Corporate Social Responsibility Disclosure and Corporate Financial Performance in Automotive Sector:A Study of Select Companies

Abstract

The upsurge of the corporations has shaped and continues to produce many social problems. A corporate cannot afford to ignore the problems of the environment in which it functions. The organizations are expected to act conscientiously and assume responsibility for addressing these problems. It is no longer an easy task to be sustainable, i.e., meet the needs of the present generation without compromising the ability of the next generations to meet their own needs. Therefore, the organizations are now being called upon to take responsibility for the ways their operations impact societies and the natural environment. Corporate social responsibility disclosures are still not an obligation in most of the countries but the concept has evolved in scope from purely financial accounting and reporting in the past to sustainability reporting today, incorporating reporting on economic, environmental and social issues. The literature scripts that the most studied aspect of Corporate Social Responsibility (CSR) has been its link to Corporate Financial Performance (CFP). A considerable amount of studies, theoretical insights and empirical findings have focused on understanding the relationship.

The present research conducts a study to understand the relation between the corporate social responsibility disclosure (economic, environmental and social) of companies with the corporate financial performance (return on equity, return on assets, profit after tax and debt on equity). The automotive companies listed in SENSEX constitute the sample and to examine the corporate social responsibility disclosure level, the reports of companies published in the five years commencing from 2009-10 to 2013-14 were considered. The findings of this research suggested no relationship between the CSR disclosure and debt on equity and the CSR disclosure (economic information) and profit after tax. However, a positive relationship between CFP variables (return on assets and return on equity) and CSR disclosure exists. The positive relationship between profit after tax and CSR disclosure (environmental and social information) of the companies is also highlighted in the study.