Corporate Social Responsibility and Financial Performance: The Examples of Estonia, Latvia and Lithuania
Abstract: Companies worldwide tend to spend significant resources to promote corporate social responsibility (CSR). Yet, previous researches have found no conclusive evidence that such activities lead to any financial benefits for the companies, especially in the less well-developed regions.The aim of this thesis is to examine the relationship between CSR activities and firm financial performance in the Baltic States of Latvia, Lithuania and Estonia. Further, CSR activities are subdivided in five categories (workplace, market place, environment, community and other CSR) to determine which particular CSR categories affect firm financial performance the most. The content analysis methodology is applied to measure CSR and regressions are run to determine the relationship between CSR and firm financial performance, approximated by return on assets (ROA).The results show that on the overall level, CSR activities do not have any effect on firm financial performance in the Baltics. However, certain CSR categories were found to impact ROA. Firstly, market place and environment related CSR activities seem to reduce firm financial performance, but other CSR activities, which are more abstract (e.g. adherence to CSR standards) increase ROA. We speculate that the notion of CSR has not yet become institutionalized in the Baltic societies, therefore, in general, people are not ready to pay more for products delivered by socially responsible companies.
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