Evaluation of Firm’s Performance by Corporate Governance and Social Responsibility: a Moderating Role of Corporate Philanthropy

Qaiser Ali Malik; Ch. Kamran Mahmood

Abstract:

The paper examines the effect of corporate governance (CG) and Corporate Social Responsibility (CSR) on firm’s performance of the listed companies of Pakistan Stock Exchange (PSX) in the presence of Corporate Strategic Philanthropy (CP). The study employs yearly data spanning over the period of 2004 to 2017. Variables such as CG and CSR serve as independent variables, CP as a moderating variable and firm’s performance proxies by Returns on Assets (ROA) and Earning Yield (EY) as dependent variable in the model. Data has been extracted from Annual reports of the firms. Interpreting all the results, it is deduced that CG and CSR have significant effect on firm’s performance. A collusive effort has been made to discern data of CSR and CP to analyze its moderating impact of CP. The objectivity of differentiation is the commitment of firm towards the welfare of the society, hence, CSR is an obligation and CP is discretion. The data has been analyzed with a view to check cause and effect relationship by using Panel Data Analysis. Firm Age, Board independence and CP have positive impact however Leverage and Board size have negative impact on Earning yield (EY). On the other hand, Firm Size and CP have shown significant positive impact on ROA. Being a moderator, CP is showing the significant positive moderating effect in relation of Board Independence and Board Size with EY. CP represents significant negative moderating effect in relation of Firm age and Leverage and significant positive moderating effect in relation of Firm size and Board Independence with ROA. Results confirmed that CP moderates the relation between CG and firm’s performance. However, the moderating effect varies from book based (ROA) and market based (EY) measures of performance. Market based measure (EY) is more justified and dynamic in nature.

research from:

• Foundation University - Faculty of Management Sciences

Year:

2018

Type of Publication:

Article

Volume:

13

Number:

1

Pages:

134-146

Month:

6