IMPLICATIONS OF CORPORATE SOCIAL RESPONSIBILITY ON ...

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IMPLICATIONS OF CORPORATE SOCIAL RESPONSIBILITY ON FINANCIAL AND

NON-FINANCIAL PERFORMANCE OF BANKING SECTOR OF PAKISTAN:

MODERATING ROLE OF STAKEHOLDER PRESSURE AND MEDIATING ROLE OF

INNOVATION AND CORPORATE REPUTATION

BY

MUZAMMAL ILYAS SINDHU

ENROLMENT: 01-280152-007

A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF

THE REQUIREMENTS FOR THE DEGREE OF

DOCTOR OF PHILOSOPHY

IN MANAGEMENT SCIENCES

To

DEPARTMENT OF MANAGEMENT STUDIES

BAHRIA UNIVERSITY, ISLAMABAD, PAKISTAN

2020

ii

SUBMISSION FORM OF THESIS FOR HIGHER RESEARCH DEGREE

BAHRIA UNIVERSITTY, ISLAMABAD

Candidate Name: Muzammal Ilyas Sindhu

Thesis Titled:

“Implications of Corporate Social Responsibility on Financial and Non-Financial Performance

of Banking Sector of Pakistan: Moderating Role of Stakeholder Pressure and Mediating Role of

Innovation and Corporate Reputation”

Candidate Signature: ____________________

Certificate of Principal Supervisor

I Dr Muhammad Arif being the principal Supervisor for the above scholar, certifies that thesis is

in a form suitable for examination and that the candidate has pursued his course in accordance

with the Rules of the University.

Signature: _______________________ Date: ______________________

Recommendation for Examination

I recommend that the thesis be examined.

Principal Supervisor: _______ Dr Muhammad Arif __________ Date: _____________________

Co-Supervisor:_________________ Date: _____________________

Not Recommended for Examination

I recommend that the thesis be examined.

Principal Supervisor: ____________________________________ Date: ___________________

Co-Supervisor:______________________ Date: __________________

Statement by the Head Faculty/Department

I support the submission of the thesis of the above named student for examination under the

University Rules for higher degrees.

Signature: ______________________________________________ Date: _________________

iii

BAHRIA UNIVERSITY, ISLAMABAD

APPROVAL SHEET

SUBMISSION OF HIGHER RESEARCH DEGREE THESIS

Candidate’s Name: Muzammal Ilyas Sindhu

Discipline: Management Sciences

Faculty/ Department: Management Studies

I hereby certify that the above candidate’s work, including the thesis, has completed to my

satisfaction and that the thesis is in a format and of an editorial standard recognized by the

faculty/ department as appropriate for examination.

Signature(s) Principal Supervisor: Dr Muhammad Arif

Dated: -----------------------------------

The undersigned certify that:

The candidate presented at a pre-completion seminar, and overview and synthesis of

major findings of the thesis, and that the research is of a standard and extent appropriate for

submission as a thesis.

I have checked the candidate’s thesis and its scope, format; editorial standards are

recognized by the faculty/department as appropriate.

Signature(s) Dean/Head of Faculty/ Department:

Dated: ------------------

iv

COPYRIGHT

Copyright © [2019] by Muzammal Ilyas Sindhu

All Rights Reserved

The thesis and its content including the proposed title “Implications of Corporate Social

Responsibility on Financial and Non-Financial Performance of Banking Sector of Pakistan:

Moderating role of Stakeholder pressure and mediating role of innovation and corporate

reputation” are the copyright of in the undersigned PhD scholar’s name as author.

Sign(s) PhD scholar: Muzammal Ilyas Sindhu

v

AUTHOR’S DECLARATION

I, Muzammal Ilyas Sindhu, PhD Scholar in the Department of Management Studies, Bahria

University, Islamabad, certify that the research work presented in this thesis is to the best of my

knowledge my own. All sources used and any help received in the preparation of this dissertation

have been acknowledged. I hereby declare that I have not submitted this material, either in

whole or in part, for any other degree at this or other institution. At any time if my statement is

found to be incorrect even after my graduation, the University has the right to withdraw/cancel

my PhD Degree.

Signature: ___________________

Name: Muzammal Ilyas Sindhu

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Dedication

I dedicate this thesis to “Allah Almighty” my eternal rock and source of refuge,

Who gave me the passion to work hard and struggle to comply with my destiny

and to “Hazrat Muhammad (PBUH)” the one who enlightened my heart with the

rules to follow.

This thesis is also dedicated to

My beloved parents, siblings, my wife and daughters (Manahil Bahu, Mahnoor

Muzammal, Malaika Muzammal) as their love, care and support for my studies

without which I could not be able to reach at this level.

(May Allah Bless Me, My Family and Well Wishers)

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ACKNOWLEDGEMENTS

All praises to “Allah Almighty” Who enabled me to complete this task successfully and my

utmost respect to His last Prophet Muhammad (PBUH).

I would like to express the deepest appreciation of my respected supervisor Prof Dr Muhammad

Arif for his patience, motivation, enthusiasm, immense knowledge and continuous support in

completion of my PhD thesis. His guidance helped me all the time in research and writing of

thesis. I could not have imagined having a better advisor and mentor for my PhD thesis.

Besides my supervisor, I would like to thank the rest of my Final defense committee: respected

Dr. Muhammad Khalid Sohail, Dr. Muhammad Razzaq Athar and Dr. Shehzad Anjum, for their

encouragement, insightful comments, and hard questions. I want to gratefully acknowledge my

respected teachers Prof. Dr Hafiz Mushtaq Ahmed, Prof. Dr. Muhammad Ismail Ramay, Prof. Dr

Nadia Tahir, Prof. Dr. Faisal Aftab, Dr Muhammad Hanif, Dr. Riaz Ahmed, Dr Abdul Sattar, Dr

Taqaddas Bashir Chaudhry, and Dr Abdul Qazi Subhan; all of them revolutionized my life in a

very real sense by planting the seeds of research and logic, what I learnt in their classes and from

their professionalism has not only add up to my knowledge but, I feel to be a better person. I am

grateful to Dr. Anwar Fazal Chishti for enlightening me the first glance of research.

I thank my beloved friends Dr Hafiz Muhammad Waqar, Muhammad Irfan Khadim, Saif ul

Rehman, Syeda Urooj Babar, Aqil Waqar Khan, Kamran Iqbal, Faisal Mehmood, Syed Usman

Lutfi, Sarina Shrizai, and Tanveer Taj who guide me in initiation of this research thesis. I also

thanks to my fellows Ehtasham Ul Haq and Muhammad Iftikhar Ali for the stimulating

discussions, for the sleepless nights we were working together before deadlines, and for all the

fun we have had in the couple of months. Also I thank my well-wisher’s Sana Ullah Khan,

Akhter, Shakeel Abbas, Ali Hassan, Abid Hussain, and Muhammad Ifraheem. In particular, last

but not the least; I would like to thank my parents for giving birth to me at the first place and to

my wife, siblings for always being encouraging and supporting me spiritually.

Muzammal Ilyas Sindhu

viii

PLAGIARISM UNDERTAKING

I, solemnly declare that research work presented in the thesis titled

“Implications of Corporate Social Responsibility on Financial and Non-Financial

Performance of Banking Sector of Pakistan: Moderating role of Stakeholder

pressure and mediating role of innovation and corporate reputation” is solely my

research work with no significant contribution from any other person. Small

contribution / help wherever taken has been duly acknowledged and that complete

thesis has been written by me.

I understand the zero tolerance policy of the HEC and Bahria University towards

plagiarism. Therefore I as an Author of the above titled thesis declare that no portion

of my thesis has been plagiarized and any material used as reference is properly

referred / cited.

I undertake that if I am found guilty of any formal plagiarism in the above titled

thesis even after award of PhD degree, the university reserves the right to withdraw /

revoke my PhD degree and that HEC and the University has the right to publish my

name on the HEC / University website on which names of scholars are placed who

submitted plagiarized thesis.

Scholar / Author’s Sign: ____________

Name of the Scholar: Muzammal Ilyas Sindhu

ix

ABSTRACT

In the banking sector, besides the short-term internal business interests of financial companies,

social, environmental and human rights objectives are gaining a dominant and interesting role. In

this perspective, engagement in socially responsible activities can serve as a strategic tool for a

firm’s to avail competitive edge. This evident that corporate social responsibility plays important

role in determining bank performance and it convinced to examine the relationship between CSR

and performance in the banking industry of Pakistan. Furthermore, this study examined the

moderating impact of stakeholder pressure and mediating influence of innovation and corporate

reputation in between the relationship of CSR and performance. There were total 405 responses

analyzed for examining aforementioned relationships. Structural equation modeling was applied

and the direct relationship indicated that there is a significant and positive relationship between

corporate social responsibility and financial performance. These findings were supported by

multiple studies, as they already tested the significant and positive relationship between these

two factors. The direct relationship indicated that there is a significant and positive relationship

between corporate social responsibility and non-financial performance. Corporate social

responsibility directly influenced financial and non-financial performance. In other direct

relationships, corporate social responsibility also influenced innovation and corporate reputation.

The innovation influenced corporate reputation, financial and non-financial performance.

Corporate reputation showed no significant influence on financial and non-financial

performance. In research analysis, simple mediations indicated that innovation played significant

mediation role in relationship between CSR, financial and non-financial performance. Moreover,

corporate reputation also mediated among CSR, financial and non-financial performance. In case

of sequential mediation, innovation and corporate reputation have strongly played role as

mediating variable among CSR, financial and non-financial performance. Last but not least,

stakeholder pressure moderated and established relation of CSR, financial and non-financial

performance. This study contributes to existing knowledge, and beneficial to policy makers,

corporate managers, and executives in establishing corporate strategies. As proposed that if the

banking industry improves their socially responsible activities, it tends toward establishing trust

among stakeholders and enhances their performance.

Keywords:

Corporate Social Responsibility; Financial Performance; Non-Financial Performance;

Innovation; Corporate Reputation; Stakeholder Pressure; Structural Equation Modeling

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TABLE OF CONTENTS

Title Page i

Submission Form ii

Approval Sheet iii

Copy Right iv

Author’s Declaration v

Dedication vi

Acknowledgements vii

Plagiarism undertaking viii

Abstract ix

Table of Contents x

List of Tables xiv

List of Abbreviations xvi

HEC Publication Requirement xvii

CHAPTER 1

INTRODUCTION

1.1 Background of the Study 01

1.2 Contextual Analysis 07

1.3 Rationale of the Study 11

1.4 Problem Statement 13

1.5 Research Questions 15

1.6 Research Objectives 15

1.7 Significance of the study 16

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction 17

2.2 Literature Search Strategy 17

2.3 Corporate Social Responsibility 17

2.4 Dimensions of CSR 24

2.5 Stakeholder Pressure 28

2.6 Corporate Reputation 32

2.7 Innovation 33

2.8 Corporate social responsibility and Financial Performance 35

2.9 Corporate social responsibility, Stakeholder Pressure and Performance 39

2.10 Corporate social responsibility, Corporate Reputation and Performance 42

2.11 Corporate social responsibility, Innovation and Performance 47

2.12 Theoretical Background 52

2.13 Conceptual Framework 54

2.15 Hypothesis 55

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CHAPTER 3

THE DATA AND RESEARCH METHODOLOGY

3.1 Introduction 56

3.2 Target Population 57

3.3 Sampling Design 57

3.4 Data Collection 58

3.5 Measurement Scale 58

3.6 Data Analysis Techniques 59

3.6.1 Normality Tests 60

3.6.2 Descriptive Statistics 60

3.6.3 Correlation 61

3.6.4 Structural Equation Modeling 61

3.7 Pilot Testing 63

3.8 Ethical Consideration 64

CHAPTER 4

EMPIRICAL STUDY

4.1 Introduction 65

4.2 Assessment of Measurement Models 65

4.2.1 Measurement Models of Corporate Social Responsibility 65

4.2.1.1 Descriptive Statistics 65

4.2.1.2 Assessment of Overall Fitness 67

4.2.1.3 Assessment of Inter Item Correlation and Reliability 73

4.2.2 Measurement Models of Corporate Reputation 74




4.2.3 Measurement Models of Innovation 81




4.2.4 Measurement Models of Financial Performance 87




4.2.5 Measurement Models of Non-Financial Performance 93



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4.2.6 Measurement Models of Stakeholder Pressure 100




