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Linkage Between Corporate Social Performance And Stock Return: An Evidence From Financial Sector Of Bangladesh

Author

Listed:
  • Sarwar Uddin Ahmed
  • Mohammad Abdullah
  • Samiul Parvez Ahmed

    (Independent University, Bangladesh)

Abstract

Fierce global competition and shrinking markets are forcing firms towards sustainable profitability. In order to accomplish sustainable profitable business, companies around the world are highly emphasizing on Corporate Social Performance (CSP). Bangladeshi banking and financial sectors are no exception to this trend. Researchers around the world have reported a positive, negative, mixed and neutral impact of CSP on stock return. On this background, this study examines the impact of CSP on stock return in the financial sector of Bangladesh. Data sample covers 30 banks and 23 financial institutions listed in Dhaka Stock Exchange (DSE). CSR reports, websites, regulatory notifications, newspaper articles of 2013 were used for the measurement of CSP and for stock return and other control variables, data of 2014 were used. Logistic Regression was applied to identify the relationships between the variables. The results of the study indicate that, CSP has a positive significant relationship with stock return. Also a positive relation between bank size and higher CSP was revealed. It was evident that investors are sensitive to the corporate social responsibility and firm’s positive engagement with the social responsibility does increase the value of stock. Findings of the study are expected to improve the investment climate by encouraging the investors to make their investment decisions based on long-term sustainability. The current study has several policy implications. Based on the findings of the study policy-makers should undertake policy measures to encourage firms to enhance their socially responsible activities. Regulatory bodies such as Bangladesh Bank, Bangladesh Securities Exchange Commission, and Insurance Development & Regulatory Authority Bangladesh (IDRAB) might consider making corporate social and environmental disclosure mandatory to make information easily accessible to the investors. By considering the constraints of considering only bank and financial institutions in this study, a more comprehensive study by covering various industries, having cross-dimensional analysis, is suggested for further studies.

Suggested Citation

  • Sarwar Uddin Ahmed & Mohammad Abdullah & Samiul Parvez Ahmed, 2017. "Linkage Between Corporate Social Performance And Stock Return: An Evidence From Financial Sector Of Bangladesh," Journal of Developing Areas, Tennessee State University, College of Business, vol. 51(2), pages 287-299, April-Jun.
    • Handle: RePEc:jda:journl:vol.51:year:2017:issue2:pp:287-299
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    Citations

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    Cited by:

    1. An-An Chiu & Ling-Na Chen & Jiun-Chen Hu, 2020. "A Study of the Relationship between Corporate Social Responsibility Report and the Stock Market," Sustainability, MDPI, vol. 12(21), pages 1-18, November.
    2. Rima Al-Sager & Durga Prasad Samontaray, 2018. "Gender Wise Saudi Investors' Awareness of Corporate Governance Mechanism and Its Importance in Their Investment Decision Making – An Empirical Study," International Business Research, Canadian Center of Science and Education, vol. 11(3), pages 118-132, March.

    More about this item

    Keywords

    CSR; Stock Return; Financial Institutions; Banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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