. 501-15. market
Abdul Hamid, F.Z. (2004), “Corporate social disclosure by banks and finance companies:
Malaysian evidence”, Corporate Ownership and Control, Vol. 1 No. 4, pp. 118-29.
Alexander, G.J. and Buchholz, R.A. (1978), “Corporate social responsibility and stock market 185
performance”, Academy of Management Journal, Vol. 21, pp. 479-86.
Al-Tuwaijri, S.A., Christensen, T.E. and Hughes, K.E. II (2004), “The relations among environmental
disclosure, environmental performance, and economic performance: a simultaneous equations
approach”, Accounting, Organizations and Society, Vol. 29, pp. 447-71.
Arellano, M. and Bond, S. (1991), “Some tests of specification for panel data: Monte Carlo
evidence and an application to employment equations”, Review of Economic Studies,
Vol. 58 No. 2, pp. 277-97.
Azlan, A. and Susela, S.D. (2007), “Corporate social reporting in Malaysia: an institutional
perspective”, World Review of Entrepreneurship, Management and Sustainable
Development (WREMSD), Vol. 3 No. 1, pp. 20-36.
Azlan, A. and Susela, S.D. (2008), “The impact of government foreign affiliate influence on
corporate social reporting: the case of Malaysia”, Managerial Auditing Journal, Vol. 23
No. 4, pp. 386-404.
Balabanis, G., Philip, H.G. and Lyall, J. (1998), “Corporate social responsibility and economic
performance in the top British companies: are they linked?”, European Business Review,
Vol. 98 No. 1, pp. 25-44.
Baltagi, B.H. (1995), Econometric Analysis of Panel Data, Wiley, Chichester.
Barnett, M.L. (2007), “Stakeholder influence capacity and the variability of financial returns to
corporate social responsibility”, Academy of Management Review, Vol. 32 No. 3,
pp. 794-816.
Berman, S.L., Wicks, A.C., Kotha, S. and Jones, T.M. (1999), “Does stakeholder orientation
matter? The relationship between stakeholder management models and firm financial
performance”, Academy of Management Journal, Vol. 42 No. 5, pp. 488-506.
Brammer, S., Brooks, C. and Pavelin, S. (2006), “Corporate social performance and stock returns:
UK evidence from disaggregate measures”, Financial Management, Vol. 35 No. 3, pp. 97-116.
Branco, M.C. and Rodrigues, L.L. (2008), “Factors influencing social responsibility disclosure by
Portuguese companies”, Journal of Business Ethics, Vol. 83, pp. 685-701.
Bursa Malaysia (2007), “Corporate social responsibility in Malaysian PLCs, an executive
summary 2007 Status Report”, available at: www.klse.com.my/website/bm/aboutus/
theorganization/csr/downloaded/csr_booklet.pdf (accessed 7 July 2008).
Chahal, H. and Sharma, R.D. (2006), “Implications of corporate social responsibility on marketing
performance: a conceptual framework”, Journal of Services Research, Vol. 6 No. 1, pp. 205-16.
Chen, K.H. and Metcalf, R.W. (1980), “The relationship between pollution control record and
financial indicators revisited”, The Accounting Review, Vol. 55 No. 1, pp. 168-77.
Christopher, T., Hutomo, Y.B.S. and Monroe, G. (1997), “Voluntary environmental disclosure by
Australian listed mineral mining companies: an application of stakeholder theory”,
The International Journal of Accounting & Business Society, Vol. 5 No. 1, pp. 42-65.
Clarkson, M.B.E. (1995), “A stakeholder framework for analyzing and evaluating corporate social
performance: an empirical investigation”, Journal of Consumer Marketing, Vol. 14 No. 6,
pp. 421-32.
APJBA Cochran, P.L. and Wood, R.A. (1984), “Corporate social responsibility and financial
performance”, Academy of Management Journal, Vol. 27 No. 1, pp. 42-56.
3,2
Cornell, B. and Shapiro, A.C. (1987), “Corporate stakeholders and corporate finance”, Financial
Management, Vol. 16 No. 1, pp. 5-14.
Delaney, J.T. and Huselid, M.A. (1996), “The impact of human resource management practices on
perceptions of organizational performance”, Academy of Management Journal, Vol. 39
186 No. 4, pp. 949-70.
Demsetz, H. and Villalonga, B. (2001), “Ownership structure and corporate performance”, Journal
of Corporate Finance, Vol. 7 No. 3, pp. 209-333.
Dunk, A.S. (2005), “Financial and non-financial performance: the influence of quality of
information system, corporate environmental integration, product innovation, and product
quality”, Advances in Management Accounting, Vol. 14, pp. 91-114.