4.3 Assessment of Structural Model 106

4.3.1. Normality 106

4.3.1.1. Descriptive Statistics of Overall Selected Variables 106

4.3.1.2. Histogram and P-P Plot 107

4.3.2. Linearity 108

4.3.3. Multicollinearity 108

4.3.4. Demographics 110

4.3.5. Reliability and Validity Analysis 111

4.3.6. Goodness and Fitness 112

4.3.7. Correlation Matrix 114

4.4 Hypothesis Testing 115

4.4.1 Direct Relationship 115

4.4.1.1 Corporate Social Responsibility and Financial Performance 115

4.4.1.2 Corporate Social Responsibility and Non-Financial Performance 118

4.4.1.3 Remaining Direct Relationships 120

4.4.2 Simple Mediation 122

4.4.2.1 Innovation mediating the relationship of Corporate Social Responsibility

and Financial Performance 122

4.4.2.2 Innovation mediating the relationship of Corporate Social Responsibility

and Non-Financial Performance 126

4.4.2.3 Corporate Reputation mediating the relationship of Corporate Social

Responsibility and Financial Performance 129

4.4.2.4 Corporate Reputation mediating the relationship of Corporate Social

Responsibility and Non-Financial Performance 132

4.4.3 Sequential Mediation 135

4.4.4 Moderation 140

4.4.4.1 Moderation I 140

4.4.4.2 Moderation II 142

CHAPTER 5

DISCUSSION AND CONCLUSION REMARKS

5.1 Introduction 144

5.2 Discussion 144

5.3 Conclusion 148

5.4 Contribution to knowledge 150

5.5 Implications 151

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5.6 Limitations 152

5.7 Delimitations 153

5.8 Recommendations and Future direction 154

References 156

Appendixes 190

Questionnaire 195

Sample selection 199

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LIST OF TABLES

Table 2.1: Evolving definitions of CSR 20

Table 4.2.1.1 Descriptive Statistics of CSR 66

Table 4.2.1.2: Fit levels of Original CSR Measurement Model 68

Table 4.2.1.3: Comparative Fitness levels of CSR Measurement Model 72

Table 4.2.1.4: Inter Item Correlation of CSR Measurement Model 73

Table 4.2.2.1 Descriptive Statistics of Corporate Reputation 74

Table 4.2.2.2: Fit levels of Original CR Measurement Model 76

Table 4.2.2.3: Comparative Fitness levels of CR Measurement Model 78

Table 4.2.2.4: Inter-item Correlation of CR Measurement Model 79

Table 4.2.3.1 Descriptive Statistics of Innovation 81

Table 4.2.3.2: Fit levels of Original IP Measurement Model 83

Table 4.2.3.3: Comparative Fitness levels of IP Measurement Model 85

Table 4.2.3.4: Inter-Item Correlation of IP Measurement Model 86

Table 4.2.4.1 Descriptive Statistics of Financial Performance 87

Table 4.2.4.2: Fit levels of Original FP Measurement Model 89

Table 4.2.4.3: Comparative Fitness levels of FP Measurement Model 91

Table 4.2.4.4: Inter-item Correlation of Financial Performance Measurement Model 92

Table 4.2.5.1 Descriptive Statistics of Non-financial performance 93

Table 4.2.5.2: Fit levels of Original NFP Measurement Model 95

Table 4.2.5.3: Comparative Fitness levels of NFP Measurement Model 97

Table 4.2.5.4: Inter-item Correlation of NFP Measurement Model 98

Table 4.2.6.1 Descriptive Statistics of Stakeholder Pressure 100

Table 4.2.6.2: Fit levels of Original SP Measurement Model 102

Table 4.2.6.3: Comparative Fitness levels of SP Measurement Model 104

Table 4.2.6.4: Inter-item Correlation of SP Measurement Model 105

Table 4.3.1.1 Descriptive Statistics Overall 107

Table 4.3.3.1: Tolerance Level for Multicollinearity 109

Table 4.3.3.2: VIF Level for Multicollinearity 109

Table 4.3.4.1: Demographics 110

Table 4.3.5.1 Reliability and Validity Analysis 111

Table 4.3.6.1: Good and Fitness levels of Final Structural Model 112

Table 4.3.7: Correlation Matrix 114

Table 4.4.1.1: CSR and Financial Performance 117

Table 4.4.1.2: CSR and Non-Financial Performance 119

Table 4.4.1.3: Direct Relationships 120

Table 4.4.1.1: Mediation I 124

Table 4.4.2.2: Mediation II 127

Table 4.4.2.3: Mediation III 130

Table 4.4.2.4: Mediation IV 133

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Table 4.4.3.1: Mediation V 136

Table 4.4.3.2: Mediation VI 139

Table 4.4.4.1: Moderation I 140

Table 4.4.4.2: Moderation II 142

Appendixes 190

xvi

LIST OF ABBREVIATIONS

Sr No. Detailed Word Abbreviation

1 Analysis of Moment Structures AMOS

2 China Pakistan economic corridor CPEC

3 Chi-square χ²

4 Comparative fit index CFI

5 Confirmatory factor analysis CFA

6 Corporate reputation CR

7 Corporate social responsibility CSR

8 Exploratory factor analysis EFA

9 Financial performance FP

10 Goodness of fit index GFI

11 Gross domestic product GDP

12 Human resource Management HRM

13 Innovation IP

14 Karachi stock exchange KSE

15 Kurtosis Kurt

16 Non-governmental organization NGO

17 Non-financial performance NFP

18 Normed chi-square χ²/df

19 Normed fit index NFI

20 Return on Asset ROA

21 Root Mean Square Error of Approximation RMSEA

22 Root mean square residual RMR

23 Skewness Skew

24 Stakeholder pressure SP

25 Standard error SE

26 State Bank of Pakistan SBP

27 Statistical Package for the Social Sciences SPSS

28 Structural equation modeling SEM

29 United States of America US/USA

30 Variance inflation factor VIF

xvii

HEC REQUIREMENT OF PUBLICATION

Paper Title:

1. Sindhu, M. I., & Arif, M. (2017). The inter linkage of corporate reputation between

corporate social responsibility and financial performance. Pakistan Journal of Commerce

and Social Sciences, 11(3), 898-910.

2. Sindhu, M. I., & Arif, M. (2017). Corporate social responsibility and loyalty: Intervening

influence of customer satisfaction and trust. Cogent Business & Management, 4(1), 1-10.

Authors Name:

Muzammal Ilyas Sindhu

Dr Muhammad Arif

Journal Name:

1. Pakistan Journal of Commerce and Social Sciences (Y Category)

2. Cogent Business & Management (ISI Indexed – ESCI)

1

CHAPTER 1

INTRODUCTION

1.1 Background of the Study

Classical theories of finance are based on the notion that the main objective of any organization

is to maximize the shareholder‟s wealth. In the context of capitalistic economy, the sole

organizational concern should be to enhance their operating performance. Financial firms are

particularly more concerned about their performance because they have to contribute toward the

financial well-being of a society. So, organization does not concern only with financial goals but

they have to respond the non-financial interests of stakeholders. However, last few years

enlightened the stakeholder‟s activism and long term sustainability context. So, the main thrust

of my study is to examine the impact of corporate social responsibility on financial performance

(Robin, Salim & Bloch, 2018; Abusharbeh, 2017; Evans et al., 2014).

Financial performance considered a key indicator of financial firms specially banks. It indicates

whether the firms work efficiently, fulfill its goals, enhanced returns and maximized

shareholder‟s wealth. It leads toward the development of human resource, business prosperity,

and more profit distribution among shareholders. The strong financial position of the business is

an important aspect for everyone like workers, stakeholders, financial institutions and

government organizations and it indicate the effectiveness and efficiency of a business entity

(Robin, Salim & Bloch, 2018; Abusharbeh, 2017; Evans et al., 2014; Mohanty, 2006; Duncan &

Elliott., 2004; Reddy, 2004; Lin & Piesse, 2004; Beck & Levine, 2004; Waddock & Graves,

1997; Griffin & Mahon, 1997).

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In the modern era, the financial performance of banks is measured through asset evaluation,

efficient risk management, offering the innovative financial product. Moreover, issuance of

secured loan, return on asset, return on investment, earning per share, dividend yield, sales, and

profitability, orientation on wealth maximization, return on capital employed, wealth creation for

shareholders, and market value of shares are also considered important yardstick for the

valuation of banks (Bektas & Kaymak, 2009; Makni, Francoeur, & Bellavance, 2009; Gilbert &

Wheelock, 2007; Mishra & Suar, 2010; Agle et al., 1999; Fowler & Schmidt, 1988;

Govindarajan, 1984). Although financial performance remains vital, however non-financial

performance is also significant that affect the stakeholder‟s perceptions about an entity. Financial

performance remains exceptional, however due to rising competitive pressure; organizations are

focusing on non-economic aspects of business which remain material in long run. Non-financial

performance reflects the going concerns and long term sustainability of a business. Although it

seems subjective, however, its long term effects are objective and definite. It is operationalized

by using the measures of a number of employees, customer satisfaction, good customer dealing,

workplace relations; new product development, cost reduction programs, research and

development, personal development, ensuring employee health and safety (Govindarajan, 1984;

Hoque, 2004; Seiford & Zhu, 1999).

Financial performance is an integral part of the financial sector's planning and development. A

number of researchers examined positive relation between financial performance and economic

development, and a negative association between financial distress and economic development

(Muyambiri & Odhiambo, 2018; Musamali et al., 2014; Skare & Golja, 2014; Ekmekcioglu,

2012; Caprio & Levine, 1994). As global financial environment change rapidly, therefore

governments, regulators, managers, and investors are more concerned about banks performance

3

as well as their working practices (Khan et al., 2017). Particularly, financial performance in the

context of banking remains more pragmatic and exceptional because the spillover effect of banks

financial instability leads toward other sectors of society. Therefore generally all entities,

however particularly banks remain more sensitive and proactive towards meeting their financial

goals.

The sound financial and non-financial performance positively affects the behavior of stakeholder

and increases the chances of customer retention. Past studies proclaimed various potential

determinants of financial and non-financial performance. Studies have been conducted in

different context and remain consistent in this opinion that financial and non-financial

performance is being determined by micro and macro-economic factors. Various

macro/microeconomic factors influence financial performance of banks. The gross domestic

product, inflation, operating cost efficiency, bank size, risk, and liquidity positively influence the

bank‟s financial performance while there is the negative impact of capital adequacy and

exchange rates on the bank performance (Elyor, 2009; Uzhegova, 2010; Kamau, 2009;

Heffernan & Fu, 2010). Financial innovation contributes to economic development (Schumpeter,

2013). Innovative companies have a competitive edge in this rapidly changing market

environment than its competitors having the low pace of innovation. Therefore, innovation is

also pivotal to signify the organizational performance (Abdulai Mahmoud & Hinson, 2012;

Gonzalez-Ramos et al., 2014). The companies which remain famous for innovation are

considered good companies (Padgett & Moura-Leite, 2012). According to past studies, the good

company means with a good reputation, so innovation remains a potential determinant to reflect

in entities' reputation in today's dynamic market environment (Anser et al., 2018; Padgett &

Moura-Leite, 2012; Padgett & Galan, 2010; Wagner, 2010).

4

Studies expounded in past literature, advocate that company reputation is a potential determinant

of financial performance (Deephouse, Li & Newburry, 2009; Gardberg, 2006). Most of the

stakeholder believes that high returns are induced from companies having good reputation. The

firm reputation is a rare and inimitable resource of an entity which further result into competitive

advantage and improved organizational performance (Rindova et al., 2005; Roberts & Dowling,

2002; Barney, 1991). However, there is limited empirical evidence which devotes their efforts to

determine how corporate reputation affects organizational performance. Besides affecting

organizational performance, corporate reputation is also robust to affect stakeholder's perception

(Gatzert, 2015; Maden et al., 2012). It is the image of the organization in the mind of stakeholder

to decide to interact with an entity. Most of the economic contracts are earned on the basis of

corporate reputation.

Therefore, the extending this notion, it will be thought-provoking to investigate that how and to

what extent corporate reputation derive financial performance (Gatzert, 2015; Maden et al.,

2012; Alniacik, Alniacik & Erdogmus, 2012). Moreover, it is also important to study that how

corporate reputation is built over time by the organizations and what are the factors which

composite a favorable reputation in the mind of stakeholder. Last couple of years have witnessed

the surge of social and environmental activism and it is demanded by stakeholder that

organizations should meet the goal of long term sustainability and environmental preservation.

