Corporate Social Responsibility and Firm Performance: The … AMOS... · Sethi (1975), discuss different dimension of “corporate social performance” and corporate behavior this

Corporate Social Responsibility and Firm Performance:

The Moderating Effect of Ownership Concentration Muhammad Ishtiaq

*, Khalid Latif

†, Arslan Najeeb Khan

‡ and

Rafia Noreen§

Abstract The relationship between CSR and firm performance: ownership

concentration as a moderator has been the crucial topic of literature

and the subject of a rich empirical literature. However, the current

literature is characterized by a lack of consistency and consensus

regarding the nature and direction of this relationship. This article

aims to contribute to literature by reviewing the diverse literature on

this subject related to developing market economies. The aim of this

study is to investigate whether the impact of ownership concentration

moderates the link between corporate social responsibility (CSR) and

firm performance (FP). This study uses a set of unique, hand-collected

CSR disclosure data to measure CSR, based on a sample of Pakistan

Stock Exchange (PSX) 100 index non-financial listed companies during

the period from 2006 to 2015.For this purpose the data is taken from

annual reports and sustainability reports of non-financial firms.

Regression and Correlation has been used to establish the relationship

between CSR and firm performance with ownership concentration as

moderator. The results reveal that there is highly significant and

positive relationship between CSR and firm performance. The result

also conclude that the CSR disclosure and FP has a positive and

significant relationship but the impact has been weakened as a

consequence of inclusion ownership concentration as a moderator.

Keywords: CSR, Firm Performance, Ownership Concentration

Introduction

From last few decades researcher and practitioners are paying

their maximum attention on corporate social responsibility (CSR). CSR

is commonly defined as the company’s creativities to measure and take

obligation for the company’s effects on social and environmental

wellbeing. In the recent business world, CSR has become one of the most

* Dr. Muhammad Ishtiaq, Assistant Professor (Division of Finance), Lyallpur

Business School, Government College University, Faisalabad Email:

[email protected] † Dr. Khalid Latif, Assistant Professor, College of Commerce, Government

College University, Faisalabad ‡ Arslan Najeeb Khan, Lecturer, Lyallpur Business School, Government College

University, Faisalabad § Rafia Noreen, MPhil (Commerce) Scholar, College of Commerce, Government

College University, Faisalabad

mailto:[email protected]

Advances in Managing Operations and Sustainability (AMOS 2017)

Journal of Managerial Sciences 354 Volume XI Number 03

important features of corporate business practice. Companies that are

engaged to CSR activities have overall improvement in reputation, boost

employee engagement with the corporations as well as attract and retain

investors, and also enhance financial return of the company.

The idea of CSR begins in 1950s which noticeable the modern

age of CSR. This era start in 1953 with the Bowen publication entitled

the “Social Responsibility of the business” .He defined CSR is the

responsibility of businessmen to follow those policies, to take those

decisions, or to pursue those lines of action which are required in term of

the aim & objective and values of our society (Bowen 1953). This

modern period of CSR evolved in 1953 with the Howard Bowen’s

definition. He defined the businessman’s social responsibility as CSR is

the responsibility of business person to follow the policies for decision

making of take actions which are desirable to meet the objectives of the

society (Bowen, 1953).

Hooghiemstra, (2000) state that from previous many years

emerging economies are more cohesive and face a lot of hurdles and

take pressure to disclose CSR evidence. Jo and Kim, (2008) stated that

from Fortune 1,000 companies more than half issue their sustainability

report frequently. Ullmann, (1985) and Ness et al., (1991) suggest that if

the corporations give their maximum attempt to invest on community

and also inform their stakeholder about CSR undertakings than they

achieve maximum trust of participants, ultimately the corporate

profitability turn to increase. Gray, et al., (1995); C: Bewley et al.,

(2000); Toms, (2002) conclude that disclosing CSR related information

to their related parties has fascinated substantial research interests.

According to Kanwal et al. paper (2013), CSR practices are an

investment of the corporation’s instead of expense as it express the

relationship between firms and the stakeholders. It will become a topic of

interest in finances and management studies that relate the arrangement

and extent of stock ownership with managerial behavior, and, ultimately,

firm’s value (Jensen and Warner, 1988; Short, 1994).

Sethi (1975), discuss different dimension of “corporate social

performance” and corporate behavior this term might be used as “social

responsibility”, “social obligation” and “social responsiveness.” Juslin

and Hansen (2003) said that CSR is a responsibility of the corporations

to invest in community for attaining economic progress, satisfy

employee, taking protection measures for society, best workplace for

performing activities and invest for the society to increase quality of life.

CSR is the obligation of firms to contribute to sustainable

economic development, maintain employee relation, working with

employees, their families, the local community and society to improve



quality of life. It goes beyond the legal, technical, and economic

requirements of the company and is viewed differently by people having

different values. CSR has appeared as an important matter in corporation.

Vidal (2008) state that firms that have huge sales volume incline to

concentrate on maximum CSR presentation and focus on environment

betterment.

CSR has become popular issue for every corporation because

every stakeholder have interest to know everything about the Business in

a true and fair manner (Singh, 2014). Many other related terms are used

for CSR by scholar and manager of corporation such as corporate

citizenship, corporate philanthropy, Business Ethics, Corporate

accountability, Responsible entrepreneurship, socially responsible

investment and involvement in community.

McWilliams and Siegel (2001) define CSR as undertake all those

actions which are not restricted by laws of those economies in which the

firms are run their trade and those are not designed for the prime

welfares of the industry also for the assistance of the general public.

Tsoutsoura (2004) define that CSR viewed as a broad range of

business practices, set of strategies, plans, and agendas that are included

into business actions, decision making process and supply chain all over

the company and generally contain matters regarding to business ethics,

environmental concern, community investment, human right,

governance, society involvement, the market place as well as the work

place. Tsoutsoura (2004) suggest that corporations operational cost can

be minimize by engaging in CSR related developments.

In under developed economies like Pakistan the society and

peoples are less aware about their rights and obligations regarding CSR.

The intention of this study is to explore the association among the CSR

and FP. Taking initiatives on CSR lead to enhance firm performance.

And better firm performance will lead to better CSR. It is very essential

to explore the factors which affect the CSR. In Ownership Concentration

the owners of the firms are dispersed in minority and majority

(dominating shareholder). The real concept of agency issue is not only

the clash between the executive and stockholder but also taking risk by

the supervisory stockholder at the cost of smaller shareholder. The

controlling shareholder take the major actions of the corporation but not

bear all cost. Large shareholder have an opportunity to control over

manager and minority shareholder.