Elijido-Ten, E. (2004), “Determinants of environmental disclosures in a developing country: an
application of the stakeholder theory”, paper presented at the 4th Asian Pacific
Interdisciplinary Research in Accounting Conference, APIRA, Singapore.
Elsayed, K. and Paton, D. (2005), “The impact of environmental performance on firm
performance: static and dynamic panel data evidence”, Structural Change and Economic
Dynamics, Vol. 16 No. 3, pp. 392-412.
Freedman, M. and Jaggi, B. (1988), “An analysis of the association between pollution disclosure and
economic performance”, Accounting, Auditing & Accountability Journal, Vol. 1 No. 2, pp. 43-58.
Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, Pitman, Boston, MA.
Friedman, M. (1970), “The social responsibility of business is to increase profits”, New York
Times Magazine, Vol. 13 No. 9, pp. 122-6.
Gardiner, L., Rubbens, C. and Bonfiglioni, E. (2003), “Research big business, big responsibilities”,
Corporate Governance, Vol. 3 No. 3, pp. 67-77.
Gittell, J.H., Nordenflycht, A.V. and Kochan, T.A. (2004), “Mutual gains or zero sum? Labor
relations and firm performance in the airline industry”, Industrial & Labor Relations
Review, Vol. 57 No. 2, pp. 163-80.
Greene, W.H. (2008), Econometric Analysis, 6th ed., Pearson Education, New York, NY.
Griffin, J.J. and Mahon, J.F. (1997), “The corporate social performance and corporate financial
performance debate: twenty-five years of incomparable research”, Business and Society,
Vol. 36 No. 1, pp. 5-31.
Han, K.C. and Suk, D.Y. (1998), “The effect of ownership structure of firm performance:
additional evidence”, Review of Financial Economics, Vol. 7 No. 2, pp. 143-55.
Haniffa, R.M. and Cooke, T.E. (2005), “The impact of culture and governance on corporate social
reporting”, Journal of Accounting & Public Policy, Vol. 24, pp. 1-40.
Hughes, S.B., Anderson, A. and Golden, S. (2001), “Corporate environmental disclosures: are they
useful in determining environmental performance?”, Journal of Accounting & Public Policy,
Vol. 20, pp. 217-40.
Huselid, M.A. (1995), “The impact of human resources management practices on turnover,
productivity, and corporate financial performance”, Academy of Management Journal,
Vol. 38 No. 3, pp. 635-72.
IJM Corporation Berhad (2005), Annual Report, available at: www.bursamalaysia.com/website/
bm/listed_companies/company_announcements/announcements/historical.jsp (accessed
2 June 2009).
Jaggi, B. and Freedman, M. (1992), “An examination of the impact of pollution performance on CSR and CFP
economic and market performance: pulp, and paper firms”, Journal of Business Finance &
Accounting, Vol. 19 No. 5, pp. 697-713. in an emerging
Jamali, D. (2008), “A stakeholder approach to corporate social responsibility: a fresh perspective market
into theory and practice”, Journal of Business Ethics, Vol. 82, pp. 213-31.
Johnston, J. and DiNardo, J. (1997), Econometrics Method, 4th ed., McGraw-Hill, New York, NY.
Jones, T. (1995), “Instrument stakeholder theory: a snapper of ethics and economics”, Academy of 187
Management Review, Vol. 2, pp. 404-37.
Laan, G.V., Ees, H.V. and Witteloostuijn, A.V. (2008), “Corporate social and financial
performance: an extended stakeholder theory, and empirical test with accounting
measures”, Journal of Business Ethics, Vol. 79, pp. 299-310.
Lindenberg, E. and Ross, S. (1981), “Tobin’s q ratio and industrial organization”, Journal of
Business, Vol. 54 No. 1, pp. 1-32.
McGuire, J., Sundgren, A. and Schneeweis, T. (1988), “Corporate social responsibility and firm
financial performance”, Academy of Management Journal, Vol. 31 No. 4, pp. 854-72.
McWilliams, A. and Siegel, D. (2001), “Corporate social responsibility: a theory of the firm
perspective”, Academy of Management Review, Vol. 26 No. 1, pp. 117-27.
Mahoney, L. and Roberts, R.W. (2007), “Corporate social performance, financial performanceand
institutional ownership in Canadian firms”, Accounting Forum, Vol. 31 No. 3, pp. 233-53.
Matsui, Y., Filippini, R., Kitanaka, H. and Sato, O. (2007), “A comparative analysis of new
product development by Italian and Japanese manufacturing companies: a case study”,
International Journal of Production Economics, Vol. 110, pp. 16-24.
Moerman, L. and Laan, S.V.D. (2005), “Social reporting in the tobacco industry: all smoke and
mirrors?”, Accounting, Auditing & Accountability Journal, Vol. 18 No. 3, pp. 374-89.
Moffat, A. and Auer, A. (2006), “Corporate Environmental Innovation (CEI): a government
initiative to support corporate sustainability leadership”, Journal of Cleaner Production,
Vol. 14, pp. 589-600.
Moore, G. (2001), “Corporate social and financial performance: an investigation in the UK
supermarket industry”, Journal of Business Ethics, Vol. 34 Nos 3/4, pp. 299-316.
Munoz, T.G. (2005), “German demand for tourist in Spain”, Tourism Management, Vol. 28, pp. 1-11.
Murray, A., Sinclair, D., Powel, D. and Gray, R. (2006), “Do financial markets care about social
and environmental disclosure? Further evidence and exploration from the UK”,
Accounting, Auditing & Accountability Journal, Vol. 19 No. 2, pp. 228-55.
Mustaruddin, S. (2009), “Corporate social responsibility disclosure in an emerging market:
a longitudinal analysis approach”, International Business Research, Vol. 2 No. 1, pp. 131-41.
Neu, D., Warsamen, H. and Pedwell, K. (1998), “Managing public impressions: environmental
disclosures in annual reports”, Accounting, Organizations and Society, Vol. 23 No. 3,
pp. 265-82.
Nik Ahmad, N.N. and Malia, S. (2004), “Environmental disclosure in Malaysian annual reports:
a legitimacy theory perspective”, International Journal of Commerce & Management,
Vol. 14 No. 1, pp. 44-58.
Nik Ahmad, N.N., Malia, M. and Siswantoro, D. (2003), “Corporate social responsibility disclosure
in Malaysia: an analysis of annual reports of KLSE listed companies”, IIU Journal of
Economics and Management, Vol. 11 No. 1, pp. 1-37.
Norhayah, Z. and Azlan, A. (2006), “Realising corporate social responsibility in Malaysia: view
from the accounting profession”, Journal of Corporate Citizenship, Vol. 24 No. 4, pp. 101-14.
APJBA Othman, R. and Ameer, R. (2010), “Environmental disclosures of palm oil plantation companies
in Malaysia: a tool for stakeholder engagement”, Corporate Social Responsibility and
3,2 Environmental Management, Vol. 17, pp. 52-62.
Parket, R. and Eibert, H. (1975), “Social responsibility: the underlying factors”, Business
Horizons, Vol. 18 No. 4, pp. 5-10.
Patten, D.M. (1990), “The market reaction to social responsibility disclosures: the case of the
188 Sullivan principles signings”, Accounting, Organization and Society, Vol. 15, pp. 575-87.
Pauwels, K., Silva-Risso, J., Srinivasan, S. and Hanssens, D.M. (2004), “New products, sales
promotions, and firm value: the case of the automobile industry”, Journal of Marketing,
Vol. 68 No. 10, pp. 142-56.
Pava, M.L. and Krausz, J. (1996), “The association between corporate social-responsibility and
financial performance – the paradox of social cost”, Journal of Business Ethics, Vol. 15
No. 3, pp. 321-57.

