Does Corporate Social Responsibility Improve Financial Performance? Evidence from Nordic companies

This paper focuses on the influence of corporate social responsibility (CSR) on the financial performance of firms in the Nordic region. The past literatures indicates mixed findings on CSR enhancing profitability and market value especially in highly economies like Nordics. This study is based on a panel dataset of 2,464 firm-year observations of listed companies across 2015 to 2024 in Finland, Norway, Sweden, Denmark and Iceland to examine the connection between ESG performance and accounting based factors and market based factors of firm performance. ESG score and ESG combined score are used to measure CSR performance. Whereas, the firm performance is measured by the return on assets (ROA) and Tobin Q. The analysis uses fixed effects regressions that have firm specific and year specific controls to explain unoserves heterogeneity. The outcomes indicate that there is no significant effect of ESG performance on profitability and market valuation. Interaction models show that the CSR and performance relationship is not particularly different between industries. Although firm size also weakens the ESG and Tobin Q. These findings are stable as checked by robustness tests. In general, the findings indicate that long term sustainability and stakeholder value are the driving force behind CSR practices of Nordic companies rather than short term financial benefits. This study foster the CSR and performance discussion because it is conducted on a region that has a high level of ethical and environmental business practices.