Impact of Corporate Social Responsibility (CSR) on Finances

Impact of Corporate Social righteousness (CSR) on FinancesSummaryThe target atomic number 18a of this research is to study the impact of Corporate Social Responsibility (CSR) on fiscal public presentation. The trend of CSR addresses a major challenge in providing a broader agency of the business surround, understood not simply in its sparing and pecuniary just now similarly amicable, human and ecological through an operationalization and verification of the theoretic shape offerd in a sample of Tunisian stiffs, evidenced by a questionnaire sent to 30 companies Tunisian drawn. The results are the lack of link amongst CSR and monetary doing mensurable by the report carding ROA, small-arm there is a imperious if financial exercise is measured by ROE.Keywords Corporate Social Responsibility of Firms, Financial Performance,RsumLobjectif de cette recherche est dtudier limpact de la Responsabilit Soci bal integrityy de lEntreprise (RSE) sur la motion financire. La RSE rpond un enjeu majeur, en proposant une reprsentation largie de lenvironnement diethylstilbesterol firmes, entendu non seulement dans ses dimensions conomiques et financires, mais aussi affectionatees, humaines et cologiques. A travers, une oprationnalisation et une vrification du modle thorique propos, au niveau dun chantillon dentreprises tunisiennes, matrialis, par un questionnaire adress 30 entreprises tunisiennes tir au sort. Les rsultats obtenus relvent labsence de lien entre la RSE et la implementation financire mesure par l omenur comptable ROA, alors quil existe un lien positif si la performance financire est mesure par lROE.Mots cls Responsabilit Socitale de lEntreprise, Performance Financire1- INTRODUCTIONIn the 1850s, the role of the lodge was seen as a purely economic, and bounded to the maximization of profit for shareholders. In this regard, such an nestle is consistent with a classical view of the firm where management essentially concerns managers and sharehol ders (Friedman, 1970). Further, the company was faced increased pressure from its stakeholders (Freeman, 1984). In this regard it should take into account the effects of its activities in the communities where it operates. This brings her back to reconsider its relations with its stakeholders and to reconcile the lots conflicting objectives of various interest groups. The estimate of well-disposed province of business without delay (CSR) responds to this challenge by providing a broader representation of the business environment, understood not simply in its economic and financial but also mixer, human and ecological. any company that wants to ensure its sustainability, an imperative for financial performance, but also should not ignore or largely ignore the societal benefit that is to say, to engage in a societal approach. The objective of this research is cardinalfold , foremost to study the impact of CSR on financial performance. Second in a to a greater extent explicit, we handle to study in the target companies in our survey, the degree of perception of the thought of friendly tariff through five dimensions namely economic, intelligent, ethical, discretionary, and environmental. In this part, our problem is as followsWhat is the impact of social responsibility of corporate financial performance?2. SOCIETAL RESPONSIBILITY OF THE COMPANY (CSR) TOWARDS THE EMERGENCE OF A NEW CONCEPTBeing responsible for(p) is to ensure their actions and their consequences and to accept accountability. hardly when this term is applied to the company, it is a concept that can be understood in opposite ways. Nowadays, the definition and delimitation of the concept of social responsibility still the subject of controversy and conceptual differences. So, social responsibility has been the subject of increased attention by many organizations of diverse spirit, the European and worldwide institutions, professional companionships and business net fiddles, Its eme rgence is born with Bowen (1953) who scored in the first initiative CSR refers to the requirement for businessmen to carry out the policies, decisions and follow the guidelines spreading objectives and site that are considered desirable in our fellowship. Subsequently, MC Guire (1963) argues in his work that the idea of social responsibility implies that the firm has not only economic or legal obligations but also has responsibilities to society that go beyond these obligations .Then, Davis (1973) emphasizes that CSR refers to the consideration by the business issues that go beyond its economic obligations and the technical equal and close to the answers that gives these companies problems. This actor that CSR begins where law ends. For Carroll (1979) CSR integrates all economic expectations, legal, ethical and philanthropic society may have in respect of a company at a time. go Jones (1980) stresses the idea that companies, by then the statutory or contractual obligation to h ave a societal actors. Similarly, Wood (1991) anchors his discussion on the meaning of the indebtedness can be seen that through the interplay of three principles legitimacy, public responsibility and distinction of three levels of institutional analysis, organizational and individual. In reality, these definitions are