Prathaban, V. (2005), “Big earners, small givers?”, Malaysian Business, September, p. 16.
Preston, L. and O’Bannon, D.P. (1997), “The corporate social-financial performance relationship:
a typology and analysis”, Business and Society, Vol. 36 No. 4, pp. 419-29.
Public Bank Berhad (2005), Annual Report, available at: www.bursamalaysia.com/website/bm/
listed_companies/company_announcements/announcements/historical.jsp (accessed 2
June 2009).
Rashid, Z.A. and Ibrahim, S. (2002), “Executive and management attitudes towards corporate
social responsibility in Malaysia”, Corporate Governance, Vol. 2 No. 4, pp. 10-16.
Richardson, A. and Welker, M. (2001), “Social disclosure, financial disclosure and the cost of
equity capital”, Accounting, Organizations and Society, Vol. 26 Nos 7/8, pp. 597-616.
Roberts, R.W. (1992), “Determinants of corporate social responsibility disclosure: an application
of stakeholder theory”, Accounting, Organisations and Society, Vol. 17 No. 6, pp. 595-612.
Roman, R.M., Hayibor, S. and Agle, B.R. (1999), “The relationship between social and financial
performance: repainting a portrait”, Business and Society, Vol. 38, pp. 109-18.
Ruf, B.M., Muralidhar, K., Brown, R.M., Janney, J.J. and Paul, K. (2001), “An empirical investigation of
the relationship between change in corporate social performance and financial performance: a
stakeholder theory perspective”, Journal of Business Ethics, Vol. 32, pp. 143-56.
Salama, A. (2005), “A note on the impact of environmental performance on financial
performance”, Structural Change and Economic Dynamics, Vol. 16, pp. 413-21.
Salzmann, O., Somers, A. and Steger, U. (2005), “The business case for corporate sustainability:
literature review and research options”, European Management Journal, Vol. 23 No. 1,
pp. 27-36.
Seifert, B., Morris, S.A. and Bartkus, B.R. (2003), “Comparing big givers and small givers:
financial correlates of corporate philanthropy”, Journal of Business Ethics, Vol. 45,
pp. 195-211.
Simerly, R.L. (2003), “An empirical examination of the relationship between management and
corporate social performance”, International Journal of Management, Vol. 20 No. 3,
pp. 353-9.
Simpson, W.G. and Kohers, T. (2002), “The link between corporate social and financial performance:
evidence from the banking industry”, Journal of Business Ethics, Vol. 35, pp. 97-109.
Smith, J. (2006), Applied Econometrics – Panel Data 2, University of Warwick, Warwick,
available at: www2.warwick\.ac.uk/fac/soc/economics/staff/faculty/jennifersmith/panel/
2dyna.doc (accessed 12 March 2009).
Snider, J., Hill, R.P. and Martin, D. (2003), “Corporate social responsibility in the 21st century: CSR and CFP
a view from the world’s most successful firms”, Journal of Business Ethics, Vol. 48 No. 2,
pp. 175-87.
in an emerging
Star Publication Malaysia Berhad (2005), Annual Report, available at: www.bursamalaysia.com/
market
website/bm/listed_companies/company_announcements/announcements/historical.jsp
(accessed 2 June 2009).
Steger, U., Somers, A. and Salzmann, O. (2007), “The economic foundations of corporate 189
sustainability”, Corporate Governance, Vol. 7 No. 2, pp. 162-77.
Sumiani, Y., Haslinda, Y. and Lehman, G. (2007), “Environmental reporting in a developing
country: a case paper on status and implementation in Malaysia”, Journal of Cleaner
Production, Vol. 15, pp. 895-901.
Tam, S. (2007), “The next wave of CSR”, The Star Online, available at: http://biz.thestar.com.my/
news/story.asp?file¼/2007/9/3/business/18731567andsec¼business (accessed July 2009).
Thompson, P. and Zurina, Z. (2004), “Corporate social responsibility reporting in Malaysia
progress and prospects”, Journal of Corporate Citizenship, Vol. 13, pp. 125-36.
Tsang, E.W.K. (1998), “A longitudinal paper of corporate social reporting in Singapore: the case
of the banking, food and beverages and hotel industries”, Accounting Auditing &
Accountability Journal, Vol. 11 No. 5, pp. 624-35.
Tsoutsoura, M. (2004), “Corporate social responsibility and financial performance”, Working Paper
Series (7), Center for Responsible Business, University of California, Berkeley, CA.
Turban, D.B. and Greening, D.W. (1997), “Corporate social performance and organizational
attractiveness to prospective employees”, Academy of Management Journal, Vol. 40 No. 3,
pp. 658-72.
Ullmann, A.A. (1985), “Data in search of a theory: a critical examination of the relationships
among social performance, social disclosure, and economic performance of US firms”,
Academy of Management Journal Review, Vol. 10 No. 3, pp. 540-57.
Vance, S.C. (1975), “Are socially responsible corporations good investment risk?”, Management
Review, Vol. 64 No. 8, pp. 18-24.
Visser, W. (2008), “Corporate social responsibility in developing countries”,
in Crane, A., McWilliams, A., Matten, D., Moon, J. and Siegel, D. (Eds), The Oxford
Handbook of Corporate Social Responsibility, Oxford University Press, Oxford, pp. 473-9.
Waddock, S.A. and Graves, S.B. (1997), “The corporate social performance-financial performance
link”, Strategic Management Journal, Vol. 18, pp. 303-19.
Wagner, M. (2005), “How to reconcile environmental and economic performance to improve
corporate sustainability: corporate environmental strategies in the European paper
industry”, Journal of Environmental Management, Vol. 76 No. 2, pp. 105-18.
Williams, S.M. and Pei, C.H.W. (1999), “Corporate social disclosures by listed companies on their
web sites: an international comparison”, The International Journal of Accounting, Vol. 34
No. 3, pp. 389-419.
Yoon, Y., Giirhan-Canli, Z. and Schwarz, N. (2006), “The effect of corporate social responsibility
(CSR) activities on companies with bad reputations”, Journal of Consumer Psychology,
Vol. 16 No. 4, pp. 377-90.
Yoshikawa, T. and Phan, P.H. (2003), “The performance implications of ownership-driven
governance reform”, European Management Journal, Vol. 21 No. 6, pp. 698-706.
APJBA Further reading
3,2 Gujarati, D.N. (2003), Basic Econometrics, 4th ed., McGraw-Hill, Boston, MA.
Guthrie, J. and Parker, L.D. (1990), “Corporate social disclosure practice: a comparative
international analysis”, Advance in Public Interest Accounting, Vol. 3, pp. 159-75.
Hsioa, C. (2003), Analysis of Panel Data, 2nd ed., Cambridge University Press, London.
190 Appendix. List of CSRD items

