THE INFLUENCE OF CORPORATE SOCIAL

RESPONSIBILITY (CSR) ON
A COMPANANY’S FINANCIAL PERFORMANCE

SEGI UNIVERSITY, KOTA DAMANSARA,

PETALING JAYA, SELANGOR, MALAYSIA

BY:
DARSHINII A/P PANNIR SELVAM
SUKD 1503307
 CHAPTER ONE

INTRODUCTION

1.1 Research Background

Organizations' interests in corporate social responsibility (CSR) actions have developed essentially
as a business technique to create value despite the difficulty to quantify the influence CSR
(McWilliams et al., 2006). The struggle to estimate the influence of CSR is clarified by the obscure
and differing meaning of the idea of CSR itself, and in spite of extensive study regarding this
matter, there are solid advocates and additionally adversaries to the organizations' CSR
commitment (in the same place). In the viewpoint of the organization, development in rivalry and
strife in business does not permit the organization to solely benefit from its business, however the
organization should show extraordinary consideration to the welfare of the public, the environment
and its stakeholders as well. In the event that organizations are neglecting its duties to the society,
the environment, and the quality existence of workforce in their business tasks, consumers might
choose to purchase goods and services from its contenders', this would threaten a company's
position.

According to Carroll (1999), in 1930’s the idea Corporate Social Responsibility (CSR) was
initially alluded to as Social Responsibility (SR). Nonetheless, this concept became prominent
when Carroll (1999) contends, it was not until the production of Bowen's Social Responsibilities
of the Businessman in 1953 that the idea moved toward becoming promoted and talked about in
comparable phrasing as it is today. Bowen (1953) characterizes CSR is characterized as the
commitments of entrepenurs to seek after arrangements, to settle on choices, or to pursue
objectives which is necessary to the societal values (Bowen, 1953). From this distribution and
through the examination that has pursued onwards, the genuine meaning of what CSR involves
has been vigorously discussed (Moon and Matten, 2008). Moura-Leite and Padgett (2011) talk
about how the focal point of CSR has moved from affirmation of social enthusiasm to having
turned into an essential piece for numerous organizations as a large vital methodology.
Even though there are many studies conducted on the positive influence of CSR on a company’s
financial performance, a few parties have argued that CSR commitment is an abuse of assets and
that organization assets ought to be utilized for activities that has significance especially to the
investors, while others contend that organizations should contribute to the society since business
have commitments to a more extensive crowd of partners and stakeholders.

1.2 CSR In Malaysia

In 2006, during the budget CSR has pulled in a considerable measure of consideration in Malaysia
when it is ordered that all public listed organizations in Malaysia need to uncover the proof of their
CSR activities. The necessity is upheld by Bursa Malaysia's posting prerequisite (Muwazir, 2011).
From that point forward CSR in Malaysia turned out to be obligatory not intentionally. Bursa
Malaysia (BM) has likewise set out an aggressive system for recorded organizations in Malaysia
to consider CSR more important. The structure was set with the expect to direct organizations in
recognizing their CSR 4 exercises covering four essential zones, for example, Environment,
Workplace, Community and Marketplace. The point is to go past consistence towards making CSR
fundamental in business activities.

There are contrasts in how CSR exercises are completed in rising nations in contrast to advanced
nations, in the perspective of the financial and social settings. There are exceptional attributes for
CSR exercises in Malaysia, for example, less custom of CSR exercises compared to advanced
nations. According to Visser (2008), exercises in Malaysia are for the most part identified with
philanthropy work, monetary commitment, and customary and profound qualities. Multiracial
culture in Malaysia is spoken to by three noteworthy ethnics gatherings notably Malay, Chinese
and Indian. These three noteworthy ethnic gatherings shape the corporate culture which is known
as “work ethos of eastern ethnics” through their insights of the industry, shared participation and
spiritual principles. Additionally, government and capital market experts practice CSR exercises
through performances and controls (Azlan & Susela, 2007). An example by Bursa Malaysia
(2007), Bursa Malaysia has propelled a CSR structure for public listed organizations to report the
organization’s CSR exercises in their yearly monetary report.
1.3 Problem Statement

