“Good Business Versus Being Good In Business”—Relationship Between Financial Performance and Corporate Social Responsibility in India

Is the goal of wealth creation by a corporation antithesis of concern for society, or does it lead to social benefits? Though the search for a linkage between corporate social performance (CSP) and corporate financial performance (CFP) began as early as the 20th century, it still remains inconclusive. The purpose of this investigation is to extend earlier research on the relationship between corporate social and financial performance in the Indian context. The study is motivated by the need to understand elements of CSP in the Indian environment since it is only in recent times that Indian corporate have started viewing CSP as a business necessity. This study empirically examines the interrelated aspects of CSP and CFP among thirty Indian companies listed in the BSE 30 Index which represent nine industries. The corporate annual reports for the financial year 2009–2010 were used as the main source of secondary data. The assessment parameters were governance, environment, product, community and employee relations. The measures of corporate financial performance were accounting based indicators namely Return on Assets, Return on Equity and growth in sales. Results of the study point out that there is no significant relationship between CSP and CFP. The paper thus concludes that the link between CSP and CFP in India is uncertain. However since the CSP-CFP link is in its nascent stage in India, it is important to extend future studies over a longer study period to examine the trajectory that this relationship follows.