An analysis of linkage between economic value added and corporate social responsibility

Purpose – Research findings indicate that there is positive relationship between corporate social responsibility (CSR) and company's reputation but relationship between CSR and company's profitability has not been explored in the Indian context. CSR level of business firms in India is increasing in terms of both amount of the disclosure and the number of participating firms. Therefore the purpose of this paper is to explore the link between good financial performance measure and other indicators of corporate responsibility. This paper also aims at studying the trend of disclosure of CSR reporting by Indian companies. Design/methodology/approach – This study seeks to investigate the relationship between ethical commitment and financial performance over the four‐year period, through statistical regression and correlation analysis. Studies of few Indian companies who have successfully implemented CSR initiatives have also been analyzed to investigate the level and nature of engagement of Indian companies in social responsibility initiatives. Findings – It has been reported that there is little evidence that companies with a code of ethics would generate significantly more economic value added (EVA) and market added value (MVA) than those without codes. Practical implications – Indian corporations need to develop a proper strategy to integrate CSR goals with stockholders' goals. Top management should create a dedicated CSR team, which should identify the core areas of CSR and strengthen internal practices such as corporate governance, transparency and disclosure issues. Originality/value – In the Indian context very few studies have analyzed the linkages between CSR and Organizational profitability. This article presents a new approach to correlate the relationship between CSR and Organizational profitability in terms of EVA and MVA.