CSR reporting and financial performance of Czech listed companies

Corporate social responsibility (hereinafter CSR) has reached significant importance in contemporary theory as well as professional practice.

Increasing numbers of companies are starting to implement CSR policy in their everyday business practice and as a result the information regarding this activity is disclosed in CSR reports or within annual reports.

Within the contemporary research about CSR these trends are visible: (i) linkage between costs and benefits from CSR, and (ii) factors affecting the extent of CSR in respected jurisdiction.

The current trade literature suggests that the major factors influencing the extent of company’s CSR are: (i) profitability, (ii) size, (iii) financial leverage, (iv) market-to-book value, (v) liquidity, (vi) ownership structure.

In most countries CSR reporting is voluntary. Therefore companies choose various means to disclose CSR related information, either in the form of standalone CSR reports or in the form of disclosure in the annual financial reports. The last option is most widely used as companies find it requires less time and effort. The KPMG Survey of Corporate Responsibility Reporting conducted in 2013 revealed that there is a growing trend in CSR reporting all over the world, with the strongest growth observed in the Asia Pacific region.

The major purpose of this paper is to measure the linkage between CSR and financial performance of Czech listed companies.

We do believe that listed companies tend to be more advanced in CSR reporting in comparison with non-listed companies. Calculating accounting and market based ratios as the companies’ current financial performance measures, we examined the existence of linkage between CSR reporting and companies’ financial performance (e.g. return on assets (ROA), market value added (MVA).

Results demonstrate that two companies with the highest value of ROA (22.59% and 13.99%) are characterized by the absence of standalone CSR reports. However, two companies with a high level of CSR disclosure have low values of ROA (-67.97% and -2.66%).

Most of the companies with the high normalized DMVA ratio are characterized by absence of standalone CSR reports. However, companies with high levels of CSR disclosure had the lowest values of normalized DMVA (-37.15%).

Based on the results we can state that the implementation of standalone CSR reporting does not have any direct linkage with the company’s financial performance.

This paper is one of the research outputs of the project IGA VŠE F3/2/2014.