Many research involving CSR has been done over the years in Malaysia. According to Muhamad
and Muwazir (2007) which examine the view of Muslim speculators in Malaysia towards CSR
from Islamic moral qualities, the results demonstrate that, there were two classifications of data
seen to be valuable by Muslim financial specialists in settling on venture choice in particular
organization's commitment to social welfare and Islamic business tasks. Additionally, Nejati and
Amran (2009) led exploratory meetings with supervisors in small and medium ventures (SMEs)
in Malaysia to research the requirement for CSR and to investigate the inspiration for rehearsing
CSR from the point of view of Malaysian SMEs. The examination discovered that, SMEs in
Malaysian were generally rehearsing CSR in light of their own convictions and qualities, religious
contemplations, weight from the administration or consolation from partners. Abdul and Ibrahim
(2002) analysed the viewpoint of administrators in Malaysia towards CSR. The outcomes uncover
that, larger part of administrators trusted organizations' associations in CSR will enhance long haul
benefit and promote goodwill. Ramasamy, Ling and Ting (2007) directed a review to investigate
how characteristics of CEOs in Malaysia may impact the construction and application of CSR
strategies and projects in Malaysia. The investigation discovered that, organizations with Malay
CEOs officer exhibited higher corporate social execution levels in contrast to organizations with
Chinese (CEO).

Notwithstanding the broad investigations on CSR in Malaysia a large portion of the examinations
focused on the adequacy of CSR revelation, impression of CSR, improvement of CSR revealing
froth and correlation among Malaysia and different nations CSR. To date there is no such research
directed dependent on the flow idea of CSR exercises and additionally the connection between
CSR activities among PLC1, if differences are present in execution of CSR among PLC in Malaysia
impacts the CFP2. Thus, this examination is to explore the CSR exercises of the organizations in
Malaysia and their relationship to CFP.

1
Public Listed Company – PLC

2
Company’s Financial Performance - CFP
1.4 Research Questions

I. What are the qualities of CSR activities among PLC in Malaysia presently?
II. Is there difference present in CSR activities among PLC in Malaysia?
III. What is the relationship between CSR and CFP?

1.5 Research Objectives

 1.5.1 Primary Objective

The primary objective of this research is to determine the present qualities of CSR exercises and
their association with CFP among PLC's in Malaysia.

 1.5.2 Secondary Objectives

I. To evaluate the present qualities of CSR activities among PLC in Malaysia
II. To examine if there are differences in CSR activities among PLC in Malaysia
III. To study the relationship between CSR and CFP

1.6 Significance of Study

This study will contribute altogether in giving present day idea in which organizations are required
to work, performs and carry on as the exploration questions is applicable to those viewpoints that
impact CFP. This research will fill in as basic leadership instrument to both users be it internally
or externally of financial proclamation of the organizations particularly for the individuals who are
the influence or who is by the influence of the organization's activity; it will assist them with
understanding completely the feasibility of organizations around them. Also, it will help in the
assessment of CFP particularly in connection to its ecological condition, societal issues and which
organization to contribute. This investigation particularly adds to the field of training, for instance,
it will help investors to comprehend financial statements presented isn't conducted
unprofessionally but managed by administrative specialist and furthermore to decide the suitability
of CSR of an endeavour. Next, this research will empower the administration to make applicable
correlation between corporate associations such comparison is helpful to quantify implementation
and control procedures of a firm. Thirdly, it will assist workers with data to survey the capacity of
the business to deliver services and merchandise on a constant approach in regards towards the
improvement of the public welfare meanwhile serving their prompt needs.
The capability to furnish its customer with data on the firm’s liquidity and productivity positions
which will indeed help the customers to decide if they should invest or not would be a significant
boost to their trust and confidence with the firm. Lastly, shareholders will profit by the data to
know the accomplishment of their firm and also the status the firm holds in giving back to the
society through CSR. A successful and proficient financial administration upgrades not just
budgetary execution yet the organization will have an extra competitive edge. CFP enhances by
complying to CSR good practices and taking part in its proposal.

