Exploring CSR and Financial Performance in Oil and Gas Industry
Keywords:Climate Change, CSR, Financial Performance, Social
Paris Agreement requires many firms, regions, and nations to put more attention on corporate social responsibility (CSR). However, not all industries could move into climate change mitigation easily. Oil and gas industry is one of industries that have dilemma. This industry is highly contributed to gas emission, but they cover it by becoming the leading of CSR activities. On the other hand, doing CSR requires firms for using their resource for non-profitable purposes. This condition gets worse due to in recent years oil and gas industry struggles to operate their business. Hence, the decision for doing CSR needs to be evaluated. This research aims to determine the impact of corporate social responsibility (CSR) on the firm’s financial performance which uses a fixed effect of panel data model for the study period from 2015-2019. Based on the results, CSR, especially social dimensions can increase the firm’s financial performance in the short term. It enables firms to build a good reputation which can attract more investors who consider the social impact of their investment portfolio. Further, since the impact of CSR is more pronounced in the economic downturn, it may not be effective in the future market value.
Ahamed, W. S. W., Almsafir, M. K., & Al-Smadi, A. W. (2014). Does corporate social responsibility lead to improve in firm financial performance? Evidence from Malaysia. International Journal of Economics and Finance, 6(3), 126–138. https://doi.org/10.5539/ijef.v6n3p126
Baird, P. L., Geylani, P. C., & Roberts, J. A. (2012). Corporate social and financial performance re-examined: Industry effects in a linear mixed model analysis. Journal of Business Ethics, 109(3), 367–388. https://www.jstor.org/stable/23257158
EWG. (2021, April). Oil and gas: An industry in decline. https://www.ewg.org/news-insights/news/oil-and-gas-industry-decline
Friedman, M. (2007). The social responsibility of business is to increase its profits. In Corporate ethics and corporate governance (pp. 173–178). Springer. https://doi.org/10.1007/978-3-540-70818-6_14`
Frynas, J. G. (2009). Corporate social responsibility in the oil and gas sector. Journal of World Energy Law & Business, 2(3), 178–195.
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323–329.
Kang, K. H., Lee, S., & Huh, C. (2010). Impacts of positive and negative corporate social responsibility activities on company performance in the hospitality industry. International Journal of Hospitality Management, 29(1), 72–82. https://doi.org/10.1016/j.ijhm.2009.05.006
Kann, D. (2019, February 19). Oil and gas production is contributing even more to global warming than was thought, study finds. CNN. https://edition.cnn.com/2020/02/19/world/methane-emissions-humans-fossil-fuels-underestimated-climate-change/index.html
Kim, J.-W. (2010). Assessing the long-term financial performance of ethical companies. Journal of Targeting, Measurement and Analysis for Marketing, 18(3), 199–208. https://doi.org/10.1057/jt.2010.8
Lee, J. W. (2020). CSR impact on the firm market value: Evidence from tour and travel companies listed on Chinese stock markets. The Journal of Asian Finance, Economics, and Business, 7(7), 159–167. https://doi.org/10.13106/jafeb.2020.vol7.no7.159
Lee, S., Kim, B., & Ham, S. (2018). Strategic CSR for airlines: does materiality matter? International Journal of Contemporary Hospitality Management, 30(12), 3592-3608. https://doi.org/10.1108/IJCHM-10-2017-0697
Malik, M. (2015). Value-enhancing capabilities of CSR: A brief review of contemporary literature. Journal of Business Ethics, 127(2), 419–438. https://doi.org/10.1007/s10551-014-2051-9
McKinsey & Company. (2009). Valuing corporate social responsibility. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/valuing-corporate-social-responsibility-mckinsey-global-survey-results
Mwangi, C. I., & Jerotich, O. J. (2013). The relationship between corporate social responsibility practices and financial performance of firms in the manufacturing, construction and allied sector of the Nairobi Securities Exchange. International Journal of Business, Humanities and Technology, 3(2), 81–90.
Nguyen, V., Nguyen, T., Tran, T., & Nghiem, T. (2019). The impact of financial leverage on the profitability of real estate companies: A study from Vietnam stock exchange. Management Science Letters, 9(13), 2315–2326. https://doi.org/10.5267/j.msl.2019.7.023
Rahaman, M. M. (2011). Access to financing and firm growth. Journal of Banking & Finance, 35(3), 709–723.
Ramasamy, B., Ong, D., & Yeung, M. C. H. (2005). Firm size, ownership and performance in the Malaysian palm oil industry. Asian Academy of Management Journal of Accounting and Finance, 1(1), 104–181.
Rizqia, D. A., & Sumiati, S. A. (2013). Effect of managerial ownership, financial leverage, profitability, firm size, and investment opportunity on dividend policy and firm value. Research Journal of Finance and Accounting, 4(11), 120–130.
Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), 341–350. https://doi.org/10.1016/j.jbusres.2014.06.024
Salim, M., & Yadav, R. (2012). Capital structure and firm performance: Evidence from Malaysian listed companies. Procedia-Social and Behavioral Sciences, 65, 156–166. https://doi.org/10.1016/j.sbspro.2012.11.105
Sila, I., & Cek, K. (2017). The impact of environmental, social and governance dimensions of corporate social responsibility on economic performance: Australian evidence. Procedia Computer Science, 120, 797–804. https://doi.org/10.1016/j.procs.2017.11.310
Wu, M.-W., & Shen, C.-H. (2013). Corporate social responsibility in the banking industry: Motives and financial performance. Journal of Banking & Finance, 37(9), 3529–3547. https://doi.org/10.1016/j.jbankfin.2013.04.023
Yang, M., Bento, P., & Akbar, A. (2019). Does CSR influence firm performance indicators? Evidence from Chinese pharmaceutical enterprises. Sustainability, 11(20), 5656. https://doi.org/10.3390/su11205656
Yazdanfar, D., & Öhman, P. (2015). Debt financing and firm performance: an empirical study based on Swedish data. Journal of Risk Finance, 16(1), 102-118. https://doi.org/10.1108/JRF-06-2014-0085
Yoon, B., & Chung, Y. (2018). The effects of corporate social responsibility on firm performance: A stakeholder approach. Journal of Hospitality and Tourism Management, 37, 89–96. https://doi.org/10.1016/j.jhtm.2018.10.005
Youn, H., Hua, N., & Lee, S. (2015). Does size matter? Corporate social responsibility and firm performance in the restaurant industry. International Journal of Hospitality Management, 51, 127–134. https://doi.org/10.1016/j.ijhm.2015.09.008
How to Cite
Copyright (c) 2022 Olivia Tanaya
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.