The nexus between Corporate Social Responsibility and Corporate Financial Performance: Evidence from Construction Companies listed on the Zimbabwe Stock Exchange

Abstract

Corporate social responsibility has taken center stage at the heart of business strategies for sustainable growth. Many businesses have been observed to be involved in sustainable investing and activities that exhibit corporate social responsibility (CSR). However, the relationship between CSR and firm performance remains unclear. Prior studies found varying results, but the relationship was either positive, negative, or non-significant. Given the mixed and inconclusive results, it is hard for managers to decide whether to continue or stop sustainable investing. Many a time, it puts decision-makers on the horns of an intractable dilemma. Thus, the study aims to reveal the relationship between CSR and financial performance in the context of construction companies in Zimbabwe. A distinguishing feature of this study is the dynamic analysis, where variation in time is incorporated, unlike previous studies. In this regard, the most suitable model to use is the Error Correction Model which makes it possible to assess the relationship between the two variables, both in the long and short run. The findings of this study help business leaders make informed dynamic, not static decisions on corporate social responsibility initiatives are supported by evidence-based management.