According to agency theory, separation of possession and control

lead to a deviation in the detection of managerial interest that are not in

accord with owner interest (Jensen and Meckling 1976), and thus

monitoring the assessments of CEOs become important for board of



directors in order to assure that stakeholder interest are secure (Fama and

Jensen 1983). There is dissimilarity among family concentrated

corporations and ownership concentration firms. Family controlled

companies are rely on external governance mechanism. Shareholders are

rely on both external and internal governance strategies. Gillan, (2006)

suggest that the external governance mechanism system like lawful

structure appropriate marketplaces. It composite a corrective role in

observing executive attitude to alleviate agency issue and hence serve to

expand performance. Jensen & Meckling (1976) explain shareholder use

their ownership concentration as one of the crucial and essential inside

control appliance to diminish agency problem elevated by separation of

hold and possession.

1.2. Ownership Concentration, CSR and FP

The aim of this study is to investigate the causes of ownership

concentration and the association among ownership concentration and

firm performance in the framework of an economy undertaking

significant variations in its regulatory and legal background. Numerous

studies suggest practical indication on the link between corporate

ownership forms and FP everywhere in the world (La Porta et al., 2000,).

Ownership of Top five Shareholders = Proportion of possession

held by Top 5 shareholders in the share capital. The ownership

concentration use as an indication of percentage share ownership of five

top shareholder. From a corporations view, ownership structure controls

the organizations success, large market share which is enjoyed by

different shareholders. Specifically ownership concentration is an

incentive for reducing the agency problem and agency cost with the

separation of management and ownership, which might be used for the

protection of firms property rights.

In developing countries including Pakistan, family owned firms

or companies widely held by financial institution (closely held

companies) take over the economic background. The agency problem is

not only the conflict between manager and shareholder but also the issue

of expropriation by the controlling or dominant shareholder at the cost of

minority shareholder. The controlling shareholder whose have great

influence make decisions but not bear fully cost. Large family

shareholders may be influence negatively on firm performance.

Empirical studies of the relationship between the ownership

concentration and firm performance have also develop mixed results.

The United States studies, Demsetz and Lehn (1985) conclude no

influence of ownership concentration on firm performance. McConnell

and Servaes (1990) find ownership concentration have no impact on the

percentage of market value to additional cost of assets (Tobin’s Q), while



they conclude a positive impact of ownership concentration by business

internals and by institutional depositors.

Problem Statement:

Corporations are mostly conscious and concerned about the

influence of their actions on the employee, stakeholder, environment and

society at large. CSR become a topic of interest for researcher from last

few decades. They always try to find the top factor which influence the

firm performance, CSR is one among them. Some researcher find

positive relationship Haleem et al., 2015; Platonova et al., 2016; and

some find negative association between CSR and FP. Here is the

problem why results between CSR and FP are mixed. Is there any factor

that makes this relationship weak or strong? For find this problem this

study intends to observe the degree of disclosing CSR practices among

Pakistani non-financial enterprises. It will investigate the link among

CSR disclosure and FP. This study also examines how Ownership

Concentration moderates the link between CSR and FP in selected

Pakistani non-financial listed firms.

Simpson and Kohers, (2002) also give their view point about the

CSR disclosure and FP. There is a restricted or limited study on CSR

disclosure in emerging countries perspective (Hossain et al., 2006).Prior

studies on CSR and firm performance still unexplored and ambiguous.

It’s become a research gap to do more research on this topic. (Wijesinghe

and Senaratne, 2011). This topic of CSR disclosure has not been much

explored in the developing countries like Pakistan.

Objectives of the Study

Previous research emphasized that developing countries

necessities more consideration to improve CSR notions because these

markets have a lot discriminates with established countries. (Blofield and

Frynas, 2005) argue that underdeveloped countries which have weak

governmental rules and regulation tries to put pressure on the

management for establishing societal betterment policies. The main

objective of this study is to maintain an index for measuring CSR in

Pakistani non-financial listed companies. Keeping in opinion the

background and need of the study, the study undertaken is done in order

to inspect the moderating consequence of Ownership Concentration on

CSR and FP in Pakistani selected listed non-financial firms, by taking the

annual panel data of the non-financial companies included in KSE 100

index for the period covering 2006 to 2015. The following are the

objectives which would be fulfilled in this research:

To inspect the association among CSR and FP.

To measure the impact of Ownership Concentration on the

relationship between CSR and FP.



Literature Review

In literature review mostly studies investigate the association

between CSR disclosures and FP. The Association between CSR and FP

in finance has attained a lot of attention of researcher, academics, media,

and the business community from many previous years. Today in

business world for survival of corporations in society CSR investments

are not consider as a cost but it become important or compulsory for a

corporations. In competitive business world those companies which

invest in CSR initiatives attain good repute and continue to survive in

society. The Securities and Exchange Commission of Pakistan (SECP)

restrict all companies for invest in CSR activities

The purpose of theoretical review is to present the review of

literature on CSR related theories. This comprise studies which relate to

framework of relevance theory on CSR in Pakistan and other advanced

economies, and connection among CSR and FP. CSR reporting develop

an integral part and basis of communication tool and competitiveness for

all participants. Many Pakistani companies have tried to develop a

structure concerning CSR accomplishments. On the other hand the

understanding of CSR concept is limited in Pakistan and other

developing countries. Pakistani corporations face challenges for

evaluating CSR activities in term of community development, public

relations, employee’s information, public relations and societal

promotion undertakings.

Different studies present a lot of concepts in the prior studies

which try to clarify CSR disclosure. All theories in CSR are helping as

topic of reference for every set of CSR action, but since there is no

specific and single accepted theoretical perspective and concept to CSR.

It means there are a lot of variations in what constitute the practical and

theoretical aspect of CSR. The theories supporting CSR studies show

how CSR is perceived and interpreted from different perspective by

different stakeholder. A lot of studies have emphasized various theories

which tried to explain CSR disclosure. Example of these theories are:

classical theory; institutional theory; signaling theory; political theory;

stewardship theory; agency theory; legitimacy theory and stakeholder

theory. Some theories have some limitation in explaining CSR issues.

These theories are classical theory deals with profit earning and

profit maximization from a shareholder perspective (Friedman, 1962).

And institutional theory; signaling theory; self-regulation; legitimacy

theory; political theory; stakeholder theory; stewardship theory and

agency theory also relate theoretical perspective. . While these theories

and concepts may frequently overlay, they suggestion a rich background

for discovering queries relating to the effect of CSR on corporations



practice. Salazar & Husted (2008) stated that agency theory stresses on

attaining the lawful gratitude to act on behalf of the principal from

managers (agents).

Legitimacy theory also give their view point on the organization

sense of connecting and the ability to operate and exist within the

community according to the law (Suchman, 1995). Stakeholder’s theory

highlights on attaining stakeholder’s rights as the basis of CSR practice

which identifies that diverse participant’s rights if properly fulfilled leads

to full awareness of corporation’s objectives (Donaldson & Preston,

1995).Instrumental/Strategic theory refer with CSR promises as a policy

to attain effectiveness and consumer affiliation management (Garriga &

Mele, 2004). Signaling theories offer supplementary awareness as they

argue whether corporations use CSR activities as sign of conformance to

social demands. On the other side well employed stakeholder theories

clarify understanding on the importance of stresses corporations face to

implement CSR applies. All these theories shows how an association can

tackle CSR activities considering various stakeholder it connects with.

