The Impact of CSR on Firm Performance: Exploring the Moderating Effect of Earnings Management

Abstract

 This study checks the CSR impact on the financial performance of the
financial sector in the moderator effect of earning management. The
public and financial sector companies active in CSR have invested most
of their capital in the financial industry. A sample of fifty financial
firms from the banking, insurance, and mudaraba sectors that are listed
on the Pakistan Stock Exchange from the period 2010 to 2023 was used
in this study. Correlation and panel regression analysis were employed
for the study. CSR has a positive but insignificant impact on the
market's financial performance. Earning management has a negative
association with accounting measures of financial performance, while
earning management has a positive association with market-based
measures of financial performance. Earning management is related to
accounting measures, whereas market-basis measures depend on
investors' perceptions. Hausman-test results of the model show a
positive but insignificant impact of CSR on the financial performance
of the financial sector in moderating the role of earning management.
The findings of this study highlight the importance of CSR because
CSR has a positive association with the long-term financial
performance of firms. The bulk of cash in the financial industry has
come from public and financial sector enterprises engaged in corporate
social responsibility.