normally content to foreground the discretionary nature of CSR, highlighting the fact that it recognized the dimensions beyond the purely economic or legal activity of the company. What brought Carroll (1979) distinguish four categories of CSRThe economic responsibilityThe legal liability,Responsibility EthicsResponsibility discretion.2.1 Approaches to CSR measuresMeasuring CSR is a necessary condition for knowledge of their own social responsibility and thus to control environmental and social impacts. Assessing the social and environmental performance, the establishment of a steering system for the performance and accountability on these external dimensions imply the existence of metrics to quantify the quality of management of the business related non-financial. In fact, the existence of these metrics is also of particular importance to some other stakeholders that ethical investors who require such data to select the best performing companies on the main criteria the quality of resource management Human and respect for human rights. This leads companies to establish a legal and socio-technical home to make measurable CSR stakeholders. In theoretical terms, the extent of CSR faces similar problems to those identified to define the concept of CSR the multiplicity of approaches and dimensions of this complex concept, difficult to report objectively its components much(prenominal) subjective often linked to an assessment ground on criteria related to ethics or a social context.2.1.1 Measuring CSR in the academic publicationsAmong the different methods of measurement of CSR that have been used, we can distinguish five categoriesMeasur es of speech, such as content analysis of annual reports, which are to be based on remarks made by companies to assess their CSR, for example by counting the number of lines or words dedicated to themes CSR in the annual report of a companyIndicators of pollution provided by some agencies to assess the pollution of businesses, such as the Toxic Release Inventory in the U.S., or for example measurements of the diffusion of carbonic acid gas by businessesMeasures of attitudes and values aimed at assessing the sensitivity of members of the organization (eg managers, employees) to the various dimensions of CSR and are generally administered in the form of a questionnaireMeasures of news report, such as the indicator of reputation developed by scribbleowitz in the 1970s in the American magazine Fortune, which includes criteria related to CSR that are assessed by a panel of industry experts to which operates within the opening move in questionThe behavioral measures or audit, developed by the agencies that specialize in the assessment of social behavior and environmental responsibility, such as the U.S. KLD, EIRIS in Britain or in France Vigeo.3. FINANCIAL carrying out DEFINITIONPerformance is tried to rely on commercialise place efficiency that ensures the best allocation of resources and rejects any printing of corporate responsibility other than making profit for its shareholders. As a design performance based on an external view (the current shareholders and potential), often linked to the stock exchange during the action of the company. The performance measures are thus based on data from financial statements. The control and management are accommodate towards the minimization of cost and return on investment. It is a large building which includes questions on the financial performance within the organization. For a financial indicator, the financial performance of the organization is measured by its financial validity, such as accessibility to differen t sources of funding or its profitability compared to its investments, its assets or its equity.2.1 MEASUREMENT OF FINANCIAL PERFORMANCEAccording to empiric studies, accounting measures provide most of the time positive correlations mingled with CSR and financial performance. (Cochran and Wood, 1994 Waddock and carve, 1997 Preston and O Bannon, 1997 Stanwick and Stanwick, 1998 Balabanis, Hugh and Jonathan, 1998, Moore, 2001 Rufetal, 2001). In addition, these measures from the accounts have the advantage of providing a more relevant measure of economic performance of the company and predict a more reliable the possible link betwixt CSR and financial performance. On the other hand, the stock market measures have the advantage of being less prone to managerial manipulation. Especially since they represent scores of investors on the business ability to start out economic benefits (Mc Guire et al, 1988). However, these variables are evaluated specific investor and does not allow to reveal the economic reality of the business (Ullmann, 1985), the results that emerge from studies using measures such as stock market are mixed, Markovitz, (1972) found a positive kin, Vance (1975) proves otherwise, and Buchotz Alexander (1978) found a weak correlation or no. Griffin and Mahon (1997) stress that results from market-related measures are in the main negative and called for greater use of accounting measures. To better understand the financial performance and provide a more comprehensive or less of the latter, elevate research incorporating both measures at a time (Mc Guire, et al, 1988 Balabanis, Hugh and Jonathan, 1998, Moore, 2001 Seifert Maurras and Barktkus, 