All these theories are related to CSR and these are under

consideration in existing literature. In essence one more theory which

relate to ownership concentration is Agency theory. Friedman (1970)

states that linking in CSP is indicative of an agency problem a clash

among the interest of CEOs and stockholders. In addition agency theory

provide the basis of the ownership concentration. How ownership

concentration affect CSR and firm performance. Agency theory provide

the basis of this study and this theory also describe how’s minority

shareholder and controlling shareholder effect the link between CSR and

FP.

In addition agency theory provide theoretical basis of this study.

In agency theory the control right have in those hand which have large

fractions of total outstanding shares and they attain self-benefit at the

expense of minority stakeholder than Conflict arise between controlling

shareholder and minority shareholder. The agency problem is not only

the conflict between the shareholder and manager but also the possibility

of expropriation by the monitoring shareholder at the expense of other.

There are many theories which relate and support CSR concept

and also discuss in prior studies. In this study ownership concentration

are under consideration that’s why we elaborate agency theory and this

theory relate this study. CSR define the business actions which involve

all those initiatives which protect all stakeholder but society at large. A

corporations CSR can include a wide range of policies and procedures,

from giving away a share of income as a charity, for availing good repute

in society. Today’s corporations are practicing different categories of



CSR such as Environmental effort, Philanthropy, Ethical labor practices,

volunteering. CSR in the perspective of firm policies and strategies

become essential to develop competitive advantage in today’s

environment.

In order to investigate and comprehend the connection between

CSR and FP, there have been a variety of studies which measure the

connotation among CSR and FP. All these prior investigation have

annoyed to examine the similar research problem, is there is a link

among CSR and FP? These reaearch conclude that the influence of CSR

on firm value vary, some reported positive, some negative and some

reported neutral.

This study choose different way to measure the CSR and firm

performance using the moderator. There are some previous studies which

relate my studies but in these studies no one use ownership concentration

as a moderator. In these studies different moderator are used except

ownership concentration. The separation of firm possession from entity

hold has set enlargement to enormous prior studies dedicated to expand.

There are some previous studies discuss here which relate this study.

Lisi (2016), examined the impact of business motivation,

perceived stakeholder pressure and top management social commitment

on firm performance. They collected survey data from Italian 97

companies and use Integrated model (PLS analysis regression) to inspect

the influence. They find that determinant and performance effect are

positively associated with social performance and measurement system.

Moreover, the use of social performance indicator is directly influenced

firm performance.

Haleem et al. (2015), inspect the connotation between CSR and

FP in globalization world use stakeholder pressure as moderator. They

collected data in 2003 from the International Manufacturing Strategy

Survey sixth (IMSS-VI). They use regression for investigation the link

among CSR and FP with moderator stakeholder pressure. They conclude

that CSR influence FP confidently, but stakeholder stress do not

moderate this connection.

Rahmawati (2014) investigate the consequence of CSR on FP

with real manipulation. They were used the sample for this study of 27

listed corporations on Indonesian stock exchange from 2006-2008.

Ordinary least square regression used for analysis and data were

composed by statistical and purposive sampling method. The results

indicate that companies which engage in practices of actual manipulation

found no impact on CSR. The study conclude that the huge extent of

actual manipulation on operations cash flow indicate the adverse

influence on the link among CSR and firm performance.



Kamal and Deegan (2013) examine the societal and surroundings

linked authority disclosure practice. The sample for data was taken from

the textile and garments corporations functioning in Bangladesh. They

discover results the disclosure of governance information gaps behind

common CSR disclosure. For achieving public expectation and to secure

validity Bangladeshi textile and garments companies disclose

information about their governance. The results shows that inadequate

responsibility and clarity in relation to community and atmosphere

connected governance practice within an emerging countries perspective.

Yao, Wang and Song (2011), investigate the determinant of CSR

disclosure in China. They collected data from the annual reports of

(2008-2009), 800 listed companies on the Shanghai Stock Exchange in

China. This study based on content analysis approach. The results of this

study support the legitimacy theory in a developing economy. They

found that CSR disclosure is certainly positively accompanying with

media exposure, firm size, institutional shareholding and OC.

Hamid and Zubair (2016) inspect the relationship between CSR

and organizational commitment among employee in the corporate sector.

This study consists of secondary data and the sample was taken from

men (n=224) and women (n=26) with (20-59) age ranging. This sample

contained of 250 employee in the business sector from Rawalpindi and

Islamabad. Self-report measure questionnaire were used in present

studies for measuring CSR and organization commitment. The results of

this study indicate that CSR and organizational commitment were

positively correlated with each other among employee in the corporate

sector.

Awan and Saeed (2015) conducted the study for investigating

the impact of CSR on FP in Ghee and Fertilizer industry in southern

Punjab Pakistan. Qualitative and Quantitative both research method were

used in this paper. Primary data was composed through questionnaire

and from other source secondary data was composed from the annual

reports of the firm. The results shows that the firms which are extremely

involve in CSR activities attain better goodwill, maximum sales volume

and higher profitability also satisfying the customer effectively.

Sharif and Rashid (2014) explore the results on Pakistani listed

commercial banks CSR reporting information along different element of

Corporate Governance (CG). The date for this research taken from the

annual reports of the commercial banks from (2005-2010). Multiple

regression analysis were used to inspect the influence of CG components

on CSR disclosing initiatives of banks. The data reveals the result that

non-executive director have a significant and positive impact on CSR

reporting.



Conceptual Framework and Hypotheses Development

This diagram shows that Corporate Social Responsibility is

independent variable and it is measured with different variable using the

firm’s annual reports. Whereas firm performance is dependent variable

and this variable measure through return on asset (ROA). Ownership

Concentration used as a moderator in this study and measured through

block holder, individual shareholder, family, foreign and director

ownership.

Figure 2.1 Conceptual Framework

H1: There is a significant relationship between CSR and firm

performance in selected Pakistani listed non-financial firms.

H2: Ownership Concentration has significant influence on the

relationship between CSR and firm performance.

Research methodology: Nature, Sources of Data and Sample of study

For the purpose of analysis of this study the secondary data of

annual panel nature for the period 2006 to 2015 of non-financial

companies listed in Pakistan Stock Exchange (PSE) is taken. For the

reliability of the analysis balance sheets, income statements were taken

from the website of the Pakistan Stock exchange. Keeping in view the

calculation requirements of the variables, the available sources that are to

be considered for the collection of data includes PSE websites. Sample

size of this study comprised of seventy listed non-financial firms at

Pakistan Stock Exchange (PSX) which are engaged in CSR activities and

analysis was based on ten years data. The data set comprised 60

companies in final sample and 600 number of observations from various

companies after the eliminating companies with missing financial



statements. In this study checklist is used to access the information

regarding CSR. I followed the Checklist made by Haniffa and Cooke

(2002, 2005) and Ghazali (2007), construct the modified checklist in

Bangladesh. There is a similarity between the culture of Bangladesh and

Pakistan, so we can use this checklist to access the CSR related

information.