Though literature revealed various antecedents of corporate reputation, however corporate social

responsibility (CSR) is integral determinant (Choongo, 2017; Crifo et al., 2016; Lee & Jung,

2016; Gatsi et al., 2016; Famiyeh et al., 2016; Elouidani & Zoubir, 2015).

Corporations are legal entities, whose major responsibilities to earn a profit, maximize

shareholder wealth, and also contribute to society by enhancing value-added activities. These

5

entities establish a corporate agenda with clearly indicating their social role which reveal them as

good citizens. Carroll (1999, 1979) suggested that CSR is operationalized into four categories,

which includes economic, legal, ethical, and philanthropic. Among all economic part of CSR

plays a vital role in organization's performance and helps the stakeholder to analyze important

economic factor, make strategic planning, manage operations of banks, earn profits and

maximize shareholder wealth (Young & Thyil, 2009; Decker & Sale, 2009; Manne & Wallich

1972; Crowther & Aras, 2008). CSR is strictly voluntary action which provides the basis of

legitimacy to operate in the society and fulfill the expectation of various stockholders. It leads to

reduce the information risk and check whether the organization is on right track and fulfill its

obligations. Consequently, it is argued that all these favorable results can have an effect on the

financial performance of a corporation, such as return on sale and return on investment (Peloza

& Shang 2011; McWilliams, Siegel & Teoh, 1999).

Economic responsibility is full filled by focusing on financial innovation. In competitive

environment, financial institutions needs to modify existing structures, generate new

opportunities through effective risk management, developing and introducing new products, that

helps to generate income, earn profit and wealth maximization (Lentner, Szegedi & Tatay, 2015;

Decker & Sale, 2009; Garriga & Mele, 2004; Carroll, 1991). Legal responsibilities are

considered the second cornerstone of CSR which described the country's legal system and it is

more important for financial institutions.

The regulators define rules which purpose is to reduce the risk, ensure security, and enhanced

customer confidence in the financial system. The supervisory agencies and trade associations

prepared rules for implementation and compliance. The basic purpose of these rules is to ensure

social responsibility in corporate activities to safeguard customer‟s stake, reduce frauds and

6

ensure the safety of customer's assets (Lentner, Szegedi & Tatay, 2015; Decker & Sale, 2009;

Carroll, 1991). But it was found that the legal system of developed countries is more appropriate

in comparison of developing counties (Sood & Arora, 2006; Chapple & Moon, 2005; Arora &

Puranink, 2004).

Ethical responsibility comprised fair, impartial and smart working environment. Ethical norms

are interpreted with individual integrity and fulfillment of stakeholder‟s expectations. It

represents the fundamental ethical principles of moralities, which is in line with confidence and

is linked to the financial sector (Decker & Sale, 2009; Carroll, 2004). Business ethics based on

principles of integrity, fair conduct, respect, and transparency in the financial sector, are in

accordance with the host country's environment. So, there is need to consider, ethical values and

expectations which communicating in the context of stakeholder perspective (Lentner, Szegedi &

Tatay, 2015; Decker & Sale, 2009; Carroll, 1994).

Philanthropic responsibility is an important element of CSR. In philanthropy, the organizations

voluntarily try to improve the social life of the people through building parks, clean water

projects, making shelter homes, and helping poor persons etc. (Crane & Matten, 2007). Today's

philanthropy helps the banking sector in enhancing good reputation and global corporate

citizenship (Lentner, Szegedi & Tatay, 2015; Decker & Sale, 2009; Carroll, 1994; Carroll, 1991).

In recent years, modern researchers examined that the level of social expectations from the

banking industry was changed. CSR activities are considered integral for the survival of the

banking industry so that they can meet the expectations of stakeholder other than wealth

maximization. This context of corporate social responsibility and financial performance is

supported by multiple theories which include stakeholder theory, social identity theory,

7

legitimacy theory, and consumer inference making theory (Pirsch, Gupta & Grau, 2007; Porter &

Kramer, 2002).

Classical theories of finance support the concept of shareholder's theory, which proposed that

main organizational objectives are to maximize the shareholder wealth (Friedman, 1970).

Besides this main objective, societal and other stakeholder's interests should not be compromised

(Crane et al., 2008). Stakeholder theory explained that an organization should consider

stakeholder perspective while making a corporate decision (Barnett & Salomon, 2012). These

stakeholders influence the organizational performance directly and indirectly, so dissatisfaction

of any stakeholder can adversely affect the business performance (Delmas & Toffel, 2008;

Henriques & Sadorsky, 1999; Clarkson, 1995).

Stakeholder theory supports to stakeholders or individuals who influence or influenced by the

corporate strategies or practices. Management is considered to respond the stakeholder concerns

because the main function of managers is to meet the stakeholder's expectations effectively.

Emshoff and Freeman (1978) proposed that organizational objectives should be aligned with

stakeholder‟s expectations. Considering stakeholders expectations while making corporate

decision reflect conventional reputation in the mind of stakeholders. This stakeholder context

explained the notion that consideration of stakeholders interests can lead toward influencing the

organizational performance.

1.2 Contextual Analysis:

Financial sector comprises banks, leasing companies, insurance, investment companies, asset

management companies, Mudarbah, and mutual funds etc. But among all these institutions, the

banking sector of Pakistan comprises 95% of the total financial market and therefore it is

8

considered an integral part of the economy (SBP, 2016). It plays an important role in the

prosperity of the economy, while a weak banking sector leads toward financial crisis and it is

dangerous for sustainability of the economy (Herwartz & Walle, 2014; Hsueh, Hu & Tu, 2013).

Therefore, its performance significantly impacts the economy of Pakistan indirectly and

investors stakes directly. But it was found that banking sector of Pakistan is not as performing as

performed by the banking sector of developed countries due to the requirement of the strict

legitimate system (Yamak & Suer, 2005).

In the context of developing counties especially, Pakistan is ranked as the sixth most populated

country in the world and forty-third largest countries in terms of its GDP. In recent years the

banking industry of Pakistan has flourished at a significant level. According to the State Bank of

Pakistan (SBP), the banking industry of Pakistan comprises more than thirty-four scheduled

banks, including four foreign banks and consists of around 12,993 branches with thousands of

ATM‟s (SBP, 2017).

The rapid growth of the banking industry of Pakistan plays a significant role in driving the

growth of the economy (SBP, 2017). The increasing number of national and international banks

reflects tough competition in the banking industry. It is more customers centric with the intention

to earn more profit and maximize shareholder wealth. Banks use modern marketing techniques to

generate customer intention, instead of only improving their performance. In the era of

technological advances and the competitive market, the banking sector has expanded its borders,

such as Islamic, mobile banking and Internet banking, etc. The findings and analysis of historical

investigations, there are different methods of marketing for survival, improvements and

enhanced performance in a tough competition of services industry (Poolthong & Mandhachitara,

9

2009). There are different sort of and challenges which the banking industry is facing in

developing economies specifically in Pakistan.

There is a need to improve the corporate governance structure of the banking sector because all

the business strategies are established be corporate managers. Weak governance system leads

toward the numerous frauds, embezzlement cases, excessive leveraging, and risky investments

etc. Banking sector associated with the interest of depositors and investors. They want to make

sure, either their money is invested in less risky, secured, and beneficial projects. Shareholders,

lenders, borrowers, managers, employees, and regulators are other stakeholders of banks. As

compared to other industries, there is comparatively number of stakeholders associated with the

banking industry. It leads toward more complicated information asymmetry. So, there is a need

to improve and establish strict compliance and regulation systems (Yamak & Suer, 2005).

Corporate social responsibility context gaining dominance in modern era in Pakistan (Khan,

2015; Qazi, Ahmed, Kashif, & Qureshi, 2015). Somehow, at corporate level, CSR is mixed with

philanthropic or charitable context. It is found that up to some extent, corporate managers are not

aware off with their social responsibilities (Khan, 2015; Waheed, 2005). Evidence founded that

corporate managers are not so interested to understand the true context of CSR while on the other

hand, there is lack of systematically and formal procedure to train and guide top management

regarding their social responsibilities (Ehsan & Kaleem, 2012). Studies highlighted that extra

working hours, less safety measures, lower level of awareness regarding regulations and non-

compliance of regulations (Kamal et al., 2012; Pasha & liesivuori, 2003).

In the banking sector, besides the short-term internal business interests of financial companies,

social, environmental and human rights objectives are gaining a dominant and interesting role. In

10

this perspective, engagement in socially responsible activities can serve as a strategic tool for a

firm‟s to avail competitive edge (McWillians & Siegel, 2000; Porter & Kramer, 2007). Corporate

social responsibility practices in the context of financial benefit remain more robust because

financial institutions play a social role by mobilizing the financial resources in the society. CSR

in the context of the banking sector not only result in competitive advantage but also result in

superior financial performance.

11

1.3 Rationale of the Study:

On the basis of extensive literature review, there are certain gaps which have been deduced and

being filed by this study. First of all, historical studies have broadly conducted and literature

posit that studies relevant to CSR and its consequences conducted in the context of developed

economies (Gangi, Mustilli & Varrone, 2018; Lentner, Szegedi & Tatay, 2015; Chiu, 2014;

Decker & Sale, 2009). Therefore due to divergent governance intra-structure, their findings

cannot be generalized in the context of developing economies, particularly for Pakistan. There is

limited empirical evidence in the context of developing economies to determine the quest of CSR

(Ip, 2008). Moreover, CSR practices in developed countries remain divergent than developing

economies (Gao, 2011; Belal, 2001). However past studies in the context of developing

economies provide limited empirical evidence that how and to what extent CSR affects firm

performance (Nyeadi, Ibrahim & Sare, 2018; Choongo, 2017; Crifo et al., 2016; Lee & Jung,

2016; Gatsi et al., 2016).

Historical studies in developing economies have limited scope and based on self-reported

questionnaires. Most of the studies focused on secondary data analysis. Studies only explored the

relationship between CSR and firm performance with a limited number of samples. Non-

financial parameters are necessary that has ignored in current literature (Mishra & Suar, 2010).

Similarly, past studies have not effectively examined the potential significance of non-financial

parameters in context of banking sector. There are few evidences among the relation of CSR and

performance which have demonstrated positive (Malik & Nadeem, 2014), negative (Iqbal et al.,

2013; Aga et al., 2012) and no relation (Kiran et al., 2015), which motivated for current research.

CSR‟ idea is now developing in the Pakistani context, and in addition some analysts carried out

research work in non-financial sector by overlooking the financial sector, especially in the oil

https://www.emeraldinsight.com/author/Nyeadi%2C+Joseph+Dery

https://www.emeraldinsight.com/author/Ibrahim%2C+Muazu

https://www.emeraldinsight.com/author/Sare%2C+Yakubu+Awudu

12

and gas sector (Kiran et al., 2015), KSE 100 index non-financial sector (Javed et al., 2013),

textile, cement, chemical, tobacco, and pharmaceutical industries (Iqbal et al., 2012; Kakakhel et

al., 2015; Jan & Baloch, 2011), but no evidence found in context of banking sector of Pakistan.

Stakeholder pressure is a recommended as a moderator which never tested earlier (Haleem et al.,

2015). Innovation and corporate reputation could establish the relationship between CSR and

performance. There is no evidence of sequential mediation of innovation and reputation between

CSR and performance. There is the significant role of CSR in determining performance and it

motivated to examine the relationship of CSR and performance in the banking industry of

Pakistan. Moreover, current study leads to validate the theoretical assumptions of stakeholder

theory. Therefore, considering all these potential GAPS, this study aim is to examine CSR-FP,

NFP, and stakeholder pressure as moderating factor, innovation and corporate reputation as

mediating factors in context of Pakistan.

13

1.4 Problem Statement:

In developed market economies, financial institutions give more importance to corporate social

responsibility. As they think, their CSR is considered an important factor, like others that helps

them in enhancing profit that resulted in the maximization of shareholder's wealth. They

considered that financial literacy and awareness, financial education, responsible, prudent

lending, risk management, fair and transparent financial services, handling of complaints are

important elements which improve business operations and to get the intention of stakeholders

(Lentner, Szegedi & Tatay, 2015). In essence, a bank‟s stable financial position, increasing

economic performance, ethical and transparent activities, and responsible financial services

ensure its predictable and reliable operations. It is evident of fact that effective implementation

of CSR activities enabled the banking industry to reduce the chances of frauds, embezzlement

cases, excessive leveraging, and risky investments etc.