2003, 2004).4. SOCIETAL RESPONSIBILITY AND FINANCIAL PERFORMANCE4.1 CSR and financial performance theoretical approaches4.1.1 The existence of a race between CSR and financial performanceThe theoretical approaches to corporate social responsibility are essentially based on the current contract philosopher s and sociological neo-institutionalism. They specially questioned the compatibility between market logic and the goal of maximum profit that underpin the economic rationale of the business and societal concerns such as sustainable development, intergenerational equity, the general interest which are purposes prior to appearing foreign or contrary to the entrepreneurial logic. In other words, the exercise of social responsibility of business is it an hopeless synthesis between the collective demands long-term expectations and short-term private? The theoretical basis is between 2 opposite poles on one side, the neoclassical theories, based on market efficiency, reject any idea of social responsibility of business other than making profit for its shareholders (Friedman, 1970). On the other, theories that mobilize a teleological principle and argue that there is a moral responsibility of policy makers towards future generations and a large number of societal problems. However, the only approach moralistic-ethical is not sufficient to illuminate the strategic behavior of firms in the societal area because it does not understand the motivations of corporate behavior. In this approach, stakeholders influence policy decisions of leaders and they are accountable to them about how they took into account their expectations.4.2 The stakeholder speculationFrom the 1980s, the theory of stakeholders (Stakeholders theory) is gradually accepted as a framework to further specify the groups vis--vis what the enterprise is (or should exercise) its societal responsibilities. The work of Freeman (1984) popularized this theory by proposing to define as stakeholder all persons or groups who are likely to affect and / or be affected by the have of the strategy of undertaking. The theory of stakeholder theory is now the most frequently mobilized both by researchers as actors in the business. She entered the company at the heart of a set of descents with partners who are not onl y shareholders (Shareholders), but players interested in or affected by the activities and business decisions. The stakeholder theory is not exempt from a normative vision and ethics but it seeks to integrate economic goals it states that cooperation contracts establish trust between the firm and its stakeholders and provides a competitive advantage the company. One might approve whether the inclusion of stakeholder expectations is not rather the result of traditional rules of management that the outcome of a deliberative process of integrating moral principles.Despite its omnipresence in all the literature on corporate social responsibility, this theory remains ambiguous about its theoretical basis and presents a number of limitations. On the one hand, it is part of a relational representation of the organization based on fair contracts that involve conflicts of interest may be resolved by ensuring a maximization of the interests of each group. On the other hand, it would be unre alistic to consider a comprehensive consideration of all potential stakeholders. The rationality of leaders is unavoidably limited by the urgency of the problems, pressures and randomness systems available to them that they decided to put in place. A first theoretical approach suggests that the company is more successful socially it is more efficient economically and financially. Instead, the company testament be more economically efficient and less it will be socially. Finally, beyond these two extreme views, it is possible to consider the assumptions of positive and negative synergy that cross the different conceptual foundations. With these assumptions also added a generic assumption of neutrality of interactions Gond, 2001) and anticipate a more complex relationship.5. CSR and financial performance Many theoretical explanationsThe theoretical explanations to clarify the nature of the relationship between societal and financial performance are numerous. They can be organized into three distinct categories explanations postulating the existence of linear relationships between these two constructs, explanations suggesting no link between the two constructs, and at long last explanations assume the existence of nonlinear relationships between these two variables.5.1 The models suggest a positive link between CSR and performanceTwo theoretical models support the idea of a positive impact of CSR on financial performance (Social Impact Hypothesis) and the assumption of funds available as excess resources available to discretionary managers or Organizational Slack (Available Fund Hypothesis). According to the guesswork of positive social impact, companies with a high level of CSR demonstrate their ability to master the implicit costs and negative externalities of the organization and report to stakeholders and the quality of their management. The theory of stakeholders (Stakeholders theory) that establishes the hypothesis of the influence of social practice s, has created a vast literature on the