The Impact of Corporate Social Responsibility on Corporate Financial Performance: Evidence From Gulf Cooperation Council Member Countries

Abstract

Corporate Social Responsibility (CSR), is a concept that has recently gained traction in strategic management, and it is continuously being cited as important for both the business, and the business shareholders. The objective of this paper is to examine CSR-CFP relationship of firms operating in GCC countries. One of the new methods used to measure the CSR engagement in any organization, is the ESG rating. The ESG rating measures the Environmental, Social and Governance (ESG) dimensions of CSR engagement. This research uses the stakeholder theory framework, together with the agency theory framework in order to find the impact that CSR has on the financial performance of organizations. In the research, we used annual data of ESG and financial ratios of 98 publicly listed firms operating in the Gulf Cooperation Council, from 2008 to 2018. Regression analysis was used to test the impact of ESG scores on the financial performance of organizations. According to the results, the Environmental, Social, Governance dimensions have a significant impact on the financial performance of organizations operating in the Gulf Cooperation Council. This study contributes to the body of knowledge on the relationship between CSR performance and Financial Performance.