Data Analysis Technique and Procedure

The analysis techniques for the panel data is used for the

estimation of results. The regression and correlation technique apply for

the analysis of data. Tsoutsoura and Margarita (2004) and Nelling &

Elizabeth (2009) give their suggestion for using this technique and

procedure. More over many other author are focus on these analysis

technique for evaluating effective results (Iqbal et al., 2012 and Kiran et

al. 2015), for the panel data models.

Descriptive Statistics:

A descriptive measurement enables to achieve a framework of

data and help to shows the data in arranged and accessible way. Bailey,

(1987) and Tabachnick and Fidell, (2007) highlight their views,

descriptive statistics contain procedures for estimating central tendency

of the data for example (average, median and mode) and also calculate

variance such as (standard deviation, range from maximum to minimum

and difference). Two common techniques such as mean and standard

deviation are employed in descriptive procedure to describe the basic

arrangement of data which is collected in research (Dancey and Reidy

(2004).

Inferential Statistics:

Inferential statistics is used to determine strength of relationship

within sample. Inferential statistics can evaluate the power of the

influence of the explanatory variables on outcome.

Correlation:

Correlation test indicate the relationship among two or more

given variables. Correlation matrix represent the relationship among two

or more variables of the study (Pallant, 2001). Gujarati and Porter (2009)

highlight correlation measurements describe the values to estimate

strength of the association among variables and proceeds values range

from -1 to +1.Commonly the upper the value of correspondence in

coefficient matrix shows a stronger relationship among variables.

Regression:

Regression test provides information about the relationship

between independent and dependent variables at significant or

insignificant level. It also tells about the variation of data and the

regression error. Tabachnick and Fidell, (2007) regression technique is



applied to evaluate the association among numerous predictor variables

and single dependent variable.

This regression equation is used in regression analysis:

Y= β0 + +β

1𝑋1 + β

2𝑋2 + ε𝑖𝑡

Where, Y represent the amount of the dependent variable and β0 indicate

the intercept whose value will be constant. β1 and β2 are the regression

constants which shows the influences of each predictor variable to the

estimate of the outcome variable. In regression X1 and X2 represent the

explanatory variables. 𝑒 denote the error term.

In this study to check the association and significance among explanatory

and dependent variable Ordinary least square (OLS) method has been

employed. This is well accepted technique which is used in this study to

investigate the connection among variables and also commonly used in

prior studies by (Abu Hussain and Al-Ajmi, 2012). It is essential to

representing that conventions such as consistency of data and

multicollinearity concentrating on data sorting and screening also have

been achieved effectively (Bilal, Talib and Khan, 2013). Further detail

description about regression analysis and regression result is discussed in

chapter four in section 4.3.

Variable description

The variables that have been used in this study are presented in

four sets. First set includes that independent variables of the study,

second includes the explanation of those variables which are to be

controlled in order to analyze the effect of independent variables, third

the moderator variable which may strong or weak the relationship

between independent or dependent variable and in the last the dependent

variable of the study is given.

Independent Variable

The overall topic of the study is CSR and FP, moderating role of

ownership concentration, which it is decomposed that the independent

variable of the study is CSR. Having reviewed the literature, it is

evidenced that many proxies have been used to measure CSR. The

reason of using many proxies for CSR may be that it has various

dimensions from which it can be measured and no single proxy can work

best. For the purpose of quantifying the concept of CSR, there is need to

first define the CSR and then to draw the measures to measure it. A

general definition is that the CSR is the activities of a firm to perform

good deeds for community afar the restriction of the regulation, and the

main goal of firms which is to execute for the benefits of its stakeholders.

The measurement of CSR concept has been used due to previous

literature by (Cochran and Wood 1984, Pava and Krausz 1996) in early

decades. Griffin and Mahon (1997), Preston and O’Bannon (1997)



highlights their finding in the same year that conclude the CSR is an

effective technique for minimizing the risk of liquidation. Haniffa and

Cooke (2002, 2005) and Ghazali (2007) provide the basis of constructing

checklist in this study.

CSR Disclosures Index

CSR is used as explanatory variable in this study and it is

measure with developing checklist including the items Society

contribution, Ecological information, Employee information, Product &

service disclosure and Value added information. These items are used by

Muttakin & Khan (2014) in Bangladesh for measuring CSR. They

followed the checklist constructed by Ghazali (2007). In Pakistan the

checklist is constructed by Butt & Butt (2016) for measuring CSR.

The CSR checklist consists of 30 CSR disclosure items. The

research tool contain five categories of CSR reporting (Community

Involvement, environmental information, employee information, product

and services information and value added information).

CSR specification is eveloped to find a complete view of CSR

disclosure extents with following items:community involvement,

ecological disclosure , employee information, product & service

information,value added information construct by Hackston and Milne

(1996). Numerous researcher identify society related factors and

employed in their study by using different methodology and maintain an

index for inspecting relationship among CSR and FP. Haniffa and Cooke

(2002,2005) perpare a CSR checklist in developing countries and

conclude that if a company accurately report to their releted parties then

the company might be generate healthier outcomes. Hossain et al,

(2007), Islam (2009), Peters and Mullen (2009) and Saleh et al, (2010)

all these scholars pay their a lot of attention for developing an index of

CSR in emerging countries.

This study follow the measurement techniques for developing

CSR index such as ( Saleh et al,, 2010;Rouf, 2011) as a dichotomous

variable. In this study CSR index develop with the assigning rate in form

of “0” or “1”. If the corporations disclose the CSR item in their annual

report or sustainabilty report then it will be assign “1” rating although if

the company did not disclose CSR item then the “0” rating assign to it.

Then we calculate the total rating for a corporations as follows:

CSRDI = Σdi30/nj

Where, CSRDI = Corporate Social Responsibility Disclosure index

nj = Total items for jth firm n= 30

dij = 1 if ith item disclose 0 if ith item is not disclosed



To find for the rating of the company each item’s score is

counted and the quantity is divided with the extreme items rate, then

multiply by 100 to get the score in percentage. In this study 30 items are

the maximum number of CSR item for disclosure.

Dependent Variable

Firm Performance

Firm performance means the financial efficiency of the

organization over a specific period of time. The accounting measures are

Return on Assets (ROA), Return on Equity (ROE), and Return on Sales

(ROS) which indicate the firms efficiency how’s an enterprise

effectively and efficiently manage and utilize their resources, assets and

equity to maximize profitability. Accounting measures are effective tool

for estimating the performance of an entity rather than market measures.