In banks, besides the short-term internal business interests of entities, social, environmental, and

human rights objectives are gaining a dominant and increasing role (Lentner, Szegedi & Tatay,

2015; Chiu, 2014; Audretsch & Lehmann, 2004). There is an increase in a number of

stakeholders, who think that business decision making must go beyond profit maximization and

it is required to involve in socially responsible activities to solve social issues. Such activities are

far away from their economic interest but included as moral responsibility (Chiu, 2014).

As in developed countries, the banking industry contributing significant role to resolve financial,

economic and social issues. There is significant importance of banking industries in developing

and emerging economies especially in Pakistan. But this industry is facing challenges like

numerous frauds, embezzlement cases, excessive leveraging, and risky investments etc. The

14

expectations of the stakeholders include safe products and adequate information. Employees

need a safe and motivating work environment that must be separate from discrimination. In

addition, there is a need for care with the respect and dignity of employees. Furthermore, the

banking sector must be aware of indirect environmental impacts, such as lending activities to

environmentally friendly organizations (Lentner, Szegedi & Tatay, 2015; Hu & Scholtens, 2014;

Chiu, 2014; Branco & Rodrigues, 2008; Scholtens, 2009; Douglas, Doris, & Johnson, 2004.

In developed economies, it is evident that corporate social responsibility contributes to a

significant role in economic development. Moreover, CSR plays an integral role in determining

the financial benefits of financial institutions, because it has a direct link with customer

satisfaction. If clients of any banks are satisfied and feel secure about their investments, they will

lead toward publicity of that banks and repeated association and the long-term relationship will

be established. According to researchers, there are limited evidences on corporate social

responsibility in banking sector of developing counties (Choongo, 2017; Crifo et al., 2016; Lee

& Jung, 2016; Gatsi et al., 2016; Famiyeh et al., 2016; Kilic et al., 2015; Siregar & Bachtiar,

2010; Monteiro & Aibar Guzmán, 2010; Cormier & Gordon, 2001). This evident that corporate

social responsibility plays important role in determining bank performance and it convinced to

examine the relationship between CSR and performance in the banking industry of Pakistan.

15

1.5 Research Questions:

1.6 Research Objectives:

16

1.7 Significance of the study:

This study examined the influence of corporate social responsibility on the financial and non-

financial performance of the banking sector of Pakistan. Findings of this study are significantly

beneficial to academicians focusing on CSR research studies. It is a contribution to existing

knowledge with the addition to the literature. This study is beneficial to businessmen, managerial

personnel and investors who are concerned with the impact of CSR on firms' financial

performance. It will support to regulators in establishing socially responsible policies keeping in

mind the expectations of stakeholders (Kilic et al., 2015; Lentner, Szegedi & Tatay, 2015; Chiu,

2014; Decker & Sale, 2009).

Most importantly, this study will be beneficial to bankers in developing and introducing financial

products and services keeping in mind the customer‟s interests (Fernando, 2007; Rathnasiri,

2003). The finding and implication of this research will be beneficial to local organizations as

they deal with CSR as a vital segment of the business. Furthermore, it is beneficial to

international organizations as they are making an investment that might crop up as a result of

CPEC etc., to utilize the benefit of developing consumer markets. This study will contribute in

multiple ways to the existing literature and it is a study which is considering both aspects of

financial and non-financial performance in developing countries.

17

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

The objective of this chapter is to review theoretical and practical aspects of CSR literature

covering the objective and philosophy of CSR, empirical studies related to financial verses non-

financial performance of the firms. In addition, historical and current studies on innovation,

corporate reputation, and stakeholder pressure were examined. The main objective of this chapter

is threefold. Firstly, it explained multiple concepts of CSR, financial and non-financial

performance, corporate reputation, innovation, and stakeholder pressure. Secondly, it examined

the relationship between CSR, financial and non-financial performance. Thirdly, it addressed the

CSR performance in the banking sector of Pakistan and the rest of the world. In this section,

literature reviewed and final research gap found which leads toward examining different direct

and indirect relationships.

2.2 Literature Search Strategy

Literature review was based on numerous sources (journals and books), publishers (science

direct, Wiley, Taylor and Francis, sage, emerald, Elsevier), indexing bodies (Thomson Reuter,

Scopus, Proquest, Ulrich), Google scholar and local and foreign dissertations. Recent research

publications were focused for literature review but the theoretical context was covered since the

emergence of theory and basic concepts.

2.3 Corporate Social Responsibility

Many years have passed to investigate CSR and multiple experts, analysts, and researchers are

defining CSR in their own way (McWilliams, Siegel, & Wright, 2006). The evolution in the

18

definitions was noticed when thoughts of the multiple researchers are considered. Davis (1973)

described that CSR started with the end of legal obligations. This was a step more than good

citizenship that for society's welfare. CSR was considered to be socially responsible besides legal

responsibility. Gomez (2014) illuminated the social responsibility of the university that other

researchers ignored. Lauesen (2016) explored the question of whether CSR can be used as a

relationship of trust between companies and society, and which part of CSR plays a better role in

organizations.

CSR was the scarification of maximization of profits over being responsible for societal well-

being. It was considered as subjective concept and source of extensive research and arguments

from last few years (Jamali, 2008). European commission defined it as deliberate interaction

between social, environmental activities and interaction with their stakeholders. Friedman (1970)

supported the above arguments and proposed it as a source of agency problem between managers

and stakeholders. It was further examined that CSR is utilized for personal career development

by managers.

Shareholder wealth maximization was the main goal of any business, but social development

activities are gaining momentum in the business. In spite of the fact that, organizations were

observed to be involved in some type of social exercises during the nineteenth century after the

industrial revolution (Maden et al., 2012); however the topic of the impact of CSR on financial

and economic performance have empowered the scholastic and business interests. Socially

responsible organization‟s demand was increasing as they need to meet the multifarious needs of

shareholders as well as stakeholders (Aguinis & Glavas, 2012). CSR was a common part of

corporate entities and organizations are now assigning senior management for discussion on CSR

19

issues which coordinate the curriculum of business administration goals relent to social activities

(Montiel & Delgado-Ceballos, 2014).

Organizations were presently incorporating the CSR with their plans of action and working

structures since they outlined a procedure for expanding benefit through self-intrigue (Servaes &

Tamayo, 2013). In the time of globalization, they additionally needed to contend

incomprehensibly (Surroca, Tribo & Zahra, 2013), restoration on the reputational crisis,

mechanical progression (Avram & Avalsilcai, 2014), expanding concerns of environmental

safety and ecological sustainability. There were various ideas of CSR, despite these energetic

social interests by business firms.

CSR has multiple concepts with respect to people, constructs, and researchers are not agreed on a

common definition (Saeidi et al., 2015). The absence of a union, definitional agreement, and

hypothetical development was not allowed to develop a common definition. A universal

understanding of the definition, development and wide acceptance of the concept was essentially

inevitable. CSR considered as a common ideology in existing literature which explained the

method of wealth creation for stockholders relatively stakeholders (Peloza & Shang, 2011).

According to the off-shoot concept, CSR defined as an arrangement of setting particular

corporate activities and approaches that coordinate the stakeholder's expectations and economic,

social, and environmental performance (Aguinis & Glavas, 2012). As per existing gap on CSR

definition and historical researches, it was acknowledged for research on CSR as deliberate

business firm activity coordinated toward enhancing the economic, social, ethical and legal

business activities which influence the organizational performance (Okoye, 2009).

20

Table 2.1.1.1: Evolving definitions of CSR

Sr.

No

Definitions of CSR Reference

1

The monetary motivation behind the presence of any business

organization is an intensification of benefit. This objective is

accomplished through the acknowledgment of social measurement

that is consumer loyalty. Accordingly, social security and social

wellbeing of any modern culture are one of the necessary factors

organization's duties other than its financial matters targets.

Drucker (1942)

2

The goal of any organization ultimately is survival that is the result of

amicability between the framework and the general population

places. Any conflict between these three players' intuitive

destinations is located in the central business position. In this way,

human labor dignity, status, and workers' training and development

are considered the asset of the company's.

Drucker (1946)

3

The main question of the society, we want a big business but we do

not know what you expect out of it? This means how organizations

are going to ensure their organizational goal of maximization of

profits to serve the aspirations and demands of society as well? To

ensure an equal balance between profit maximization and high

employment as social contributions, government administration

should clearly mention the controlling policies over it.

Drucker (1946)

21

4

Businesses are bound to follow policies and decisions which are

necessary for the social values of any society.

Bowen and

Howard (1953)

5

Business will not be limited to corporate interests‟ implementation of

firm policies only, but should also cater for social and legal aspects as

well.

Davis (1960)

6

CSR could not be limited only to economic and legal responsibilities

but societal obligations must be incorporated.

McGuire (1963)

7

CSR is a response to a firm‟s technical and economic issues beyond

legal requirements.

Davis (1973)

8

This "fit" between the business communities' expectations and

business ethics.

Zenisek (1979)

9

Social responsibility is set to operate within complex business

organizations society's economic, legal, ethical and philanthropic

expectations.

Carroll (1979)

10

The distributing a portion of corporate organization is to need

people's needs with master capacities, continue reacting to the

business focus, make quality items in any event possible cost by

compelling and practical use of benefits.

Vogel and

Bradshaw (1981)

11

Philanthropy, responsibility, and policy are three main corporate

levels of any large organization.

Vogel and

Bradshaw (1981)

22

12

The business associations have societal commitments of acquiring

sensible benefits for their proprietors.

Epstein (1989)

13

Morals have advanced that the business is obliged to work according

to directs of the law, give work to the general public, obey set of

accepted rules and pay taxes.

Nelson (1996)

14

The level of good commitment that might be attributed to companies

beyond simple obedience of governmental rules and regulations.

Kilcullen, Ohles

and Kooistra

(1999)

15

CSR offers for moral business conduct in seeking after its monetary

objectives. The moral conduct calls for business moral duty regarding

the change in laborers life quality and well beings of their family and

social gatherings.

Holme & Watts

(2000)

16

Business is obligatory for the benefit of society as a moral and

ethical. To achieve this, the economic capital of the business

objectives will commit its resources for the benefit of society and its

people.

Van der Wiele

et al., (2001)

17

CSR rotates around the relationship between business and the general

public and it demonstrates its obligations to its partners and the

business practices.

Hick (2007)

18

CSR is an essential part of the corporate procedure and essential for

business achievement. Organizations must locate a practical strategy

Vogel (2007)

23

between what is social, ethically and economically profitable.

19

Kotler holds the view that a firm, other than fulfilling prompt needs

and wants of an objective market, should likewise convey an

incentive to the client that keeps up or boosts buyers and social

prosperity for a long period of time.

Kotler and

Armstrong (2008)

20

CSR is a deliberate business firm activity coordinated toward

enhancing the economic, social, ethical and legal business activities

which influence the organizational performance.

Okoye (2009)

21

CSR identifies with non-benefit exercises of partnerships executed

for the welfare of groups beyond their monetary advantages.

Carroll and

Shabana (2010)

22

CSR is a common ideology which explains the method of wealth

creation for stockholders relatively stakeholders.

Peloza and Shang

(2011)

23

CSR could be defined as an arrangement of setting particular

corporate activities and approaches that coordinate the stakeholder‟s

expectations and economic, social and environmental performance.

Aguinis and

Glavas (2012)

24

CSR is normally related as a way to deal with coordinate social and

environmental aspects into corporate exercises.

Baumgartner

(2014)

24

2.4 Dimensions of CSR

Numerous measurements of the CSR were considered as satisfactory for research considerations.

The early conceptualization of CSR was the generous point of view whereby business firms

make altruistic gifts or commitments to the general public (Caroll, 1991). The associations that

make such corporate commitments including banks do open up such demonstrations of liberality

in their distributed information to attract open regard for them in order to accumulate support and

authenticity.

Carroll (1991) proposed that all the dimensions are integrated and could not anyone be

considered as mutually exclusive. CSR framework incorporated the all concepts and definitions

of CSR, corporate citizenship and stakeholder theory during this time period (Carroll, 1979, 1999

& 2004). He divided these responsibilities into four subparts like economic, legal, ethical and

philanthropic. Having a structure and order to the social and moral responsibilities of business

partners around the world was a fundamental best practice. The Pyramid of worldwide CSR was

considered as an attractive method to deal with graphically depicted the four sorts of social

commitment that the organization has concerns about overall stakeholders. The pyramid

delineates the four sections of overall CSR, beginning with the basic building square of financial

performance. Meanwhile, business depended upon to agree to the law since the law is each

nation's codification of adequate and unsatisfactory activities and practices (Carroll, 2004).

