Corporate Social Responsibility

Now a days no any company can survive and stay in competition without Corporate Social Responsibility, it is abbreviated as CSR and is also describes as “corporate citizenship” that promotes optimistic changes in the environment and promotes social wellbeing.The concept of CSR was started in 1950s and now it has been growing immensely and it is considering as a part of business ethics (Singh, 2014).

Johansson, et.al (2015) discussed that the scope of CSR has been changed from the acceptance of environmental wellbeing to become a necessary part of the strategic planning of any organization.Many companies are adding CSR as the part of their long term strategic planning but the motives behind them are different.

In this new era it has become essential for organizations to cope up with the problems that are directly or indirectly related to the stakeholders (Karagiorgos, 2010), that is why Singh (2014) probes that the main purpose of every firm to carry out CSR activities is to maximize the shareholders wealth.

According to Martins (2015) the contemporary concept of CSR is that companies must have to conduct those activities which bring the positive changes in the environment, are according to the law, socially acceptable and, most important, increase the company’s financial performance. Alinoor (2016) states that if firm will be socially responsible, abiding the law and working for the environment then it means that they are improving their performance which leads to profitability.

According to Ingley et al., (2010), In this highly competition era firms must have to perform according to the approach, that includes social justice, economic prosperity and environmental quality, which is known as “Triple Bottom Line Approach”. CSR includes all the economical, social and environmental actions which are taken by the firm to maximize the stakeholders’ wealth and improves the firm’s financial performance.

According to Malik and Kanwal (2016) in today’s dynamic business world, where competition is too high, business uses CSR as there competitive advantage because Mehralian, et,tl., (2016) states that it help companies to provide value to its stakeholders which ultimately results in achieving organizational goals and assist them to sustain.CSR is one of the most important activities which are performed by all companies and specifically food industry.

The stakeholders of food industry are employees, shareholders, NGOs, debt providing institutions, suppliers, wholesalers, retailers, agents, government, raw material providers, farmers, consumer and general public, which expects that company is responsible to bring environmental and social changes in society by eliminating the negative impact their operations and by contributing towards the society.

Pakistan is a developing country; food industry is one of the largest and fastest growing industry of Pakistan, but still the concept of CSR is unclear and not understood by many companies because they believe that by spending on CSR will decreases the profit ratio of the firm which will affect firm’s financial performance. Therefore, this research is conducted to identify the effect of CSR on firm’s financial performance.

This research is conducted to show that CSR is not only performed for social and environmental wellbeing but it is also conducted to improve the firm’s financial performance and maximize the stakeholders’ wealth. It also helps firms to remain in sustainable competitive advantage.

This study will be helpful for developing countries like Pakistan because in developing country there were fewer contexts on CSR and financial performance. Due to this research companies will be more focus towards CSR, especially evidence from food industry. This research will assist to decision makers and policy makers by formulating strategies for socio-economic aspect as well as for the sustainable growth especially for food companies.

The objectives of this study are: To investigate the effect of CSR on firm’s financial performance.To investigate the impact of CSR on ROA (return on asset).To investigate the effect of CSR on (return on equity).To investigate the impact of CSR on EPS (earning per share).

Hypothesis

There is significantly positive impact of CSR on firm’s financial performance.  There is significantly positive impact of CSR on ROAH3: There is significantly positive impact of CSR on ROE.H4: There is significantly positive impact of CSR on EPS.

The focus of this study will be limited to food sector. This research finding shows the impact of CSR on financial performance including ROA, ROE, EPS of food industries, which are listed in Karachi Stock Exchange. The food industries which are selected for this research are Engro Food, Mitchells Fruit Farms, Nestle Pakistan and National Foods, which are listed in KSE. The survey of this research excludes all food companies which are not listed in KSE and also excludes all food companies which are not mentioned above. This survey also excludes all other industries as well.