The Association Between Corporate Social Performance and Corporate Financial Performance: Evidence From Kuwait
DOI:
https://doi.org/10.33423/jaf.v22i3.5302Keywords:
accounting, finance, corporate social performance (CSP), corporate financial performance (CFP), Return on Assets (ROA), Return on Equity (ROE), content analysis, Kuwait stock exchange (KSE)Abstract
The literature on the association between corporate social performance (CSP) and corporate financial performance (CFP) fails to provide conclusive evidence regarding the nature of this relationship. Some studies found a positive while others reported a negative or neutral (no) relationship. The purpose of the present study is to expand earlier research on this relationship in the context of Kuwaiti corporations. To achieve this objective, a sample of Kuwaiti corporations is selected, representing all economic sectors, sizes and ages over a period of two years: 2018 and 2019. A disclosure index of CSP disclosure is developed, to measure corporate social performance. The results of the two regression models reveal that both ROA and ROE as measures of CFP are positively and significantly associated with CSP, while control variables (size and age) are not statistically significant at any acceptable level. These results suggest that corporate management should treat investing in social activities as a core business strategy that would pave a way for a higher financial performance and thus, maximize its stockholder’s wealth.