Moral and ethical aspects were commercially dependent on business. At its core level, it is

dedicated to reducing stakeholder's loss by opting correct choices. Lastly, policies of acceptable

social and philanthropic activities should be adopted for corporate citizenship. Today, the

25

organizations are relying on to collect money and to "give back" to support financial and human

labor resources, so that personal satisfaction can be improved and supported (Carroll, 1999).

Picture-I, Carroll’s (1991), CSR-Pyramid

Economic activities referred to the factors of production to meet consumer market' demand

(Garriga & Mele, 2004). The firm's financial commitments, regardless of whether or not the

world around it is considered as a foundation for business. The overall organizations were

dependent on each other and they offer them an advantage in making ventures. The key sound

organization offers rules on how and where it can be refined in a general environment. At this

level, the agreement is definitely necessary, but the activities related to the money of the

commercial companies are difficult to achieve. What may change according to the nation or

place in the world is the issue of what constitutes a satisfactory rate of return or rate of

development (Carroll, 1999). Associations working in critical situations may consider this issue

remarkably opposed to those working in developed countries. Subsequently, this part of the

structure depends on the neighborhood and regional goals found in financial markets, but they

are still fundamental for survival and advancement (Carroll, 2004).

26

The legal responsibilities involve the activities executed in the legal system of the country and

more important for multinational companies. Those countries that have well supported financial

systems will definitely apply legitimate systems. The social contract between commercial

companies and host countries varies by country and, in this sense, legal systems and

responsibilities also vary. At this level, we observe critical differences in honest systems and

commitments with those of kindness on the part of the countries and local regions of the world.

For example, we understand that Chinese labor laws are not executed routinely and that outside

financial professionals are observing that China's legal structure resolves some disputes. We also

realized that the absence of a legitimate framework is repressing remote post-war interest in Iraq

(Dolven, 2003). One thing is clear, however: legitimate duty exists and is found similarly in

developed, emerging, developing and similar underdeveloped nations (King, 2003).

Ethical obligations comprise fair, just and accurately working (Gregory & Mayell, 2004). Ethical

responsibilities deal with those undertakings and practices that are general or repudiated by

society, regardless of whether these principles are not organized (Carroll, 2004). In fact, around

the world, business ethics based on the country's ethical instructions, host country; and the

commitment to the quality. The act of good relativism, in which organizations basically conform

to neighborhood standards, creates a circumstance that is regularly unsustainable in light of the

fact that many nations, especially those that are creating, do not have verbal ethical measures that

guarantee the helpless fire. Ethical universalism as a norm that would establish an ethical

standard recognized by all cultures (Carroll, 2004). The ethical universalism was the

recognizable test of ethical points of reference that would have broad global support, for

example, the United States Global Compact or the Global Reporting Initiative.

27

In Philanthropic responsibilities, social work included work to ensure the better quality of social

life (Crane & Matten, 2007). These responsibilities reflected the wishes of society around the

world that companies should participate in social exercises that cannot be ordered by law. The

fact is that it is sometimes handled with a moral chain of social practices. Today's philanthropy

is, as a rule, key in nature, with anticipated businesses that would assume a dynamic part in

global corporate citizenship (Carroll, 1991). As a result of law and morality, philanthropic

desires usually change from one to another nation and will find the wishes of host nations.

Finland, for example, it is discovered that Finns do not respect philanthropy excessively in light

of the fact that in their framework, senior positions are considered by companies rather than to

deal with this type of desire to citizenship. Schwartz and Carroll (2003) merged later on, these

dimensions and provided three overlapping CSR categories because the philanthropic dimension

is not the official responsibility of any business (Lantos, 2001). Look picture I & II which

explains the (Schwartz and Carroll (2003) three domain approach.

Picture-II, Schwartz & Carroll, (2003), Three Domain Approach of CSR

The Global Pyramid of CSR and Performance will help organizational governing bodies to

consider the various stakeholders‟ wishes interconnected with their associations. It is important

28

to understand that these duties necessarily to be implemented. Past studies supported that

administrators found the significance of their obligations as taking after this succession of needs:

financial, lawful, moral, and charitable (Aupperle, Carroll & Hatfield 1985).

2.5 Stakeholder Pressure

Many researchers included the customers, suppliers, employees, shareholders, the community,

and government in the category of stakeholders (Buysse & Verbeke 2003; Donaldson & Preston

1995; Freeman 1983; Henriques & Sadorsky 1999). Business strategies toward CSR were

improved from simply showing social responsibilities to internal and external organizational

environments which are associated with stakeholders. These are the forces which influence the

organizational performances in multiple ways. There is a direct impact of losing the interest of

these stakeholders on financial performance (Lee, 2008). Customers stop to purchase products,

shareholders prefer to sell its shares, and employees lose confidence in work and environmental

personnel go for sue (Wood, 1991). Organizational success and survival primarily based on

manager's abilities who want to create enough wealth and stakeholder's' satisfaction (Clarkson,

1995). He further depicted that if anyone from stakeholders ready to support the organization

then its performance will automatically improve.

Impact of stakeholder's based CSR on financial and non-performance could be understood with

help of different underpinning theories which validate the views, concepts and thoughts.

According to social identity theory, there is a direct impact of image and reputation of

organization on employee's self-image, loyalty, and sincerity. Organizational employees relevant

policies reflect the company's intention to fulfill their needs, the participation of employees in

29

strategies and union relations, decision making, remuneration policy, better work environment,

employees eradication of child labor expose the practices of organizational CSR.

These proactive activities enhanced improvement in financial and non-financial performance. It

referred to as reputational component and responds as a glamorous power for potential workers

(Turban & Greening, 1997). Moral trustworthiness and positive responses from family and

companions adds to worker work fulfillment and lower job turnover (Riordan et al., 1997) on the

grounds that workers with higher confidence and inspiration will work all the more proficiently

and viable (Berman et al., 1999) and participate in improvement of organizational performance

(Koys, 2001). Valmohammadi, (2014) examined that employee-related CSR activities are

strongly correlated with organizational performance. Gbadamosi, (2016) conducted the study in

US-based banks for identifying CSR and financial performance. He proposed that governance,

diversity, and worker connection were emphatically identified with bookkeeping returns.

According to CIM theory, consumers prefer to purchase products of such like organization which

is socially responsible. So, it is a way of improving purchase intention and consumer goodwill

(Gildea, 1994). According to signaling theory, consumers prefer more products where there exist

information and communication asymmetry in between buyer and sellers. Consumers think that

warranty is an indication of higher product quality and reliability, so it is also an indication of

corporate citizenship (Boulding & Kirmani, 1993; Maignan & Ferrell, 2000).

Customers are also considered as part of stakeholder because CSR practices are impossible to

execute with them. Consumer loyalty can be characterized as a general assessment of the

consumer's aggregate purchasing and utilization which includes different products. Fornell et al.

(2006) expressed that consumer loyalty is perceived as a promoting technique and a key driver of

30

organization long-run financial performance and market value (Gruca & Rego 2005).

Valmohammadi, (2014) examined that consumer-related CSR activities are significant and

positively participate in organizational performance.

Firms can improve their relationships with local and international investors by embracing

suitable corporate governance measures. After the financial crisis in all over the worlds, there is

given proper importance to secure the interest and rights of shareholders and investors. This

corporate governance embraces on the suitable financial and non-financial transparency with

legal and regulatory requirements, data frameworks, and the proper accessibility of information.

Investors prefer those organizations which actively participating in CSR related activities like

consulting shareholders' opinion in financial decisions, autonomous audits, and insider's trading

strategies. From above evidences, we can propose that appropriation of better corporate

governance's standards can improve organizational performance. Investors prefer those

corporations which are participating in better governance standards (Coombes & Watson, 2000).

Corporate governance positively contributed toward the financial performance of sector (Dahya

& McConnell, 2007; Black & Khanna, 2007).

Post liberalization decades giving much importance on health and safety, environmental

influences, social involvement, payment of living allowances both at home and within

organizations to outsourced suppliers. In the present ages, organizations are ensuring loyalty with

suppliers if they also make ensure in the eradication of child labor, moral acquisition in raw

material, following human right policies. There is inverse relation in CSR benchmarks and

financial performance of organizations if suppliers violate the CSR standards. In recent evidence,

the Indian carpet industry was banned by international purchasers due to child labor because

31

international buyers prefer Rugmark certified firms (Mishra & Suar, 2010). So, we can say that

there is a relation in the CSR of suppliers and organization performance.

Organizations are involving in education, health and development programs for eradication of

poverty from the community. These corporations are performing CSR activities through public-

private partnerships, establishing welfare foundations and NGO's, in the empowerment of the

local community. Microsoft is offering quality educations in backward rural areas (Brugmann &

Prahalad, 2007). Hewlett Packard is offering sustainable livelihoods to women self-held groups

of India (Dunn & Yamashita, 2003). These community development programs are influencing

investors and stakeholders in way of investing, purchasing and motivations toward performance

developments. Valmohammadi, (2014) examined that community-related CSR activities are

participating in organizational performance. Gbadamosi, (2016) conducted a study in US-based

banks for identifying CSR and financial performance and he proposed that product and

community factors were negatively related to profits while study of (Yusoff and Adamu, 2016)

proposed a positive relationship with community-related CSR and performance.

From last few years, global environment protection departments are mounting pressure to follow

strict legislation and organizations are adopting proactive strategies for environmental and

societal development. Organizations are modifying the policies with respect to environmentally

friendly products and manufacturing procedures. Greenhouse and processing resources

developed following environment protection standards. Resource saving and recyclable

technology, efficient manufacturing systems, and management information systems are utilized

as key instruments for protection.

32

Graafland, (2002) conducted a research study to analyze long-term reputations are affected by

short-term profit-making strategy. He depicted that today's globalization and growing dynamics

are forcing the organization to consider social and environmental factors stakeholders.

Valmohammadi, (2014) proposed that environment-related CSR activities are strongly related to

organizational performance. These environment protectants improve the organization

performance in way of profitability and growth (Russo & Fouts, 1997; Klassen & Mc Laughlin,

1996), reputation and financial performance (Gil et al., 2001). Yusoff and Adamu (2016)

proposed positive relationship among environment-related CSR and performance.

2.6 Corporate Reputation

Margolis and Walsh (2003) comment that many researches concentrated just on testing the

immediate relationship amongst CSR and firm performance, and concluded that only few

evidences found that are in support of direct relationship (Wood, 2010). Hence, keeping in mind

the main goal to acquire solid outcomes, powerful factors which are excluded and disregarded

should be considered and observationally analyzed. Three interconnected factors, consumer

loyalty, reputation, and feasible competitive edge, were incorporated into to acquire reliable

findings. Existing studies explained that consumer loyalty, reputation, and competitive edge are

connected with organizational performance. Studies on the relationship amongst reputation and

organizational performance demonstrated that financial advantages, as well as non-financial

benefits, are results of a decent reputation (Flatt & Kowalczyk, 2011).

Helm (2007) said that a corporation with decent credibility "is considered less dangerous than

corporations with low economic performance and less reputable corporation". From the financial

perspective, (Roberts & Dowling, 2002) has shown that the organizations with the best

33

reputation offer good returns when investing in them. (Shamsie, 2003) proposed the direct and

positive effect of the best reputation on organizational performance. Finally, (Cabral, 2012)

ensures that organizational performance is based on its best reputation, and it is assumed that in

order to maintain overall reputation, organizations should focus on developing good

methodologies.

In the 21st century, development context is increasing as new corporate difficulties for

complexity, rapid competition, corporate direct promotion, and social responsibility. It has

threatened companies to worry about corporate reputation. It is expected that the performance of

a company depends on its reputation (Cabral, 2012). Corporate reputation is an impression of

what the general population is convinced that organizations are fulfilling their wishes with their

offers (Brammer & Pavelin, 2006). As indicated (Walsh et al., 2006), long-term consumer

loyalty tends toward reputation.

Gupta (2002) indicated that the company's CSR capacity is essential to the reputation of an

organization. These findings proposed an observation in the commercial studies that when

customers feel that product and services are being offered on similar rates, then preference

should be gone for those organizations that add practices related to the environment, for

example, CSR. For this situation, companies should know that the most ideal approach to show

an abnormal state of CSR and to build consumer loyalty is to do everything possible to

understand the wishes of interested parties and outline and update their CSR in the same way.

2.7 Innovation

Monetary maintainability captures the general parts of an association that must be considered

taking into account its long life survival. These facets incorporate technological advancement

34

and innovation (Baumgartner & Ebner, 2010). The social point of view entails organizations to

show themselves to stakeholders such as clients, financial specialists and the administration and

to comply with the company's internal affairs by inspiring representatives in ways that

incentivize the organization (Eesley & Lenox, 2006; Freeman et al., 2010). In terms of natural

measurement, securing land and expanding ecological performance are at the heart of the

manageability problems that must be incorporated (Baumgartner, 2014).