3.3.2.1.1 Measures of Firm Performance

In this study Return on Asset (ROA) ratio was used as proxy of

firm performance. Tsoutsoura and Margarita (2004) used the same

proxy. Return on Assets is measure by net income divided by total assets

used by Cheruiyot (2010), Hull and Rothenberg (2008), Mahoney &

Roberts (2007). Setiawan & Darmawan (2011), state that mostly entities

takes ROA as enactment measure indicator for assessing either firms are

attaing their desired outcome from their resources (Bhagat & Bolton

2008 and Cornett, Otgontsetseg, & Hassan 2014.

ROA =Net Income

Total asset

ROA is the most appropriate measure to measure firm performance.

Moderating Variable

Ownership Concentration

The top five shareholder such as block holder, individual

shareholder, family, foreign and director ownership are used as proxy for

the Ownership Concentration. Chemma et al., (2003) suggest on the

basis of practical evidence Pakistani enterprises are concentrated for

attaining possession. La Porta et al., (1999) finding also consistent with

this evidence. These measure is defined as percentage of share owned by

the largest five shareholder in a firm, and a block is defined as to be

entity owning more than 10 percent of the firm’s equity.

Ownership of Top five shareholders measure as a

Percentage of possession detained by Top five shareholders in the share

capital. First five largest shareholder was taken for assessing the

percentage of share ownership for ownership concentration. From a

corporations view, ownership structure controls the organizations

success, large market share which is enjoyed by different shareholders.

Specifically ownership concentration is an incentive for reducing the



agency problem and agency cost with the separation of management and

ownership, which might be used for the protection of firms property

rights (Barbosa and Louri, 2002).

Control Variables

Previous study suggest that CSR and FP are influenced by some

factors such as size, leverage and liquidity, Ullmann, A.A., (1985),

Blazovich, J.L., (2011) said that these are control variables which we are

going to use in this study. Prior studies suggest that these variables can

be taken as control variable. Tsoutsoura and Margarita (2004) state that

size of the corporation taken as a control variables. Size is measured as

taking natural log of total assets by Tsoutsoura and Margarita (2004).

The size of the firm may be important for numerous causes, containing

the potential presence of scale economies essential in environmental

concerned investments. Further larger firms follow CSR practices more

than small level (McWilliams 2001). Leverage is a proportion of a

company’s entire liability to the total value of asset. This study take

leverage as a control variable because leverage effect the performance

and attitude of executives and companies’ CSR procedures. Because high

leverage proportion execute restraint on directors, and “motivate them to

take assessments that are in favor of the corporations” (Barnett &

Salomon, 2012). Furthermore high leverage ratio obliges the executives

to take venture decisions to create different chance, thus negatively

impact profits of corporations. Commonly those corporations which have

lower debt are more concentrated for taking the CSR initiatives than

those entities with huge debt proportion. Leverage calculated by total

debts divided by total assets, Tsoutsoura and Margarita (2004).In this

study the liquidity is also use as a control variable. This is also support

by previous studies such as (Brammer & Pavelin 2008, Abd-Elsalam &

Weetman 2003, Samaha& Dahawy 2011). Liquidity ratios is use as a

control variable because it gives uncertain outcomes in previous studies.

Some previous studies suggest that those companies which have high

liquidity ratios are more able to invest in CSR activities and willingly

disclose CSR items because they want to differentiate themselves for low

liquidity corporations, (Abd-Elsalam & Weetman 2003). Many

researchers are unable to find any associations between CSR disclosure

and liquidity (Samaha & Dahawy 2011). Liquidity was measured by

current ratio of the companies.

Model of the Study

Model 1

The regression technique is used for the data analysis in this

study as employed by Nelling & Elizabeth (2009), Iqbal et al., (2012),

Kiran et al. (2015). For data analysis panel data models used.



𝐹𝑃𝑖𝑡= β0 + +β

1Size𝑖𝑡 + β

2𝐿𝑒𝑣𝑖𝑡+β

3Liq𝑖𝑡 + β

4CSR𝑖𝑡 + ε𝑖𝑡

CSR𝑖𝑡 Corporate social responsibility spending of firm i in time t.

𝐹𝑃𝑖𝑡 Firm performance i at time t.

OC𝑖𝑡 Ownership concentration i at time t.

Size𝑖𝑡 Size in form of total assets of firm i at time t.

Leverage𝑖𝑡 Debt to total asset i at time t.

Liquidity𝑖𝑡 Current assets to current liability i at time t.

ε𝑖𝑡 Denote error term of the model.

β0 is constant whileβ

1,β

2 and β

3are the coefficients of variables.

Model 2

𝐹𝑃𝑖𝑡 = β0 + β

1CSR𝑖𝑡 + β

2OC𝑖𝑡 + β

3CSR𝑖𝑡OC𝑖𝑡 + β

6Size𝑖𝑡 + β

7Lev𝑖𝑡

+β8

Liq𝑖𝑡+ε𝑖𝑡

CSR𝑖𝑡 Corporate social responsibility spending of firm i in time t.

𝐹𝑃𝑖𝑡 Firm performance i at time t.

OC𝑖𝑡 Ownership concentration i at time t.

Size𝑖𝑡 Size in form of total assets of firm i at time t.

Levearge𝑖𝑡Debt to total asset i at time t.

Liquidity𝑖𝑡 Current assets to current liability i at time t.

ε𝑖𝑡 error term of the model.

Results and Discussion

After gathering data from secondary sources point out in

methodology portion, the procedure of quantifying variables taking

place. This study also inspects the link among variables and presents the

value of data in a summarized form. The structure of analysis procedure

has been obtainable in three steps. Those steps are descriptive statistics,

correlation matrix and regression analysis. Analyses of non-financial

firms are done.

Descriptive Statistics

It is difficult to access the enormous values of statistical data in

this study. Descriptive statistics permits the investigator to elaborate the

finding in précised form by employing various methods. The data can be

reviewed effortlessly by investigative the finding of descriptive

technique. It is also used in the present study to explain the large values

of data. The date tenure of this study starts 2006-2015 which constitute

10 years throughout the data.

Table 4.1. Descriptive Statistics

ROA CSR OC LEV LIQ SIZE

Mean 11.74125 68.90000 66.49486 0.455370 1.078424 16.66164

Median 10.80000 70.00000 67.61116 0.504836 1.120257 16.73403

Maximum 43.79000 100.0000 99.03868 0.668320 1.922081 19.87387

Minimum -24.59000 30.00000 4.838515 0.030720 0.020356 12.42163

Std. Dev. 10.28135 13.82420 19.15077 0.159183 0.291401 1.409942

N 600



Table 4.1 reports the descriptive statistics of the variables of the

study for 60 non-financial firms listed in Pakistani Stock Exchange 100

index by taking the historical date for the period covering from 2006-

2015. ROA is return on asset calculated as dividing the profit after tax by

the total assets during the period. CSR index is the corporate social

responsibility index which is formed by the framework stated in the

methodology section. OC is the ownership concentration and it is

calculated by taking the average percentage of ownership held by Top

five shareholders in the share capital. Leverage is calculated by dividing

the total debt by the total assets. Liquidity is current ratio which is

calculated as dividing the current assets by the current liabilities. Size is

measured by natural log of assets.

