Ownership Structure Moderates the Relationship Between Corporate Social Responsibility and Firm Performance; An Empirical Study of Manufacturing Firms in Pakistan

Abstract

The study aims to explore the association between corporate social responsibility and firm performance with the moderating effect of ownership structure. The ownership structure is divided into two parts: managerial ownership and ownership concentration. ROA and ROE are used as dependent variables as a proxy for firm performance. CSR, firm size, leverage and asset turnover are independent variables. The sample of the study includes 146 firms that are listed on Pakistan Stock Exchange (PSX) from the manufacturing sector of Pakistan. The sample time period is 6 years from 2016 to 2021.Three different regression models i.e., Fixed Effect model (FE), Random Effect model (RE) and Weighted-Least Square (WLS) have been employed to investigate the association between CSR and firm performance. The results show the following conclusions: first, CSR and firm performance are positively and significantly associated. Second, CSR and firm performance are positive and significantly associated when tested with ROE. Lastly, the interaction of ownership concentration with CSR and ROA is positive and significant indicating a significant moderating effect of ownership structure on the hypothesized relationship.

Keyword: Corporate social responsibility, firm performance, ownership structure.