The financial, social and ecological imperatives are not only diagnostic ideas, but they speak of

the factors that a company can use to adjust the action plan to the commercial technique. CSR is

usually related as a way to address the incorporation of social and natural points of view in

corporate exercises (Baumgartner, 2014). The educational community has shown that the

introduction of CSR is a way to strengthen stability, development and long-term management in

a vibrant and modern state (Prado-Lorenzo et al., 2008). Lo (2010) discussed terminologies such

as CSR and corporate maintainability. These are considered "excellent business exercises" and

CSR is assumed in corporate sustainability, which is a transition phase of the company's

experiences to implement corporate sustainability.

Heikkurinen and Bonnedahl, (2013) indicated that in economic development, organizations

should have the responsibility to assume the key duty of corporate sustainability. With respect to

a dialogue on sustainable development, another key area is the role of innovation to improve

corporate sustainability (Boons et al., 2013). One of the most important ways to contribute to

sustainable development in companies is the participation of innovation practices (Schaltegger,

2011). The integration of products, procedures, and vertical structures is considered an

integration of social perspectives based on sustainability. This indicates a direction for the need

35

for the management of financial, social and biological ideology with the purpose of incorporating

new structures, procedures and stops in the plan (Klewitz & Hansen, 2014).

2.8 Corporate social responsibility and Performance

Jain et al., (2016) wants to scrutinize the relationship between CSR and financial performance of

SME's working in Rajasthan. They distributed 384 structured questionnaires among the workers

of multiple sectors like ceramics, carpet, wool, gem and jewelry, machine tools, textile, and other

manufacturing organizations. An exploratory study was conducted and structural equation

modeling was used as an econometric technique. The findings of study designated significant

and positive relationship among CSR and financial performance. They also proposed that SMEs

working in Rajasthan are interconnected with the socially responsible activities. Furthermore, it

was also noticed that such like organizations are not necessarily doing CSR as a necessary

fragment but that associate them with their religious spirit. So, CSR could not be considered an

important factor of economic improvement but it links them with their religious associations.

Yusoff and Adamu, (2016) conducted a research study in the domain of Malaysian stock

exchange. Their sample contained a group of 100 listed companies for a sample period of 5 years

from 2009 to 2013. They investigated the above-mentioned relationship using four aspects of

CSR like environment, community, workplace, and marketplace. This study also provided some

implications that adaptation of corporate socially responsible activities leads to improve the

economic development in Malaysian organizations.

Madorran and Garcia (2016) proposed their study on the background of enormous interests of

academic and business firms in CSR. They want to investigate the interconnection existing

between CSR and financial performance of multiple organizations listed in the IBEX-35 stock

36

exchange of Spain. They analyzed the above-mentioned relationship using panel data analysis

for the time period of 8 years during 2003-2010. Findings proposed no apparent connection

exists between independent and dependent factors in organizations of the Spanish market. Nollet

et al. (2016) examined the relationships between CSR and financial performance with a non-

linear and disaggregated approach in the indexed organizations of the S & P 500 for a five-year

sample period between 2007 and 2011. Findings proposed that corporate social performance is

contributing negatively to return on capital during this tenure, while the non-linear model

described the U-shaped diagram in the aforementioned long-term relationship.

Nakamura, (2015) proved a bidirectional relationship between social responsibility and

performance in Japanese organizations through the use of a simultaneous system of linear

equations. The results have shown the mixture of results such as positive, negative and neutral

relationships. For managerial personnel, natural and work-related investments are not feasible to

improve monetary performance, while the total reduction could compromise the reputation of the

organization. Interestingly, social initiatives have proven to be essential. For policymakers,

distinctive methodologies could be utilized to build social investment. From time to time,

legislators can rely on firm activities instead of controlling or improving CSR exercises.

Ahamed et al., (2014) examined in their paper the relationship between CSR and corporate

financial performance for Malaysian firms for the time period of five years from 2007 to 2011.

In their study they incorporated the environment, community, marketplace and workplace CSR

dimensions which could show most probably all positive, negative or neutral relationship with

corporate financial performance. The findings of this research concluded on basis of regression

analysis and concluded that CSR practices positively affect the corporate financial performance.

In addition, this paper added to business literature in recognized interest in CSR will prompt to

37

organizational economic performance. CSR significantly contributed toward non-financial

performance in Indian context (Mishra & Suar, 2010).

Gbadamosi (2016) inspected the relation between banking CSR and financial performance of

working in the United States of America. He proposed this review upon the premise on an

example of 71 banks, the freely accessible moral appraisals, budgetary information, and

securities exchange information were broke down utilizing numerous relapse models. The

discoveries of this examination repudiate with the individuals who bolster the positive and

negative relationship in the CSR and performance relation while results presumed that there is no

connection exists in the CSR and financial performance. The review likewise demonstrated that

administration, differing qualities, and worker interconnection were positively identified with

accounting returns while social and communal elements were contrarily interconnected with

profits. This exploration adds to positive social change by helping the bank supervisors,

executives, financial specialists, controllers, and government in enhancing the release of their

separate parts to the optimal allocation of assets to contending social exercises in a way that may

magnify performance and enhance the stakeholder welfare.

Miller (2016) inspected the connection between banking CSR and financial performance in the

United States of America. He proposed this review upon the premise on a specimen of 25 banks

for the example time of 2011 to 2013 and this study examined relationships between fortune

reputation score and financial measure like ROA, ROE, and EPS etc. Results demonstrated that

for the initial two years, there exists a noteworthy positive connection between CSR activities

and performance, however an insignificant relationship found for the time of 2012.

38

Awan and Nazish (2016) examined in their paper that CSR influences the financial performance

of the banking industry positively. The prospects, challenges, and impediments have analyzed.

The relationship between bilateral trade, the integration of employees in the banking sector, and

role in Pakistan economic development is tested. Malik and Nadeem (2014) investigated that

CSR influences positively to the financial performance of banks as a service sector of Pakistan.

Regression analysis is incorporated for confirming the relationship between profitability and

CSR. The results have estimated that organizations involved in social activities avail its benefit

and it reflects a long life impact on organizational performance.

Kim et al., (2015) inspected the connection between CSR and organizational financial

performance utilizing a competitive action perspective. They contend that competitive action to

be considered as an imperative possibility that decides the impacts of CSR exercises on firm

monetary performance. The results of this study based on 113 public limited companies from the

time duration of 2000 to 2005. They found that more CSR related activities improve the

organizational performance with more competitive action level. Furthermore, it is assumed that

corporate social irresponsibility enhances the performance with least level of competitive action

level. The contributing factor of this study is an introduction of competitive action in literature

and strategic management.

Kakakhel et al., (2015) researched the influence of CSR on financial performance in the

Pakistani manufacturing industry. They conducted the study on cement organizations listed in

Karachi stock exchange with a sample time of 7 years from 2008 to 2014. Panel analysis was

used to identify outcomes and analysis proposed that CSR of selected organizations is positively

influencing the financial performance. This work additionally strengthens the perspective of

39

every one of those specialists whose experimental proof discovered a positive and noteworthy

relationship between CSR and financial performance.

Rodriguez-Fernandez (2016) directed a hypothetical and observational review to explore the

bidirectional relationship between CSR and financial performance in Spanish recorded

organizations. A total hypothetical system - in view of office, stewardship, reliance assets, and

partner hypotheses - gives the premise to the reasonable model. An important commitment is to

use the social behavior record developed by an index based on four indicators. The result of the

performance review in the organizations listed on the Madrid Stock Exchange is that it shows

positive contacts in both aspects, especially beneficial in the social context. The consequences of

this investigation have down to earth applications in the meeting room; they are evidence that all

social strategies increase money related assets, and the other way around, that expanded

monetary exhibitions prompt to more noteworthy social advantages. Consequently, this paper

emphasizes all the people of the board to ensure financial assets in creating ways that will be a

social endeavor with a specific end to contribute globally to the change in society.

2.9 Corporate social responsibility, Stakeholder Pressure, and Performance

The survival of the company is basically based on management skills that have the main task of

producing wealth for their interconnected stakeholders (Clarkson, 1995). Employees, owners,

managers, customers, suppliers and the natural environment should be considered important

stakeholders. There will be an adverse effect on the performance of the organization if any of the

stakeholders refused to participate in their contribution to the organization's support (Clarkson,

1995). Therefore, organizations also try to interconnect and establish relationships with primary

40

stakeholders, who could improve their competitive advantage and their performance will

improve (Barney & Hansen, 1994; Fomburn & Shanley, 1990).

Effective organizational management skills, of course, lead to lower costs and performance

inflicted by the stakeholders will be displayed in a positive context (McVea & Freeman, 2005). It

is important to accomplish business sustainability, the companies should have a controversy with

the key recipients who should influence the company, recognize their needs and plan strategies

and methods to implement. Similarly, we describe CSR to a specific group of stakeholders such

as the approaches, procedures, and practices of an organization to meet their needs.

Different examinations explored the analysis of the relationship of CSR and performance;

however, few kinds of researchers explored the moderated-mediated mechanism (Saeidi et al.,

2015; Chang, Oh & Messersmith, 2013; Lioui & Sharma, 2012). There is mixed kind of relations

explored like neutral (McWillians & Siegel, 2000), negative relations (Davidson & Worell,

1988), and positive effects (Prado-Lorenzo, et al., 2008). This study identified the deficiency of

involvement of moderating/mediating factors (Saeidi et al., 2015) and proposed stakeholders as

moderating factor in CSR and financial performance.

Lioui and Sharma (2012) evaluated the impact of environmental CSR on CFP. They showed that

the relationship between the ROA of the companies and the ECSR is significantly negative and it

is a very solid relationship. They also showed that other performance indicators and ECSR are

significantly and negatively correlated. However, explaining the interaction between the

environmental efforts of companies and research and development produces a different

perspective: while the direct effect of CSR on financial performance remains negative, the

interaction of social responsibility and research and development has a positive and significant

41

impact on that. The strengths and concerns of social responsibility are harming the CFP, as they

are perceived as a potential cost. However, this social responsibility activity encourages the

research and development efforts of companies that indirectly generate additional value.

Chang, Oh and Messersmith (2013) proposed the relation between CSR and financial

performance while also incorporate high-performance work practices. We use arguments to

demonstrate a vertical association between a company's approach to HRM and the adaptation of

management of a company for social performance. More research is being done on the

moderating effect of HPWPs between social responsibility and financial performance. The

findings explained that there is a significant moderating effect among the aforementioned

relationships and recommended that human resource practices be very important to improve the

performance of the organization. This study also elaborated the alignment of human behaviors

with the values and orientations of the organization.

The market and its external factors moderated the relationship of social responsibility and

performance (Hoffman & Ventresca, 1999; Zhu & Sarkis, 2007). They proposed that coercive

pressures improve environmental practices while competitive pressure improves financial

performance. Ketikidis et al., (2013) examined that external forces do not matter in strengthening

or weakening the aforementioned relationship. This study is conducted on the companies of

southeast European region and found the insignificant relationship between environmental

practices and organizational performance. Marshall and McCarthy (2013) analyzed that

stakeholder's pressure has a significant role in the contribution of CSR, economic and

operational performance. Most of the studies focus on environmental aspects, while this study is

relevant when incorporating comparative social pressure to environmental pressure.

42

Zhu and Sarkis (2007) conducted a study on Chinese industry and examined the increase in

external pressures from institutional factors, including market, government and competitive

sources. Few companies started working on the start of green practices to reduce this pressure.

Moderated hierarchical regression analysis is performed and the relationships between green

practice, environmental and economic performance are examined. This study is based on three

main moderating factors: institutional, regulatory and competitive market pressures. The finding

recommended that there is an increase in external pressure that affects green practices in the

Chinese context. In addition, market pressure, competitive and regulatory is also increasing,

which affected the economic and operational performance. Finally, it is examined that the

institutional pressure could not contribute to any type of performance.

2.10 Corporate social responsibility, Corporate Reputation, and Performance

Corporate social responsibility is no more anonymous in a business area but up till now, there is

no well-versed definition to elaborate this terminology which could contain all major aspects in

contextual meanings (Jamali, 2008). Moir (2001) termed CSR as perpetual ethical behavior of an

organization which takes an active part in economic progress also pays to heed towards worker's

wellbeing, amelioration of community as well as betterment of society. Jamali and Mirshak

(2007) also elaborate CSR as "a corporation's responsibility in the achievement of basic

requirements of a considerable domain of participants".