In this study the mean value of ROA for Pakistani firms is

11.74125 while the maximum value is 43.79000 and the minimum value

-24.59000 shows optimum spread with standard deviation 10.28135. Its

means the mean can move away 10.28135 in both direction. So this value

shows that this value is not abnormal. Thus data indicate normal pattern.

CSR Index of Pakistani firms on average is 68.90000 whereas its

minimum value is 30 and maximum is 100 showing optimum spread

with standard deviation 13.82420. The mean value of OC is 66.49486

and the maximum value is 99.03868 and the minimum value is 4.838515,

and its standard deviation is 19.15077. So this value shows that the mean

can deviate 19.15077 in either sides. Leverage has mean value 0.455370

for Pakistani firms. While its maximum value is 0.668320 and the

minimum value is 0.030720 with standard deviation is 0.159183. The

standard deviation value is not abnormal so data shows normal form. The

mean value of CR is 1.078424 for Pakistani Companies have 1.672070

rupee to release 1 rupee current liability. Its maximum value is 1.672070

and minimum value is 0.08997 which indicate normal range with

standard deviation of 0.291401. Size of Pakistani firms mean value is

16.66164 natural log assets while its range from 12.42163 to 19.87387

with standard deviation of 1.409942 presenting large dispersion from

mean.

Correlation Analysis

The Pearson correlation present the direction and strength of correlations

among the variables and helps identify for any Multicollinearity problem.

This table represent the correlation coefficient and p-value for measuring

CSR through index. As per shown, if the p-value is less than 0.05 then

we can say correlation coefficient are significant. According to (Pallant,

2001) correlation analysis check the association among multiple

variables.



4.2. Table Correlation Analysis

ROA CSR OC LEV SIZE LIQ

ROA 1.000

CSR 0.2058*** 1.000

OC 0.1001** 0.0909** 1.000

LEV -0.2535*** -0.0617 0.1040** 1.000

SIZE -0.2405*** 0.2819*** 0.1435*** 0.1685*** 1.000

LIQ 0.3791*** 0.0503 -0.1204*** -0.2804*** -0.1049** 1.000

***Significant at 1%, **Significant at 5% and *Significant 10%

The table 4.2 shows the matrix for correlation among the CSR

variables and other variables that are used as control variables in this

study. The purpose of evaluating correlation may differ in various the

studies. As expected the CSR and FP are positively associated as

represented by the correlation matrix (0.2058). The positive correlation

among these variables shows that higher the CSR disclosure practices

linked with the higher the firm value. As the consequences show that the

company social responsibility variable which is here CSR index is

significantly interrelated with the variables FP (ROA). Leverage has

negative relationship with ROA, CSRIND and positive association with

OC. While liquidity is positively correlated with ROA, CSR, and have

negative association with OC, size and leverage. The size which we use

in this study as a control variable negatively associate with ROA (-

0.2405) and liquidity (-0.1049) while positively correlate with CSR

(0.2819), OC (0.1435), and leverage (0.1685). The moderator have

positive association with ROA, CSR, OC, leverage size while negatively

associate with liquidity.

The correlation coefficient results shows positive association

between CSR and FP at 1%. This level of significance shows that higher

the CSR disclosure leads higher the firm value. Those firms which invest

more in CSR undertakings and report their CSR item in annual reports to

report stakeholder leads higher firm performance. The correlation

coefficient results represent that no one variables of the study are

strongly associated with each other and this shows that the problem of

multi-collinearity is not serious, it means the variables of this study are

appropriate for showing regression analysis.

Regression Analysis

This study proposed to found an association between CSR and

FP, and also impact of CSR and FP through OC which is used as

moderator. Whether CSR is independent Variable, ROA dependent, OC

is moderator and firm size, Leverage, liquidity use as a control variable.

To check this impact ordinary least square (OLS) was applied for a panel



of 60 companies for ten years data for the period 2006-2015. 600 firm-

year observations were analyzed.

Table 4.3. Regression Results of Ordinary Least Square Method Variable Model 1 Model 2

Co-efficient P-Value Co-efficient P-Value

C 21.85954 0.0000*** 23.23037 0.0000***

SIZE -1.916487 0.0000*** -1.993227 0.0000***

LEV -6.898519 0.0043*** -7.923792 0.0000***

LIQ 10.88946 0.0000*** 11.38892 0.0000***

CSR 0.191748 0.0000*** 0.101384 0.0472

OC 0.003575 0.9231

CSR*OC 0.001265 0.0050

R2 0.260371 0.289039

Adj. R2 0.255399 0.281846

F-Statistic 52.36446 0.000000*** 40.18046 0.000000***

Table 4.3 shows reports the regression results of two models. In

model 1 the connection between CSR and FP was analyzed by applying

OLS regression model. While in model 2 the influence of ownership

concentration on the link among CSR and FP has been identified. In

model 1 firm performance measure (ROA) has been regressed on the

independent variable (CSRIND) after controlling for (Lev, Liquidity,

Firm size). While in model 2 moderating variable (ownership

concentration) has been added to the model to evaluate the moderating

impact of ownership concentration on the association between CSR and

FP.

If the moderating term which is illustrated as the product of

CSRIND and TOP5 is found to be significant, it would mean that there is

significant role of ownership concentration as a moderator. However the

variable have significant association if the p value less than 0.05. The

results are more significant, if the p-value smaller (Rodgers &

Nicewander 1988). In model 1 the regression analysis has the co-

efficient of determination (𝑅2-value) 0.260371 indicates that 26% of the

variation in firm performance explained by the CSR disclosure index,

leverage, firm size and liquidity whereas the remaining 74% is described

by the unnoticed elements.

In regression analysis of model 1 the co-efficient of CSR is

(0.191748) and its p-value is (0.0000) which means that it has a highly

significant and direct impact on ROA in such that as a firm engages more

in CSR initiatives, its performance will be improved. This outcome

indicates that if a corporation doing well for society and it will have

enough resources to take initiatives for society, which eventually will

help in constructing healthier relations with the society. The studies of

Preston and O’Bannon (1997); Orlitzky, James, Schmidt, and Rynes



(2003); Rim Makni et al. (2009); Ehsan and Kaleem (2012) also support

this result. The result express that those which invest in socially

responsible activities for community enhance their firm value and sustain

competitive edge in community. The research of Choi et al (2010) and

Gang Fu et al. (2012) also support these results.