(1) Employee relation:
.
Employee health and safety.
.
Training and education.
.
Employees benefits.
.
Employees profile.
.
Share option for employees.
.
Health and safety award.
(2) Community involvement:
.
Cash donation program.
.
Charity program.
.
Scholarship program.
.
Sponsor for sport activities.
.
Supporting national pride.
.
Public project.
(3) Product:
.
Product development.
. Product safety.
.
Product quality.
.
Customer services.
(4) Environment:
.
Pollution control.
.
Prevention or reparation program.
.
Conservation and recycled materials.
.
Award in environment program.
Corresponding author
Mustaruddin Saleh can be contacted at: mustaruddin@yahoo.com
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints
This article has been cited by:
1. Kumaran Rajandran, Fauziah Taib. 2014. The representation of CSR in Malaysian CEO statements: a
critical discourse analysis. Corporate Communications: An International Journal 19:3, 303-317. [Abstract]
[Full Text] [PDF]
2. Abdul Moyeen, Brian West. 2014. Promoting CSR to foster sustainable development. Asia-Pacific Journal
of Business Administration 6:2, 97-115. [Abstract] [Full Text] [PDF]
3. Haslinda Yusoff, Siti Salwa Mohamad, Faizah Darus. 2013. The Influence of CSR Disclosure Structure
on Corporate Financial Performance: Evidence from Stakeholders’ Perspectives. Procedia Economics and
Finance 7, 213-220. [CrossRef]