Carroll's (1979) definition, which is widely described in the literature, determines the economic

responsibility of profitable income, legal as the management of the administration and the social

obligations according to the appropriate international laws, ethical means which is emitting of

any misconducting kind, and social wishes to include social responsibilities. There is no

43

obligation to include, non-standard articles, or responsible for providing financial awareness to

the investors, and responsible for implementing additional activities that society is willing to

admit. Many experts have repeatedly emphasized that CSR can be considered as part of

organizational culture and it should be understood that not only is the main purpose of profit-

making but also scarification for society (McWillians & Siegel, 2000). The researcher has

recommended that organizations must follow social responsibility strategy to initiate

responsibilities to those individuals that seek more horoscope than economic and legal

obligations.

Hung (2011) believes that the confession of a company to CSR is affected by four elements;

receptive objectives, flexibility, willingness and responsibility for the fight. Moir (2001) believes

that the company's encouragement to emphasize socially responsible activities may be due to

some social desires to maintain trust for the community, government and employees with legal

and moral patrimony and source of wealth creation for shareholders. According to Porter and

Kramer (2007), support for CSR is based on four principles: ethical responsibility, solidarity,

certification, and public relations. Although it is considered that the company gets out of the past

disposal tasks, that is, standard products/services, good follow-up history, curative therapeutic

works and positive words of intentional image development, CSR is an element that is

considered to accelerate the corporate reputation of an organization (Carroll 1979).

The historical studies showed that the corporate reputation and the organizational image is

something valuable that any company has used as a source of development and growth. Walker

(2010) provided a view on the reputation that "is relatively stable, the future scenario of the

company as, compared to some standards". Eberl and Schwaiger (2005) differentiate between the

reputation and the public perspective of the image. They demonstrated that the prestige of a

44

company is more important than its transmitted image. It is evolutionary and firmly compatible

with the company and the interested parties. On the contrary, it is based on the sensitivity of the

recipients who have direct and consent experiences with the corporation.

Several ideological and experimental analyzes have shown that CSR has affected the corporate

image of the company as an important factor. For example, Turban and Greening (1997) show

that the self-determination of CSR is positively linked to the reputation of companies. Similarly,

Siltaoja (2006) demonstrated that organizations maintain remarkable behavior as part of the CSR

and when joining dangerous operations they do not have stability in their licenses, so they can

obtain temporary gains. Abdullah and Abdul Aziz (2013) explained that the inductive and

remedial management of CSR programs is important for the business because it molds the

corporate identity of the company and for a long time were able to obtain important commercial

resources.

Fombrun and Van Riel (2004) recommend that a level of corporate charity be related mainly to

corporate repute. De Quevedo-Puente, et al., (2007) proposed that there is no contradiction on

argument that the RSC has strongly emphasized in its reputation. McWilliams, Siegel, and

Wright (2006) suggest that CSR can be qualified as a long-term investment because it is part of

the construction and maintenance of corporate reputation. Famiyeh et al., (2016) has revealed

that solidarity (economic, social and environmental) has a great impact on the corporate image.

For this reason, CSR programs help build a positive reputation and a brand image and (Porter &

Kramer, 2007) proposed that many organizations apply the reputation to their advantage.

The recent study concludes that socially responsible organizations have directly benefited from

the implementation of CSR practices through the improvement of the company's implementation

45

in which the image of the company has improved (Van Beurden & Gossling, 2008). Dyer and

Chu (2003) found that good support is due to low inspection and monitoring costs because

providers have a risky risk hazard when businesses change with reputable institutes. Kotha,

Rajgogal and Rindova (2001) explained the same thing as the investment of good corporate

reputation in which the transaction cost reduced what it caused in reducing the cost of the buyer-

supplier exchange. With the help of a high reputation, organizations can easily attract

investments and international collaborations (Fombrun & Van Riel, 2003). This concept can also

help to launch various products while selecting the same products in different competitive

forums.

Great reputation increases customer loyalty and gives a hint of quality when looking for buyers

with a choice among the contending products (Shapiro, 1983). It is observed that companies with

a decent reputation have more value and, therefore, can charge higher costs and obtain better

results than expected, which improves their financial performance. Orlitzky (2005) recommends

that reputation deserve more credit for the positive effect of corporate social measures on its

performance. More products, in any case, show a great positive relationship (Roberts & Dowling

2002; Fombrun & Van Riel, 2004). Multiple analyzes that showed positive results presumed that

a high reputation improves the image of an organization, strengthens its image and increases its

value estimation.

Roberts and Dowling (2002) have described appreciating the additional benefits in order to

accelerate financial performance as time passes. Orlitzky (2005) recommended that social

responsibility contributes to corporate reputation and, after all, is associated with the price of

shares in the stock market. Herremans, Akathaporn and McInnes (1993) found that the major

46

companies of US manufacturers that have a good reputation could be considered more profitable

compared to organizations with less reputation.

Famiyeh, et al., (2016) deliberated in their findings that corporate social obligation, in

accordance with their public relations and earnings, increased overall performance in different

contexts and proxies. They indicated in their results that, because it practically confirms the

position of CSR as waste or not only in the organization, but its effect is twofold: this firm and

positive image and the acceleration of institutions in general. Structural equation modeling was

applied to identify the aforementioned relationships after collecting data from sub-Saharan

African areas. This study has also introduced new parts of a particular environment, which is not

an ideological approach despite participating in theory development.

Saeidi et al., (2015) proposed that the beneficial result of CSR in the performance of the

company is due to the constructive result that CSR has in hand, the notoriety and loyalty of the

consumer. The latest discoveries show that the only ideological and high interference in the

connection between CSR and performance. These results recommend a part of CSR, clearly, by

improving the performance of the company, through the improvement of reputation and

profitability, while improving the level of loyalty of the company. The growing modernity of

partners and conditions, the acute rivalry, the growing interest in business frankness and social

duty have progressively become the new corporate difficulties of the 21st century that have made

companies increasingly related about corporate notoriety. It is expected that the performance of a

company depends on its notoriety.

Corporate reputation is an impression of how much people, in general, are fulfilling that

organizations are fulfilling their desires with their articles and administrations (Brammer &

47

Pavelin, 2006). According to them, notoriety is one of the results of high long-term consumer

loyalty. Gupta (2002) indicated that the CSR capacity of the association is essential for the

notoriety of an organization. This finding supports the prevailing view in business writing that

when looking at clients with equal cost and quality of items, they would want to choose items

from organizations that add green management practices, for example, CSR. For this situation,

companies should know that the most ideal approach to show an abnormal state of CSR and to

expand consumer loyalty is to do everything possible to understand the wishes of the partners

and define and update their CSR as necessary.

2.11 Corporate social responsibility, Innovation and Performance

The idea of development has sought to represent the way in which organizations can be prepared

to potentially create and develop potential changes, to promote sustainable development

(Gaynor, 2002). In this unique situation, once the improvement is updated, with the advantages

of its association, which have the ability to support its stability in the global economy. Gaynor

(2002) refers to the association of advanced social component that should receive and capture the

directors to transmit to the representatives a basic element of the association's vital relationship

and then urge the workers to seek better arrangements through improvement and data

performance and correspondence innovation frameworks, promotion of techniques or

procedures. These "best answers for change" can be identified with a creative domain that

incorporates representatives as key actors in the distinctive test and the performance of new open

doors that result in more efficient use of assets (Gaynor, 2002).

In this document, the creators receive the approach proposed by Gaynor (2002) and,

consequently, adopt an approach that considers development as the ability to establish the ground

48

to move forward and seek better arrangements (Martins & Terblanche, 2003). As Abraham and

Knight (2001) point out, the development includes making the creation of learning and inventive

activity a way of life that confirms, for example, trying to create and expand showcases instead

of simply responding to the client's request. In this line, at its heart, a process of fruitful

development can be seen as the use of better arrangements that meet new needs, unexpressed

needs or needs of the existing commercial sector (Martins & Terblanche, 2003).

It should be noted, in any case, that the creation of measures for the advancement can be a

dubious matter. Previous research has created measures of progress identified with their

performance and components (Leenders & Wierenga, 2002). For example, some previous

examinations have created measures that identify the degree to which an association has an

inventive culture by using measures that are expressly identified with the presence of specific

practices (Brettel & Cleven, 2011), while others recommended that the measurement of

development performance allow authorized representatives to focus on actual progress rather

than simply pretending service to possibly creative practices (Michalisin, 2001). This review

focuses on performance indicators that speak of the long-distance returns of an inventive culture,

improved elements, and administrations, changes in procedures or promotion of techniques

formed by an imaginative culture.

Social advances are developments that are useful for society and improve the ability of the

organization to act in achieving its financial improvement objectives (Rexhepi et al., 2013). In

this way, characterizes the CSR since the initiatives of the organizations go beyond those that

arise due to the instructions to adjust the needs of the partners with the need to obtain a benefit

(Doane & Abasta-Vilaplana, 2005). Hopkins (2016) states that CSR includes cooperation with

external and internal partners of the company in a morally or socially competent manner. This

49

understanding verifies the thoughts of (Du, Bhattacharya & Sen (2011) that, by participating in

CSR exercises, organizations cannot simply create positive partner dispositions and best aid

practices (for example, buy, search for business or put resources in the organization).), but also,

as time passes, builds a corporate image, strengthens the connections of the partner organization

and improves the support practices of the partners. In addition, (Rasoulzadeh et al., 2013)

consider that CSR is a method to increase operational productivity and reduce expenses, and

(Dahlsrud, 2008) recommends that, from a financial perspective, CSR be considered to be

identified with the assets of the generation of goods and adventures is dispersed within the social

framework.

Although some consider CSR to be a source of advantage for improving corporate image and

visibility (Knox & Maklan, 2004), it can also be a source of controversy if it is not legitimately

controlled (Doane & Abasta-Vilaplana, 2005). As argued by (Blakely & Aparicio, 1990), it is

likely that financial and social objectives are having progressive difficulties as hierarchical assets

recede and administrative support for social projects decreases. In this way, I understand that

observational investigations of the connection between CSR and performance related to money

have uncertain, revealing positive aspects (Johnson & Greening, 1999), negatives (Davidson &

Worrel, 1988) and even non-partisan results (McWillians & Siegel, 2000). Even so, the lack of

agreement may reflect problems of demonstrative determination, for example, the exclusion of

factors identified with the development.

Martinez-Conesa, Soto-Acosta and Palacios-Manzano (2017) explore the connection between

corporate social obligation and business esteem, however, a critical research gap remains when

considering the connection between CSR and progress. The document evaluates its association

with the hierarchical development and the performance of the company in a solitary integrating

50

model by using the auxiliary condition that it shows in an information collection of 552 Spanish

companies. Our results support an impact of fractional intervention in the performance of

progress in the connection between CSR and the performance of the company, from the impact

of CSR on the performance contracts of the company on the expansion of the performance of

development towards the model. The findings can see how CSR is an imperative driving tool for

organizations to be more imaginative, productive and powerful.

Cegarra-Navarro et al., (2016) led in this exam focuses on the culture of advancement of an

organization in the connection of monetary and social duties with performance related to money.

In particular, our research tends to the two investigations that accompany it: Does the advance

trigger the concurrent improvement of the monetary and social measurements of the corporate

social duty? Does the simultaneous search for monetary and social obligations result in a higher

budget performance? These consultations are inspected through an observation examination of

133 organizations, which have a place with the Social Environmental Agreement of Spain, which

uses the auxiliary condition that shows approved by the research factor. The results show that,

despite the fact that organizations are using development results to help the monetary and social

achievements, they are simply successfully exploiting financial achievements to obtain greater

performance related to money.

Wagner (2010) analyzed the connection between progress with high social advantages and

corporate social performance and the part that family businesses play in this. This issue is

especially important given a large number of companies that are claimed by the family. In

addition, the demonstrable ability of the development to accommodate the views of the corporate

management capacity with the gain legitimizes an extended investigation of this connection.

Governments regularly reinforce the socially advantageous advance with different instruments of

51

an agreement, with the aim of expanding global aggression and at the same time supporting

sustainable improvement. At the same time, companies look for corporate social duties (CSR)

and ecological management exercises mainly with the expectation that this will encourage such

an advance in their association (close to their fundamental point to improve CSP).