1.6 Scope of Study

This study will focus on the qualities of CSR exercises and its association CFP. It secured 3 years
financial report examinations of the best 10 PLC based in Malaysia. Annual Financial Record of
10 organizations between the year 2016 to 2018 is used in this study. Only CSR exercises were
analysed to see the quality of correlation with CFP. This study will be focused on 10 PLC listed in
Bursa Malaysia specifically in the area of Klang Valley (Selangor and Wilayah Persekutuan Kuala
Lumpur) and the respondents will consist of managers and executives from the accounting
company of the firm chosen.
1.7 Proposed Chapters

The figure below describes briefly the flow of this dissertation

Figure 1.0: Structure of the Dissertation

 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction
This section harps on the relationship between CSR exercises and CFP. Also, this study
investigates the impact of implementation of CSR on the firm (positive or negative). It gives
general thought on CSR development and related hypotheses and offers information on previous
research done in the area of CSR and CFP constructed on different types of technique. Moreover,
this section comprises of the subsequent subject; definition of CSR, theory related to CSR,
literature review on variables, preface of research gap, the connection of CSR and CFP, and
enhancement of CSR in Malaysia.

2.2 Definition of CSR

Jamali (2006) states that CSR is comprehended to be the manner in which firms incorporate
monetary, social, and environmental worries into their decision making, principles, ethics, tactics
and execution in a straightforward and responsible means and hence set up healthier practices in
the firm, make profits and enhance the community. Since corporations has a goodwill to maintain
and wide commitment of partners, CSR helps these firms to manage the risk proactively and make
full use of the benefits that comes along. Also, CSR incorporates "beyond law" responsibilities
and exercises relating to corporate administration and morals, wellbeing and security, supervision
of environment, human rights, HR3 administration, society association, investment and growth for
Aboriginal groups, corporate donations and volunteering of workers (McBarnet et al., 2009).

Banerjee (2008) stated that, CSR is additionally characterized as a vital arrangement of an

organization that changes business tasks to create, continue, or reduce awful organization's effect
on society and nature. It includes an arrangement of activities of an organization that changes
business tasks to enhance, keep up, or moderate an organization's effect on society and nature
(Porter and Kramer, 2006). Dahlsrud (2008) characterized CSR as an administration idea whereby

3
HR – Human resource
organizations incorporate concerns regarding social and natural into their business tasks and
collaborations with their firm partners or stakeholders. Clear, straightforwardness, responsibility
and good corporate conduct are elements to performance reporting. There are constantly
significant potential issues when stakeholders see that a firm is simply interested in publicity and
not having genuine concern over the welfare of the society and the environment (Freeman, 2010).

2.3 Theory in CSR

 Doing well by doing good

Abdulrazak and Ahmad (2014) expressed, if organization neglects to manage the onus set upon
them, the command could be pulled back "whenever", recommending a pressing need with
respect to the firm to be CSR friendly or else endure fiscally. Nevertheless, this contention
made a presumption: that society has outright control over the organizations. This supposition
seems, by all accounts, to be exceptionally dutiable as there exist numerous socially
bothersome companies, for example, liquor companies. That they exist as well as flourish in
the economy appears to suggest that society does not recognize what it genuinely needs. In this
manner, it pursues that the fiscally shrewd firm need not put resources into CSR exercises as
the general public is an inept judge of rights and wrongs, and, consequently, will stay
uninformed of their socially demeritorious activities.

In any case, authors discovered proof of the social order hypothesis by noticing that the socially
dependable firm "earn[s] higher benefit", a case that has been bolstered by other exact
investigations demonstrating that CSR enhance CFP (Orlitzky et al., 2003; Besley and Ghatak,
2007; Santoso and Feliana, 2014). Schmitz and Schrader (2013) additionally thought about
CSR both as a correspondence and as flagging instrument for the firm. They contended that it
is, from one perspective, a viable instrument for the firm to demonstrate their public interest,
and, on the other, a tool to demonstrate their effectiveness accumulating to them giving
products in good quality while managing the expenses of CSR (ibid,2013). Furthermore,
Eabrasu (2015) attested that money related advantage "normally" frame a noteworthy
motivating force to CSR, further validating the idea that organizations enhance CFP by doing
CSR. As a conclusion, it very well may be recommended that organizations conduct CSR
because it expands CFP (Kitzmueller and Shimshack, 2012).
2.4 Literature Review on Variables