interaction between CSR and firm performance (Freeman, 1984, Cornell and Shapiro, 1987 Ullmann, 1985, Clarkson 1995, Donaldson and Preston, 1995) Satisfaction with the business objectives of stakeholders promotes the improvement of economic and financial performance (Freeman, 1984).The second model, that of Organizational Slack addresses the link between social performance and economic performance by proposing the idea that this is not the social responsibility that is the condition for obtaining a high level financial performance but, instead, the level of financial performance which allows the company to engage in socially responsible actions. Mc Guire et al, (1988) reported that financial performance could improve the level of social performance and their work has been partly confirmed those by Preston et al, (1991). The profitability of the business differential is then a condition of social behavior Kraft and Hadges (1990) have shown tha t excess resources and the attitude of managers towards society strongly influence the level of responsibility social enterprises.5.2 The models suggest a negative relationship between CSR and financial performanceUnlike the two previous(prenominal) models, others say that companies realize the best social performance are also those with the worst economic performance and vice versa in this spirit, a negative relationship between societal performance and financial performance dominates. The literature suggests two models that assume a negative relationship between CSR and performance, distinguished by the nature of causality assumed. The first model Trade-Off Hypothesis or assumptions arbitration assumes that the inclusion of corporate social responsibility involves extra financial costs resulting thence a competitive disadvantage (Friedman, 1962, 1970). In this perspective, any move away from socially responsible leaders of their goal of maximizing net (Aupperle, Carroll and Ha tzfeld, 1985). Drucker (1984, p.58) states that making a profit is fundamentally incompatible with the social responsibility of business5.3 The models suggest a positive or negative synergyThe typology developed by Preston and OBannon (1997) suggests two hypotheses that are based on different theoretical approaches outlined above. Indeed, in the context of a comprehensive model explaining it is possible to envisage a virginal circle (positive synergy) a high level of social performance leads to improved financial performance that provides the opportunity to reinvest in social actions responsible (Waddock and Graves, 1997). In contrast, a low level of societal performance led to a decline in financial performance limits, therefore, socially responsible investment (negative synergy).5.4 The models suggest a missing linkThe conceptual contributions of Mc Williams and Siegel (2001) lead Gond (2001) to complete the typology of Preston and O Bannon (1997) by formulating the hypothesis of no link between the two dimensions. Indeed, Mc Williams and Siegel (2001) propose a model of fork out and demand for social responsibility that helps explain the lack of consensus results obtained by empirical academic studies. According to them, there is a supply and demand for social responsibility, in a standard micro, who led each of them to invest socially to meet the demand of stakeholders. Market equilibrium cancels costs and profits generated by successively supply of social responsibility. This approach leads to a hypothesis of neutrality of interactions between social performance and financial performance.5.5 The models suggest a more complex relationshipThe results obtained by Bowman and Haire (1975) led Moore (2001) also refine the typology of Preston and OBannon (1997) and the hypothesis of positive relationship between more complex two-dimensional. Indeed, Bowman and Haire (1975) but also, more recently, Barnett and Salomon (2003) showed a non-linear U-shaped inverte d between social performance and financial performance, indicating an optimum level beyond which socially responsible investment longer improves financial performance. The multiplicity of theoretical hypotheses advanced to explain the nature of interactions between CSR and financial performance has led to develop empirical tests to define the conditions of validity of the various mechanisms invoked..6. CSR and financial performance empirical approachesClarification of the economic impact of CSR has always been a major concern in the field of study on the relationship between business and society. It is therefore not surprising that empirical work on this issue have been really numerous, there were in 2007 more than 160 empirical studies on the subject. This work focused on the nature of interactions between the firms ability to achieve a high level of CSR and financial performance by studying the interactions between on the one hand, social performance (or societal) Company (CSR) a nd, secondly, its financial performance (FP). These interactions have been studied mainly through two levels of analysis we will present successivelyMany publications over the last twenty years have highlighted the link between social responsibility and financial performance of the company. But these studies show conflicting results do not establish clearly the existence of a