Corporate Social Responsibility & Corporate Financial Performance Relationship: Evidence from UK´s Food Industry

1. Research Questions & Research Objectives

The main purpose of the proposed research paper will be to investigate the impact of Corporate Social Responsibility on the listed companies’ share price in order to evaluate and analyse its contribution to their increases. In the below portion, the research questions with its objectives are listed and briefly discussed below:

1.1. Research Question

The Research Questions for the desired research paper are listed below:

What Impact the Corporate Social Responsibility (CSR) Disclosure would made on the Corporate Financial Performance (CFP)?

Is it any relationship exists between the firm’s CSR and its performance based on its share prices.

Identify at least one dimension of Corporate Social Responsibility (CSR) which would be positively related to Corporate Financial Performance (CFP)? Investigate and Presents the benefits of CSR’s implementation to the UK’s Food Industry financial and market performance?

So it is cleared that the questions are properly designed in order to accomplish the core objective of the Proposed Research Paper.

1.2. Research Objectives

The objectives of the proposed Research Paper are outlined below:

To discover that either the CSR Disclosure is positive or negatively related to the Corporate Financial Performance.

To learn that either the CSR based on environmental reporting resulting in increasing the listed companies’ share prices or not.

To identify at least one dimension of CSR disclosure which is positive significantly related to the Corporate Financial Performance (CFP), in order to direct the companies under discussion to focus and emphasis on that particular CSR’s dimension.

To understand the importance of CSR Disclosure and its implementation within the UK’s Food Industry.

2. Research Methodology

The Research Methodology adopted for the proposed research will be based on the both approaches: quantitative approach as well as qualitative approach. The quantitative approach will be adopted and implemented for the first two questions as it involved the use and analysis of certain CSR and Financial measures. Whereas the last the question will be based on the qualitative approach it will involve the interview of several companies stakeholders (Investors, Stock Analysts and the Consumers). The brief description of these two approaches along with its measures is mentioned below.

2.1. Quantitative Approach

2.1.1. Measurements of Corporate Social Responsibility (CSR)

For the purpose of measuring the CSR disclosure, this research study will adopt the methodology named as Disclosure Scoring, which would be based entirely on the technique called content analysis which incorporates and includes four important CSR indicators (Employee Retention, Community Involvement, Product and the Environment). Each factor then has more sub-item disclosure which needed to be adjusted and disclosed depending on the type of specified item disclosure. Al-Tuwaijri, et al. (2004) stated and proposed that the objective of underlined process can be achieved with the use of diclosure measures that uses quantitative approach by assigning and denoting weights to the different disclosure items depending on their importance in the within the given user category which will be marked and denoted as the greatest weight in order to quantify the disclosures items incorporated in the CSR indicator as mentioned above (Al-Tuwaijri, et al., 2004). So in this manner marking and assiging the next the item with less wieght than the previous one. So as the item included in the disclore measures will receive the minimum wieght. It has also being elaborated that the firm which failed to disclose the any of the information on the defined indicators will be managed receive zero score. So this research will adop and utilise this above procedures for the purpose of measuring Corporate Social Responsibility (CSR) Diclosure.

2.1.2. Measurements of Financial Performance

The proposed research paper will use three identical financial measure of performance which will be determined as the dependent variables for the given research. All of these measure comes under the umbrella of accounting based performance measure which are listed and explained below:

2.1.2.1. Return on Assets (ROA)

The main reason for using this performance measure as dependent variable is due its reliability and importance in accounting term as it is predicted to be less manipulated and is used widely to widely to measure the corporation’s financial performance over a time period (Yoshikawa & Phan, 2003).

2.1.2.2. Stock Market Return (R i )

The reason for using this performance measure as dependent variable is that the investor’s behaviour as now a day investors are more conscious and emphasized towards the stock return (Yoshikawa & Phan, 2003).

2.1.2.3. Tobin ’ s q ratio

The reasons for using Tobin’s q ratio is due to the current trend as financial performance measures has became widespread in Empirical market analysis. And now it is the widely used financial performance measure, which is calculated by dividing the value of underlying firm with its asset’s replacement cost (Hirsch & Seaks, 1993). It is important to illustrate more that the Tobin’s q ratio is also termed as crucial for testing reported results’ robustness which is the alternative measure of financial performance (Welch, 2003). The Tobin’s q ratio is basically a representation of certain community of investors which are to be constrained or doubt by the businesses insight (Demsetz & Villalonga, 2001).

So, it has been demonstrated that on the basis of this research paper objectives, these all variables will be used and adopted on respective manner, In short, it has been cleared and understood that three variables (Return on Assets, Stock Market Return and Tobin’s q ration) will be used as dependent variables. Whereas the for the purpose making findings and conclusion, four Corporate Social Responsibility (CSR) Disclosure measures (Employee’s Relational Dimension, Environmental Dimension, Product Dimension and Community Involvement Dimension) will be used as Independent variable for the desired research study. These both measures (Performance & CSR Disclosure) together will able to the control the effect on certain variables listed below:

a) System Risk (BETA)
b) Financial Leverage (LEV)
c) Company’s size (SIZE)
d) Company’s turnover (SALES)
e) Company’s asset turnover (ATR)
f) Earnings Per Share (EPS)

2.2. Qualitative Approach

2.2.1. Interview

For the purpose of researching through the fourth and the last question, certain interviews will be conducted. These interviews will be based on the Qualitative Approach in which companies’ stakeholders (Investors, Stock Analysts and Consumers) will be the main participants. This purpose of this qualitative approach will be to determine the importance of CSR Disclosure implementation in UK’s Food Industry. The discussion involved in this method will be preceded in three parts. The first phase will be designed to assess the participant’s understanding CSR disclosure.

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