Impact of Corporate Social Responsibility on Financial Performance: Evidence from SMEs in Quetta

Abstract

The study explored the relationship between financial performance of businesses and CSR among Small and Medium Enterprises (SMEs) working in Quetta city. Quetta, like other cities in Pakistan faces many societal issues, and SMEs can act in minimizing some of those issues. The population for the current study was the SME’s registered with SECP (Security Exchange Commission of Pakistan) operating in Quetta, City, with the sample of 278 SMEs. A self-administered questionnaire to measure CSR was employed to collect data from SMEs.  Multiple linear regression was used to analyze the impact of CSR practices on financial performance of SMEs of Quetta city.  The results indicated that there is a significant impact of CSR on the financial performance of SMEs in Quetta. Furthermore, with the help of regression analysis the impact of each dimension of CSR (Economic, Philanthropic responsibilities, Legal Obligation and Ethical Responsibility) was studied. The results showed significant impact of Economic and Philanthropic responsibilities on financial performance, but Legal obligation and Ethical Responsibility showed a negative relationship with Financial Performance. This study further suggested that businesses must involve themselves in the CSR activities as it has a positive impact on the financial performance of businesses by contributing to their positive image building