Bridging the gap: The moderating roles of institutional quality and compliance on the link between CSR and financial performance

Syed Asad Abbas Bokhari, Murad Ali, Gema Albort-Morant, Hengky Latan*, Ana Beatriz Lopes de Sousa Jabbour, Shakir Ullah, Mohammad Asif Salam, Tan Vo-Thanh

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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Abstract

Corporate social responsibility (CSR) is widely acknowledged to have a significant impact on firm's financial performance, but it is yet ambiguous how institutional, cultural and national factors influence this relationship in corruption contexts. Therefore, institutional mechanisms and perceived corruption should not be considered in isolation, as this would jeopardize the company's ability to act in a socially responsible manner. Obtaining an institutional approach of corruption and using self-administered survey data collected from 632 Pakistani firms operating in manufacturing and service sectors, we investigated the impact of CSR, institutional quality and law enforcement (IQLE), and internal compliance and ethical management (ICEM) on firm financial performance. Our results found that IQLE negatively moderates and weakened the positive relationship between CSR and firm financial performance. Additionally, we discover that ICEM positively moderates and strengthened the direct relationship between CSR and financial performance. We show that improving compliance and ethics management, CSR has the potential to enhance financial performance.
Original languageEnglish
Article number136897
JournalJournal of Cleaner Production
Volume404
Early online date31 Mar 2023
DOIs
Publication statusPublished - 10 Jun 2023

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