Asia-Pacific Journal of Business Administration: Article Information

Diunggah oleh

Informasi Dokumen

Deskripsi Asli:

Judul Asli

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Asia-Pacific Journal of Business Administration: Article Information

Diunggah oleh

Hak Cipta:

Format Tersedia

Asia-Pacific Journal of Business Administration

Permanent link to this document:

*Related content and download information correct at time of download.

CSR and CFP

Tanjungpura University, Pontianak, Indonesia, and

2. CSR practices in Malaysia

China, African humanism (ubuntu) in South Africa, mutual cooperation

3. The theoretical approaches of CSR and CFP

and Graves, 1997; Roberts, 1992).

4. CSR and CFP in Malaysian context

5. Research method 171

5.1 Data and sample size

5.2 Measurements of CSR

gi;t ¼ xi;t21 b þ vi þ mi;t21 ð1Þ

mi;t21 ¼ ei þ vi;t21 ð2Þ

ROA 0.0458 0.1662 1.00

8.2 Relationship between CSR and CFP

(0.0012 (0.0037) (0.0140) (0.0354) (0.0045) (0.0280)

of financial performance, the FE model is more appropriate compared to the RE model.

C 2 0.1018 * * * 2 0.1033 * * 23.8868 * * * 23.0675 * * * 2 0.2762 * * * 2 1.2463 * * *

BETA 2 0.0086 * * * 2 0.0110 20.3593 * * * 20.0323 * * * 2 0.0368 * * * 2 0.1277 * * *

8.3 Dynamic impacts of CSR on CFP

9. Discussion and conclusion

Lag DV 2.0693 * * 21.1751 * * * 0.6440 * * * 0.5315 2 1.1177 * * * 0.8662 * *

(0.8251) (0.5279) (0.3013)

quality”, Advances in Management Accounting, Vol. 14, pp. 91-114.

No. 3, pp. 321-57.

190 Appendix. List of CSRD items

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Anda mungkin juga menyukai