positive or negative relationship between social responsibility and financial firms (Preston and OBannon, 1997 Griffin and Mahon, 1997 Mac Williams and Siegel , 2001, Margolis and Walsh, 2002). The lack of theoretical foundation and conceptual studies, lack of uniformity in evaluation of social responsibility and financial and methodological shortcomings found explain the poor results obtained. Studies most recent research (Griffin and Mahon, 1997 Roman Hayibor and Agle, 1999, Margolis and Walsh, 2003) found a slight advantage for the detection of positive links between societal performance and financial perfor mance . The synthesis of the literature identifies 122 studies published between 1971 and 2001 with an accelerating pace of recently published (35 studies between 1997 and 2001) and far (2007) on more than 160 empirical studies on this subject, but also this research were sometimes biased in the direction of the illumination of a positive relationship. For example, the 122 education cubic decimetre and claim a positive association between social responsibility and financial performance twenty get mixed results, twenty seven indicate no ties and seven observed a negative relationship.6.1 The hypothesis of impact-social Social Impact HypothesisAccording to (Freeman 1984, Donaldson and Preston, 1995), stakeholder theory has explained the origin of the favorable influence social behavior on financial performance. Indeed, CSR is an indicator of the ability of business to effectively meet the demands of various stakeholders. This has consequently regained their confidence and thus improv e profitability (Balabanis, Hugh and Jonathan, 1998). Waddock and Graves (1997) speak of Good Management Theory that there is a high correlation between good management practice and CSR, simply because an improvement in social activity entails a special relationship with Key Stakeholders Groups (Freeman, 1984), implying more performance. In addition, a review of empirical literature confirms a positive relationship between the two components (Mc Guire et al, 1988 Waddock and Graves, 1997 Preston and OBannon, 1997 Verschoor, 1998, Stanwick and Stanwick, 1998 Mc Williams and Siegel, 2000, Moore 2001, Ruf et al, 2001, Orlitsky, 2001 Kohers and Simpson, 2002). Allouche and Laroche (2005) identified 82 research, 75 of them have found a positive link, while Margolis and Walsh (2003) who counted 54 out of 127 studies confirming the positive relationship. Hence our first hypothesis H1 Social responsibility has a positive impact on financial performance.6.2 The Trade-Off HypothesisThis hypot hesis refers to the classical theory of Friedman (1962, 1970) that CSR is an investment that increases costs and takes place at the expense of financial performance. For example a decision to invest in equipment acquisition environmentally friendly while other competitors do not, can generate a competitive disadvantage. Hence the reduction in profitability which may cause discontent among shareholders. This finding was also confirmed by Aupperle et al, (1985), the authors conclude that social activities such as donation to charity, environmental protection and community development dissipate more resources and generate additional costs, which disadvantages the company against its competitors less engaged in social actions. Searches return the negative relationship to abnormalities in particular methodological tools to measure financial performance. The negative association is due to the use of market variables as a measure of financial performance (Griffin and Mahon, 1997). In reali ty, the number of studies that lead to a negative relationship is very small, Margolis and Walsh (2003) identify 127 studies dealing with the subject in question, and they found that only 8 of them expect a negative correlation between the two dimensions. of where our second hypothesis H2 The social responsibility has a negative impact on financial performance.6.3 The lack of connection between the two dimensionsSome authors suggest that CSR and financial performance are both built entirely separate. Ullmann (1995) emphasizes that the link from a pure coincidence. The correlation is generated, according to the author, by intervening variables that occur in an unpredictable behavior and that link the two constructs. Meanwhile, Waddock and Graves (1997) show that the methodological problems in operationalizing CSR tend to obscure the link. A multitude of empirical studies have provided no link between the two dimensions (Aupperle et al, 1985 Fogler and Nutt, 1975 Abbot and Monsen, 19 79, Freedman and Jaggi, 1986 ONeil, Mark Saunders and Carthey 1989 Seifert, Maris and Barkus, 2004, Graves and Waddock, 1999). Others state that the link is weak or nonexistent (Alexander and Bchholz 1978, Cochran and Wood, 1984 Krauz and Pava, 1996 Berman et al, 1999 Balabanis, Hugh and Jonathan, 1998, Seifert and Morris Barktkus , 2003). Griffin and Mahon (1997), Balaban, Hugh and Jonathan (1998) found that the results are inconclusive the variables selected do not distinguish between successful firms and inefficient firms. In this context, our third hypothesis H3 There is no link between social responsibility and financial performance.7. CSR and financial performance The effect of control variablesResearch