Page 1 of 6

Journal for Studies in Management and Planning

Available at https://pen2print.org/index.php/jsmap/

ISSN: 2395-0463

Volume 04 Issue 12

December 2018

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 22

Impact of Corporate Social Responsibility on

Organizational Performance of Financial

Institutions in Batticaloa District

Vianny Jeniston Delima

Lecturer (Probationary), Trincomalee Campus, Eastern University, Sri Lanka

Abstract:

Corporate social responsibility plays an important

role in attracting and retaining stakeholders to

achieve organizational performance. Stakeholders

expect the business to be involved in socially

responsible manner. Thus, companies try to adopt

various practices to reveal that they have continuous

commitment over all stakeholders by behaving

morally to fulfill social expectations and improving

economic development. Companies are expected to

develop as a socially responsible entity in the

market. This study examined whether corporate

social responsibility has an impact on organizational

performance of financial institutions in Batticaloa

district (Manmunai North D.S. Division). The

conceptual framework has been developed to

measure association between corporate social

responsibility and organizational performance.

Economic, legal, ethical, and discretionary

responsibilities are considered as the measurements

of corporate social responsibility which was derived

from Carroll (2000). Corporate reputation and

employee commitment are considered as

measurements organizational performance which

was derived from Carton (2004). Questionnaires

were used to collect data for this study. 198

questionnaires were collected from 59 companies in

Batticaloa district. Data were analyzed and

evaluated by univariate and bivariate techniques.

Descriptive statistic has been used for the analysis.

In Bivariate analysis, correlation and multiple

regressions have been used for the analysis. Findings

shows that corporate social responsibility and

organizational performance are at high level. There

is a strong positive relationship between corporate

social responsibility and organizational

performance. Corporate social responsibility

significantly impacts on organizational performance

of Financial Institutions. These findings would be

useful to consider more on corporate social

responsibility practices to avoid the corporate

collapses and unethical issues to achieve

organizational performance.

Keywords: Corporate social responsibility,

Organizational performance

1. Introduction

Corporate social responsibility is becoming an

important concept among financial institutions

in recent years. Several companies have been

collapsed and failed to secure their market due

to ethical, legal, economical, discretionary

activities. Corporate social responsibility

becomes a compulsory activity for companies to

creates positive influence on society for

sustainable development by strengthening their

reputation in the market. Companies should

focus on environment protection, corporate

ethics, social activities to satisfy the all the

stakeholders. European Commission (2001)

defines corporate social responsibility that “a

concept whereby companies integrate social and

environmental concerns in their business

operations and in their interaction with their

stakeholders on a voluntary basis”. Corporate

social responsibility is not just charitable events

but it is profit increasing events of the company.

Islam et al. (2012) states that companies are not

just engaged in profit seeking activities but

engaged in social welfare activities where

companies are responsible for all of

stakeholders. Financial institutions focus on

corporate social responsibility because it

enhances profitability of shareholders, solves

liquidity problems, satisfying the regulations,

and finally contributing to growth of the

economy (Nwankwo, 1991). Companies can

safeguard themselves from corporate scandals,

environmental problems, rules and regulations,

good relationship with employees (Norton et al.,

2009). In order to get sympathy of customers,

companies should concentrate on corporate

social responsibility activities. Not only it

attracts and retains customers, but also it

motivates employees which helps organizations

to sustain in the market (Okwemba, 2014).

Social responsibility is identified as

Page 2 of 6

Journal for Studies in Management and Planning

Available at https://pen2print.org/index.php/jsmap/

ISSN: 2395-0463

Volume 04 Issue 12

December 2018

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 23

responsibility that associated with corporate

performance (Carroll, 1979). This paper

analyses impact of corporate social

responsibility on organizational performance of

financial institutions in Batticaloa district.

2. Research Problem

Organization’s goal is to improve its

competencies by engaging social activities to retain

loyal customers at the same time financial

institutions can earn profit in the market (Grant,

1991). Companies can improve its competitive

advantage by sacrificing short term expenses for

social responsibility (Daniel, 2013). According to

Daniel (2013), it enhances profit by increasing sales

volume, improved market share, competitive

advantage, good customer relationship and customer

loyalty. Companies’ products, services, operations

are related with community. According to Marcia et

al (2013), customers good perception can be created

when the companies involve in socially responsible

activities in competitive market. Financial

institutions can use these practices to improve brand

value among the customers (Omoro et al, 2013).

There is a knowledge gap regarding corporate social

responsibility and organizational performance due to

lack of findings in previous researches. Therefore,

this research made a noteworthy contribution to find

the relationship of corporate social responsibility and

organizational performance in financial institutions

in Batticaloa.

3. Objectives

The specific objectives of this study are given

below. These objectives have been derived from

the research questions and purpose of the study.

• To identify the level of corporate social

responsibility in financial institutions.

• To identify level of organizational

performance in financial institutions.

• To analyze the relationship between

corporate social responsibility and

Organizational performance in financial

institutions.

• To identify the impact of corporate social

responsibility on organizational performance in

financial institutions.

4. Conceptual Framework

Based on literature survey following conceptual

framework was developed. This conceptual

framework establishes link between corporate

social responsibility and organizational performance.

Figure 1. Conceptual Framework

5. Theoretical consideration

Corporate social responsibility is developing

policies and decisions to create value and benefit

to community (Bowen, 1953). Davis (1960)

defines that “social responsibility is

businessmen's decisions and actions taken for

reasons at least partially beyond the firm's direct

economic or technical interest”. Organizations

must expand their thoughts in terms of social

wellbeing and economic benefits beyond the

profit making (Davis, 1960). Due to benefits of

corporate social responsibilities, companies put

more investment in social wellbeing activities.

Carroll (1979) states that there are four

responsibilities such as economics, legal, ethical,

discretionary responsibilities. Economics

responsibility means responsibility for being

profitable and productive (Maignan, 2001). The

society includes shareholders, investors, and

lenders and they are interested in companies to

receive high profit margins. If the companies

could be able to productive then it fulfills the

expectation of society which means the

company satisfies the economic responsibility.

Legal responsibility means business must

achieve their profitability within the legal

Independent

variable

Corporate Social

Responsibility

Economics

Responsibil

ities

Legal

Responsibil

ities

Ethical

Responsibil

ities

Dependent variable

Organizational

Performance

Discretionar

y

Responsibil

ities

Employee

Commitment

Corporate

Reputation