The impact of corporate social responsibility on financial performance - Evidence from Finland

Abstract

Throughout recent history, there have been significant changes to the business sector, notably to stakeholder groups, corporate duties, and business operations. More than at any other time in history, corporations are starting to show care for the environment, society, and their stakeholder groups. As a result, companies increasingly disclose their CSR initiatives, and parallelly, a growing amount of research are being held to understand the nature of the association between corporate social responsibility (CSR) and corporate financial performance (CFP). Even though the subject has been the focus of multiple studies from the decade of 1950, the question still lacks a definitive answer. As a result, this study aims to find does CSR has any favorable influence on financial performance based on Finland's publicly traded companies. Both profitability and firm value are compared to CSR, which is assessed using both the total ESG and specific aspects. This thesis retrieved CSR (lag) and CFP data from LSEG data base between 2010 and 2022, and use the Panel least squares model, to analyze the linkage between CSR and CFP. Unexpectedly, CSR has no statistically significant correlation with financial performance either with the account-based or market-based CFP measures. Furthermore, CFP has minimal links to ESG at both the overall and individual element levels. Although this thesis concludes that there is no major association, the nature of the relationship remains ambiguous and, as with earlier research, must be examined further.