has shown that the relationship between CSR and financial performance is not absolute, it must take into account the weight of the elements of each company (Ullmann, 1985 Waddock and Graves, 1997) and are likely to moderate the relationship between the two constructs. These cha racteristics are operationalized as control variables.7.1 The effect riskThe risk is variable, with several studies in different contexts have shown that it controls the relationship between the two dimensions. The argument assumes the risk that companies have a low risk to commit advantage in social activities, and vice versa. Companies with low risk have a stable performance model, and therefore, this situation seems very conducive to investment in social activities (Roberts, 1992). Aupperle et al, (1985) postulate that firms more socially responsible are identified as being better managed and risks are minimal. This finding is especially approved by the study of Mc Guire et al, (1988) ONeil, Mark Saunders and Carthey (1989), Waddock and Graves (1997), Graves and Waddock (1999). In contrast, Aupperle et al, (1985) found a correlation, positive correlation between CSR and risk accounting, and negative but not significant between CSR and market risk.7.2 The effect sizeThe argument f or the size stipulated that organizations undertake major advantage in social actions small organizations do not give importance to social activity (Waddock and Graves, 1997). Burke et al, (1986) argue that companies, as and as they grow, give more attention to external factors and better meet the demands of stakeholders, Stanwick and Stanwick (1998) found that size, measured by the passel of sales and total assets is positively related to CSR. Mc Guire et al (1988) find a positive but not significant between CSR and the size measured by total assets.7.3 The effect sectorThe sector as designed in the literature is a moderating effect of CSR and PF relationship, eg the extent of the consideration of environmental responsibility by a chemical company is not the same a financial institution. A plurality of researchers took into account the control variable as in include Waddock and Graves, 1997, Griffin and Mahon, 1997, Graves and Waddock, 1999 Balabanis, Hugh and Jonathan, 1998, McWi lliams and Siegel 2000, Moore 2001, Ruf et al, 2001 Seifer, Morris and Barktkus, 2003.2004.8. theoretical model9. METHODOLOGY OF RESEARCHThe objective of empirical research is to empirically test our research hypotheses and the theoretical model proposed. In order to test the validity of our assumptions on a sample drawn from all Tunisian companies, we proceeded by two steps the first is to measure the perception of Tunisian companies to the concept of CSR and then study the impact of this latest financial performance. Through our research, we chose the method of direct interview, and for several reasons, we conduct a field investigation, by adopting the technique of direct investigation on the basis of a questionnaire. The survey covered a sample of 30 Tunisian companies selected from different sectors.9.1 The racing shell of measurement of CSR predictorFor measurement of CSR, we will adopt that developed by Maignan et al (1999), which forms part of the work on measuring social pe rformance. This scale operationalizes the concept of social performance by measuring the dimensions of the construct. In fact, two major scales have been developed in this perspective The oldest is that of Aupperle, Carroll and Hatfield (1985) measuring the orientation of managers towards social responsibility, the latest and most complete is that of organizational citizenship Maignan et al. (1999), reused by Maignan and Ferrell (2001).These two instruments take over the traditional classification in four types of social responsibilities of Carroll (1979) economic, legal, ethical and discretionary or philanthropic organizations that are a reflection of society see the company actively engaged in its local environment and / or global defense of social causes and public interest.Regarding the scale of Aupperle et al (1985), it is intended to measure only the views of leaders on the relative importance of each of the four dimensions of social responsibility of business.While the scale of Maignan et al. (1999) is designed to gather perceptions of the social performance of the business stakeholders throughout the company (Maignan and Ferrell, 2001). Indeed, the scale was constructed from academic studies describing activities commonly accepted as citizens by the three main stakeholders ie employees, customers, stakeholders public. These authors manage this work, mainly to executives (Maignan et al 1999, Maignan and Ferrell, 2001) to have completed the questionnaire as relevant as the leaders and general information about the company cutting.Hence, our questionnaire has five dimensions are those of Carroll (1979), added an environmental dimension whose items are inspired by the Global Compact (1999). This choice is argued by the importance it attaches to the environment today, and the pressures that companies face to reflect the impact of its activities on the environment in which it operates, it is relevant namely the impact of the inclusion of the natural environm ent on the financial performance of Tunisian firms.