The findings on the part of this variable are also consistent with

the theory of stakeholders which implies. Ruf et al. (2001) discussed that

the association between CSR and FP established on stakeholder theory

was significant and positive. According to Schreck, 2011 and many

previous studies those companies which protect the interest of all

stakeholder not only share holder but also society those companies

sustain their competitive advantage in society and expand firm value.

Porter and Kramer (2002) suggested that society related actions

are expand competitive edge to the corporations. If clients are attentive

of community actions such as donations, charity, environmental

protection, employee welfare and investment for natural disaster that

might affect positively their concern of the corporation. (Fombrum and

Shanley 1990). If companies sustain better connection with society then

the society helps form expectation, trust and confidence (Schreck 2011).

This become a source of corporations rick minimization. Many studies

shows mixed outcomes for the association among CSR and FP.

This study also express a positive and significant connection

between societies related actions and many other perspective which is

explained in the methodology section and FP measured by ROA. This

outcome is also consistent with current CSR research, such as Waddok

and Graves (1997) and Peters and Mullen (2009).

The review of literature exposed that in emerging economies

CSR is primarily of a philanthropic nature, such as societal initiatives.

The emerging economies corporations are executing these actions as a

measure of their corporate plan and procedure to rise business repute in

their society. Although, outcomes express a confident and positive

relationship among communal linked CSR events and CP. So the first

hypothesis of the study stating significant association between CSR and

FP is accepted as the outcomes also confirm such relationship.

So far as the findings of control variables are concerned,

Leverage has a negative and significant influence on the dependent

variable ROA as its co-efficient is (-6.8985) with p-value (0.0043). The

negative observation on the part of this variable is consistent with the

view that more profitable or firm with well financial performance uses

less amount of debt. The findings are consistent with that of Demsetz and

Villalonga (2001), Himmelberg et al., (1999) and Welch (2003) said that

leverage has inverse influence on the FP. Moreover, high leverage



obliges the administrators to take investment decisions in such a way

which explore innovative opportunity, thus negatively impact returns of

companies (Inour & Lee, 2011). A corporation with high leverage ratio

infers that corporation is more probable to default, hence, it poses higher

risk chances for stakeholders. Generally companies with lower leverage

ratio are more expected to employ in CSR undertakings rather than

companies with high leverage ratio.

Size being second control variable occupies an inverse

association with ROA as its co-efficient is (-1.916487) along with p-

value (0.0000). This is an interesting result as most of the literature has

arrived at the conclusion that size increases the firm performance. The

present study the effect has been witnessed as to be negative. This result

consistent with the firm size is size is indirectly related with FP (Donker

et al. 2008). The composite business arrangement of large organization

and the varied interests in them may be lead to declines in their outcomes

and performance because of asymmetries information, agency costs and

control (De Miguel et al. 2004; Himmelberg et al. 1999). This can be

justified from the fact that large sized firms might have to incur huge

costs in managing the scattered size of the organization. It can also

possible that due to large size and there can also be agency problem.

In the end the effect of liquidity is positive and statistically

significant as the co-efficient is (10.88946) and p-value (0.0000).

Uplifted Firm performance as measured by ROA would be as a

consequence of increased liquidity. It is consistent with the view (Abd-

Elsalam & Weetman 2003), suggest that highly liquid corporations are

more likely to disclose CSR activities because highly liquid companies

want to differentiate themselves from those companies which have lower

liquidity. Ezat & El-Masry (2008) argue that the CSR disclosures level

has also been related to huge liquidity, while many other researchers

unable to investigate any connection between CSR disclosure and

liquidity (Ali et al. 2010, Samaha & Dahawy 2011).

R-square which shows the proportion of change in ROA due to

variation in independent and control variables of the study. The value of

R-square is (26%) which designates that 26 percent variation in ROA is

explained by CSR, Leverage, Size and Liquidity. F-Statistic shows the

overall significance of the variables and fitness of the model. The p-value

of the test is (0.0000) which means that the model is overall fit.

In the regression results of model 2, the co-efficient of CSR is

(0.101384) and its p-value is (0.0472) which means that CSR has a direct

significant impact on ROA. This co-efficient value has been changed as a

result of inclusion of moderator which indicates the presence of

moderating role. Moreover, the significance of CSR has also reduced



because the p-value dropped from (0.0000) to (0.0472). Literately, it is

situation where the impact has been weakened as a consequence of

inclusion of moderator. The research of Choi et al (2010) and Gang Fu et

al. (2012) also support these results. The positive effect is again

consistent with Preston and O’Bannon (1997); Orlitzky, James, Schmidt,

and Rynes (2003); Rim Makni et al. (2008); Ehsan and Kaleem (2012).

The result express that those which invest in socially responsible

activities for community enhance their firm value and sustain

competitive edge in community.

In this model ownership concentration has been included as a

moderator. The moderating variable has been analyzed once

independently and then in the form of moderating term found by

multiplying CSR with OC. The value of co-efficient of OC is (0.003575)

with p-value (0.9231) which indicates that there is no independent

association between OC and ROA. Thomsen &Pedersen, (2000)

exhibited the insignificant effect between ownership concentration and

firm value.

According to (Ahmed, Ahmed, Khan, Pasha, & Rehman, 2012;

Bhabra, 2007; Cronqvist & Nilsson, 2003; Leech & Leahy, 1991) there is

non-linear relationship is typically showed with large shareholdings,

which is arise to the dominating shareholder attitude. This result also

consistent with agency theory in which dominant families held large

shares and ownership concentration is to emphasis conflicts of interest

not only among manager and owners but also between minor

shareholders and majorities (Chen & Steiner, 1999; Vafeas, 1999).This

insignificant impact not only influence the firm performance but also

expropriate the level of impact of minor shareholders and other

stakeholders (Cheung & Chan, 2004). On the other hand, the dominant

interest of heavy shareholders may be insignificantly influenced firm

performance (Ahmed et al., 2012; Bhabra, 2007; Chen & Steiner, 1999;

Claessens &Yurtoglu, 2013; Fama & Jensen, 1983).

Now, the discussion is turned towards moderating impact of

ownership concentration. To account for intervention the OC is

multiplied by CSR. The co-efficient of moderating term is (0.001265)

with p-value (0.0050) which suggests that intervening term is

significantly and positively impacting the ROA. This suggests that the

existence of bulky shareholders encourages the dominant shareholders to

do good overall inspiration. In developing economies like Pakistan

companies have shown higher ownership concentration (Dam

&Scholtens, 2013), family domination (Castellaneta & Gottschalg,

2016), weak legal and regulatory backgrounds (Herrera, Roman, &

Alarilla, 2010), superior government possession (Abdullah et al., 2011),



more diverse shareholder summaries (Zhao, 2012), and prominent

control (Du, Swaen, Lindgreen, & Sen, 2013). Such distinctive

appearances of developing countries make them exclusive in nature.

