The Effect of CSR on Firm Performance: Evidence from Pharmaceutical and Chemical Industries of Bangladesh

Abstract

Corporate Social Responsibility (CSR) has become an important part of business strategy globally, with increasing recognition of its potential impacts on firm performance. This study displays the relationship between CSR and firm performance in the pharmaceutical and chemical industries in Bangladesh. By applying the secondary data from annual reports of 28 companies listed in Dhaka Stock Exchange (DSE) over a seven-year period (2016/17-2022/23), this study applies Tobin’s Q to measure firm performance. The findings display a positive relation between CSR activities that is measured by expenditures on Workers Participation Provision Fund (WPPF) and Welfare Fund (WF) and firm performance is measured by indicators such as market value and total assets. Companies that give importance to CSR not only achieve financial gains but also can contribute to strong relationship with stakeholders. This paper contributes experimental evidence by supporting the benefits of CSR in increasing financial performance within the pharmaceutical and chemical industry. This research is relevant for the stakeholders who are willing to put more effort on sustainable business practices to increase the economic growth in Bangladesh.