Impact of corporate social responsibility and corporate governance on the performance of nonfinancial companies

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Abstract

This research paper focuses on the growing importance of corporate social responsibility (CSR) in the business world, particularly in the Gulf Cooperation Council (GCC) region. The main aim is to bridge the gap by assessing the impact of CSR and corporate governance on financial performance. Ultimately, this paper emphasizes the strategic importance of CSR for improving financial performance and promoting trustworthiness and public image. This paper applied the ordinary least squares (OLS) and panel regressions (fixed and random) to investigate the impact of CSR, board size, independent directors, company size, and leverage as independent variables on the financial performance as the dependent variable (return on assets — ROA). The data were collected from Refinitiv Eikon platform for 210 listed nonfinancial companies for the last ten years (2013–2022). The results suggested that the higher the company’s involvement in CSR, the more the number of board members and the more independent directors the higher the performance. In addition, the higher the leverage in the GCC the less is the profitability of firms. Finally, the larger the company the better is the performance. Such results imply that more board of directors should be hired and increase compliance with the CSR principles to achieve better performance.

Keywords: CSR, Corporate Governance, Performance, Leverage, Size of the Company, Panel Regression

Authors’ individual contribution: Conceptualization — O.A., B.A.K., and A.B.A.; Methodology — B.A.K. and A.B.A.; Validation — O.A., B.A.K., and A.B.A.; Formal Analysis — O.A., B.A.K., and A.B.A.; Investigation — B.A.K. and A.B.A.; Resources — O.A.; Data Curation — O.A., B.A.K., and A.B.A.; Writing — Original Draft — O.A., B.A.K., and A.B.A.; Writing — Review & Editing — O.A., B.A.K., and A.B.A.; Supervision — O.A., B.A.K., and A.B.A.; Project Administration — O.A. and B.A.K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G10, G18, G19

Received: 17.07.2023
Accepted: 13.12.2023
Published online: 15.12.2023

How to cite this paper: Ahmed, O., Khalaf, B. A., & Awad, A. B. (2023). Impact of corporate social responsibility and corporate governance on the performance of nonfinancial companies [Special issue]. Corporate Governance and Organizational Behavior Review, 7(4), 370–379. https://doi.org/10.22495/cgobrv7i4sip15