The moderating variable influence the relationship between CSR

and firm performance positively and significantly but due to the

moderator this association between CSR and FP become weak. Because

Pakistani companies are more family firms and ownership concentrated

due to weak legal environment so, they are less paying attention to invest

in community and CSR undertakings. The greater ownership

concentration firm’s supports block shareholder that has less influence

the community betterment and CSR disclosure. Hence there is rational

doubt about the influence the effectiveness of ownership concentration

and the firm environment activities on firm performance (Khan et al.,

2013).

So that second hypothesis of the study regarding the significant

influence of ownership concentration on relationship between CSR and

ROA is accepted.

So far as the findings of control variables are concerned,

Leverage has a negative and significant influence on the dependent

variable ROA as its co-efficient is (-6.8985) with p-value (0.0043). The

negative observation on the part of this variable is consistent with the

view that more profitable or firm with well financial performance uses

less amount of debt. The findings are consistent with that of Himmelberg

et al., (1999) and Welch (2003) said that leverage has a negative

influence on the FP.

Size being second control variable occupies an inverse

association with ROA as its co-efficient is (-1.916487) along with p-

value (0.0000). This is an interesting result as most of the literature has

arrived at the conclusion that size increases the firm performance. But in

the present study the effect has been witnessed as to be negative. This

can be justified from the fact that large sized firms might have to incur

huge costs in managing the scattered size of the organization. It can also

possible that due to large size and there can also be agency problem. This

result consistent with the firm size is size is indirectly related with FP

(Donker et al. 2008; Garcia-Castro et al. 2010).

In the end the effect of liquidity is positive and statistically

significant as the co-efficient is (10.88946) and p-value (0.0000).

Uplifted Firm performance as measured by ROA would be as a

consequence of increased liquidity. It is consistent with the view (Abd-

Elsalam & Weetman 2003), suggest that highly liquid corporations are

more likely to disclose CSR activities because highly liquid companies



want to differentiate themselves from those companies which have lower

liquidity.

R-square which shows the proportion of change in ROA due to

variation in independent and control variables of the study. The value of

R-square is (29%) which designates that 29 percent variation in ROA is

explained by CSR, OC, OC*CSR, Leverage, Size and Liquidity. F-

Statistic shows the overall significance of the variables and fitness of the

model. The p-value of the test is (0.0000) which means that the model is

overall fit.

Summary

This study examines the relationship between CSR and FP in

non-financial companies of Pakistan Stock Exchange (PSX), and also

inspects the association between CSR and FP using ownership

concentration as a moderator. To check this impact ordinary least square

(OLS) was applied for a panel of 60 companies for ten years data for the

period 2006-2015. 600 firm-year observations. Empirical literature and

analysis reveal the relationship between CSR and FP is highly

significant. These results suggest that Pakistani companies incline to do

maximum investment for the betterment of community and social

benefits. Then they produce more outcome due to invest in CSR

undertakings and disclosing CSR items and it have a strong positive and

highly significant impact on constructing and maintaining a satisfactory

repute in society.

Stakeholders’ theory and the legitimacy theory are consistent

with this view support these findings. The results of this study has

recognized that there is a link between CSR and FP. Furthermore we can

say that better CSR indications to expansion of firm value and then

companies will be able to more investing on CSR undertakings, and

preemptive initiatives engaged on CSR will consequence in enhanced

financial performance. Corporations which have better financial position

have more funds to invest in community domains, for example employee

benefits, community concerns and environmental protection concerns.

This distribution may be intentionally associate to build good image in

society and improved link with the society.

This study also investigated the role of ownership concentration

on the relationship between CSR and FP. This study conclude that there

is positive and significant relationship between CSR and FP. this study

also shows that the moderation effect is exiting between independent and

dependent variables. The significance level has been changed as a result

of inclusion of moderator which indicates the presence of moderating

role. Moreover, the significance of CSR has also reduced because the p-

value dropped. Literately, it is situation where the impact has been



weakened as a consequence of inclusion of moderator. The moderator.

Our study confirms the suggestion of prior studies that ownership

concentration influence strategic planning and decisions of the

corporation by presenting that investors have unlike behavior or attitudes

toward CSR commitment. We establish that top shareholder in Pakistan

lead to be less concentrated in enlightening their corporations’ CSR

disclosure ratings. This conclusion improves our understanding on the

relationship between CSR and FP, ownership concentration as a

moderator.

Research Contribution

This research has made unique contribution into the literature. In

additional, the objective of this research not generalizes the whole CSR

of Pakistan through its outcomes. Relatively, it has tried to maintain a

CSR index and framework for quantifying the CSR practices with using

ownership concentration as a moderator. Previous studies have

investigated CSR in developed and emerging countries and the

association between the CSR and FP in developing and developed

countries. So, this study presents their involvement to the CSR literature

in Pakistan.

This study also investigates the relevance of various theories for

explaining CSR concept and for finding the association among variables.

Specifically the theoretical contribution of this research is ensuring the

support of stakeholder theory. Finally, the method which is employed for

this research has made essential involvement to CSR concept in Pakistan.

To assemble the data for this study, the secondary data source is used

such as annual reports and sustainability reports. Moreover, to develop

the CSR index, this study used a dichotomous method.

Limitation

This study exposed significant results on the CSR disclosure and

its implications in Pakistan. This study aims, objectives, hypothesis was

achieved successfully but every research is unfinished without its

limitation so this study encountered some limitations. This research

concentrates on the extent of CSR undertakings and constructing CSR

disclosure index at major PSX in non-financial companies. This research

has concentrated in CSR with primary stakeholder such as community,

environment, employee, customer and suppliers. This study have not

been focused on other essential external stakeholder such as civil society

and internal stakeholder like investor, and many other sectors and

companies are not a part of this research.

Only 60 companies were used for this study and limited number of

observation although in PSX non-financial companies. Lastly few



variables were used for the measurement of CSR, Ownership

concentration and FP. Some more suitable variable can be used in future.

Lastly this study is limited to measure the FP performance measure such

as ROA. Many other measure of FP such as ROE, EPS, NPM, and TBQ

can be used to measure firm performance.

Recommendation of Future Research

Future study may explore whether related outcomes are attained from

using market based measures such as Tobin’s Q. In addition the research

also be can continue on comparative analysis between different sectors

like manufacturing and service sectors. Research may also focus at the

effect of age of corporations and the extent of CSR actions. Future study

may concentrate on socially committed spending which participate the

personal morals and socially responsible concerns decision making for

investment. This study only focus limited Pakistani non-financial

companies, cross sectional comparative study can also be done in other

community in future.

In future comparative study can also be done in developed and

developing comparison perspective for analyzing the nature of CSR

disclosure and its link with FP with more ownership concentration

measurement variable such as (top 3 or top 10 shareholder of the

company).



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