IMPACTS OF CORPORATE SOCIAL RESPONSIBILITY ON THE FINANCIAL PERFORMANCE OF THE FIRMS

Abstract

Does CSR impact on firms' profits? CSR will lead to increase or decrease of financial performance of the firms. Firms face complex market conditions, external effects and asymmetric information which may lead to market failure and sub‐optimal profits. In the literature, market failures could build the theoretical base for corporate social responsibility (CSR) implementation by firms. In fact, firms in competitive markets could use CSR as a management tool to gain more profits through diversification. Further, the implementation of CSR requires the detection of future trends and developments which makes the firms more stable to sudden events. Therefore, CSR may offer firms the opportunity to gain higher profits than they would get without CSR. Alternatively, CSR could lead to higher costs and thus to worse financial performance. Many studies are taken in which the method of study is quantitative or using the KLD data base. In this study, I will examine the relationship of CSR and financial performance in a different view and different method. This study makes clear relationship in the aspect of identifying the costs and benefits of CRS, how those costs and benefits will affect the accounting earnings or profits of the firms. Those issues will be improved by the case of Vedan and Unilever in Vietnam.