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2.12 Theoretical Background

The main motivation of the study is to investigate how an organization can improve its financial

performance by adopting CSR practices. Multiple theories proposed that CSR leads toward

improving organizational performance (Porter & Kramar, 2002). Corporations are legal entities

with economic responsibilities and also subject to fulfill their moral obligations toward society at

large. CSR is being conceptualized as economic, legal, ethical and philanthropic aspects of an

organization.

The prophecy of the stakeholder theory holds the view that corporate ethics should be preserved

in the decision-making process. Corporate decisions affect stakeholders with a different level of

intensity and organizations should consider their moral obligations toward stakeholders. Past

studies outline various theories which support the phenomena of CSR. Literature base on CSR

proclaims various theories mainly stakeholder theory, social identity theory, consumer inference

making, and signaling theory. Classical economics support the concept of shareholder's theory

(Friedman, 1970), which proposed that organizational objectives are only associated with wealth

maximization of owners. However, organizational objectives should not be effectively

accomplished by compromising societal and other stakeholder's interests (Crane et al., 2008).

Stakeholder theory holds the notion that an organization incorporates the insight of stakeholder

while making a corporate decision (Barnett & Salomon, 2012). These stakeholders influence the

organizational performance directly and indirectly, so dissatisfaction of any stakeholder can

adversely affect the business continuity of an organization (Delmas & Toffel, 2008; Henriques &

Sadorsky, 1999; Clarkson, 1995).

53

Stakeholder theory supports to stakeholders or individuals who influence or influenced by the

corporate strategies or practices. Management is considered to respond the stakeholder concerns

because the main function of managers is to meet the stakeholder's expectations effectively.

Emshoff and Freeman (1978) proposed that organizational objectives should be aligned with

stakeholder‟s expectations. Considering stakeholders expectations while making corporate

decision reflect conventional reputation in the mind of stakeholders.

Integrative social contract theory indicates that there exists an implicit contract between business

and society (Donaldson & Dunfee, 1995). It imposes few responsibilities on working business

for the development of society. It also elaborates the socio-cultural context and normative aspect

of management because this will tend to influence the organizational performance. Shareholder

theory indicated that it is the first priority of organization to maximize shareholders wealth which

leads to developing a strong interaction between investors and organization tend to improve its

performance (Greenwood, 2001). Legitimacy theory proposed that the organization's activities

must be accordingly the expectations of societal and environmental norms, values, and beliefs.

This social activism leads to develop a positive perception between the actions of organizations

that tends toward better financial performance (Suchman, 1995).

Besides banking customer demand it's also asserted by stakeholder theory that corporate

decisions affect stakeholders with a different level of intensity and organization should consider

their moral obligations toward stakeholders. Past studies outline various theories which support

the phenomenon of CSR however stakeholder theory dominantly emphasis that CSR remains

vital for positively affecting customer perception and reaping positive outcome. By using the

lens of stakeholder theory it is intriguing to examine the effect of CSR, corporate reputation and

innovation in determining the bank's financial performance in the context of Pakistan.

54

2.13 Conceptual Framework

Figure-1: Conceptual Framework

Financial Performance

Innovation

Corporate

Reputation

Stakeholder Pressure

Non-Financial Performance

CSR

55

2.14 Hypothesis

56

CHAPTER 3

The Data and Research Methodology

3.1 Introduction

The main objective of this chapter includes research design, population and sampling technique,

scale measurements, research procedures, and data analysis techniques. The main concern of this

study is to examine the implications of corporate social responsibility on the financial and non-

financial performance of Pakistani banks. Moreover, moderating role of stakeholder pressure and

mediating role of innovation and corporate reputation between the relationship of CSR and

performance. The research design included the onion metaphor (Saunders et al., 2011) which

explained philosophies, approaches for research, times schedules, choices, procedure &

techniques of this study. This study adopted the positivism philosophy (Crotty, 1998) with a

quantitative methodology to examine the research model through the data collected from

respondents (Robson & McCartan, 2016).

Quantitative method is appropriate for analyzing the cause and effect relationship between

dependent and independent variables (Creswell, 2002; Sekaran, 2006). The current study is

based on cross-sectional data, so survey methods adopted and questionnaires distributed for data

collection. The survey method is considered comparatively better and more adequate to

understand the attitude of the respondents. There are three ways of conducting a study, such as

mono-method, mixed method and multi-method, which are applied research analyzes, but this

study followed a mono-method and the survey data were collected in a single moment.

57

3.2 Target Population

Data collection strategy explains the type of required data, respondents, time, place and method.

This study is based on primary data and collected from the banking sector of Pakistan. Banks

contribute a significant role in the economy and these have a direct association with stakes of

investors and other stakeholders (Herwartz & Walle, 2014; Hsueh, Hu & Tu, 2013). With

approximately 12,993 branches, thirty-four scheduled banks are working in Pakistan. There is a

total of eight major banks having 9054 branches in different regions. These banks are targeted

because contributing major role in the banking sector of Pakistan.

3.3 Sampling Design

Data collection was planned through a survey method which includes questionnaires distribution.

Stratified sampling technique is used because sample selection is made based on the strata of

having more than five hundred branches in commercial banks (Sekaran, 2006). These banks are

including Habib Bank Limited, National Bank Of Pakistan, United Bank Limited, Muslim

Commercial Bank Limited, Allied Bank Limited, Bank Alfalah Limited, Bank Al Habib Limited,

and Askari Bank Limited. These banks have total 9054 branches working in all over Pakistan.

Federal, central, and south regions are focused for data collection because the majority of

branches are in working in these regions.

In this study, the unit of analysis is individuals and the respondents include branch managers

(Hidiroglou, 1994). The selected banks have 9054 branches all over Pakistan, and especially

there are 5032 branches working in federal, central and south regions. There are different

methods and formula for sample selection but in this study two methods are used. Firstly,

58

Yamane (1967) developed a formula for calculation of sample size. The researcher

recommended that for the targeted population, a sample size of 370 is enough. Secondly, as per

the described table of the researcher, if the population is approximately between 5000-6000, a

sample of 370 will be enough (Annex 3.3.1).

3.4 Data Collection

In this study, keeping in mind the research ethics, few measures applied. Firstly, after getting

complete information regarding a number of branches, addresses, and locations working in

targeted regions; it is started with formally contacting the respective department and operational

management through telephone, emails etc. This was conditional by management not to disclose

the name of the branch and respondents. After having positive consent from their management,

the concerned authorities of targeted banks reviewed the questionnaire. It was planned to

distribute a total of 700 questionnaires keeping in mind the lower response rates, busy schedules,

working hours, and commitments of respondents. Data collection is experienced as a tough job

and after numerous contacts, reminders, and visits, researcher succeeded to receive back 460

questionnaires. (Annex 3.3.2)

3.5 Measurement Scale

The instruments used in this study have adopted from research studies. Corporate social

responsibility scale adopted from (Turker, 2009) and validated by (Moisescu, 2015). Corporate

59

reputation scale adopted from (Weiss, Anderson, & MacInnis, 1999) and validated by (Saeidi et

al., 2015). Innovation scale adopted from (Manu, 1992) and validated by (Martinez-Conesa, et

al., 2017; Bocquet et al., 2013; Lee & Choi, 2003). Stakeholder pressure scale adopted from

(Delmas & Toffel, 2008) and validated by (Yu & Ramanathan, 2015). Financial Performance

scale adopted from (Govindarajan, 1984) and validated by (Mishra & Suar, 2010). Non-financial

Performance scale adopted from (Govindarajan, 1984) and validated by (Mishra & Suar, 2010;

Hoque, 2004). The detailed questionnaire is attached in Annexure. Historical research studies

explained different survey methods related to data collection, while this study followed the five-

point Likert scale method. It provides comparatively better results; as it is respondent-friendly. It

indicates that how much respondents consent to a particular articulation can be found out

utilizing Likert questions. The scale starts from 1) strongly disagree to 2) disagree, 3) neutral, 4)

agree, and 5) strongly agree.

3.6 Data Analysis Techniques

This analysis includes cross-sectional data and it was collected from multiple respondents'

belonging to different managerial posts of federal, central and south regions of commercial

banks. SPSS, AMOS and MedThree Macro of (Preacher & Hayes, 2004) were used for analysis.

Following econometric techniques were used for checking normality, correlation and hypothesis

testing of CSR and financial, non-financial performance.

Normality Tests

Descriptive statistics

Correlation

Structural equation modeling

60

3.6.1 Normality Tests

Normality tests are applied to check the normal distribution of random variables. Different types

of tests are conducted to verify that data is normal and there is no issue of errors. It is important

to make ensure that the instrument which has used in this study is accurate and truly measuring

the variable. There could be possible variation is the developed scale like including omitted or an

irrelevant case of items. The reliability analysis explains the consistency of the measurement

elements over time and their respective latent variables. It elaborates that the variable is free of

levels of bias. In addition, it can be explained as the stability, consistency and goodness of an

instrument that measures the observed factor with its different elements. This study focused on

data and checked that either data is useful for the research model through reliability, histogram,

P.P. Plot, and Q.Q. Plot etc. Linearity is seen using a graph known as scatter plot in which the

values of two variables are plotted along two axes, the pattern of the resulting points revealing

any correlation present. Furthermore, as there were a total of 460 responses received and few of

questionnaires contained missing values, those were dropped from studies.

3.6.2 Descriptive Statistics

Descriptive statistics indicate the mean and standard deviation. Moreover, it is used for purpose

indicating normality of data using Skewness, and kurtosis. Mean shows that the trend of data is

going toward strongly agree or strongly disagree as per average of results. Skewness is a measure

of symmetry, or all the more unequivocally, the absence of symmetry. An appropriation, or

information set, is symmetric in the event that it appears to be identical to one side and right of

the inside point. Skewness explains the spread of data. Kurtosis is a measure of whether the data

are heavy-tailed or light-tailed relative to a normal distribution. That is, data sets with high

61

kurtosis tend to have heavy tails, or outliers. Data sets with low kurtosis tend to have light tails,

or lack of outliers.

3.6.3 Correlation

In this study, the Pearson correlation method has used for the portrayal of the relationship

between Independent, and dependent factors. It gives the level of relationship between factors.

Correlation framework is helpful in light of the fact that it can show the analytical relationship

among factors. This system bargains about the quality and course of the relationship between the

factors. However, correlation is old method since it just considers the quality and heading of a

relationship and does not clarify the lead lack relationship. It just recognizes that factors have no

relationship, negative or positive correlation. Because of these issues, this method is not

considered as a viable strategy. So, other different regression analyses and structural equation

modeling are applied for relationship testing.

3.6.4 Structural Equation Modeling

Structural equation modeling (SEM) is considered an important technique which is used to

analyze the relationships between CSR and financial performance (Rowley & Berman, 2000).

SEM refers to a diverse set of statistical methods that fit observed items of constructs to data. It

includes exploratory factor analysis, confirmatory factor analysis, path analysis, and partial least

squares path analysis. It ascertains the consistency of covariance matrices with their

hypothesized research model. It is considered as extensive form of research technique of

historical multivariate techniques and regression analysis. So, later on it is defined as the

combination of multiple regression technique and factor analysis which also incorporates the

model goodness and fitness (Hair et al., 1998). Structural equation modeling is emerging and is

62

being used currently in developing economies at a broader level as compare to other regression

analysis.

In the modern era of technological advancement, new and latest techniques and statistical

packages have developed for the provision of researchers. SEM is considered one of those

advanced techniques that can be applied to the analysis of corporate social responsibility

(Johnson & Greening, 1999). This technique is friendly to researchers because it can provide

simultaneous tests of different independent, dependent and other factors. In this way, the scholars

can analyze multiple relationships only in an individual output with the inclusion of several

measures of goodness of the model. There could be many ways to analyze CSR and

performance, but SEM is considered one of the best ways.

SEM has examined by using AMOS software in social and management sciences. It is used to

testify that which variable and its scale could be best fitted at measurement model and structural

model and applied to analyze the impact of CSR on financial and non-financial performance with

moderating impact of stakeholder pressure and mediating influence of corporate reputation and

innovation. In this study, there are two types of components including a measurement model and

structural model which are applied at two different stages.

The measurement model is the first stage which explains the fitness of each item of scale which

could be included in the model and confirmatory factor analysis is used to analyze the observed

variables and their goodness, fitness, and reliability. The structural model is applied at the second

stage which provides the overall goodness, fitness, and reliability of collected data and the

hypothesized structural model. These are compared by using the fit indices and threshold values.

In this study, AMOS as an advanced statistical package and SEM as an econometric technique

63

applied to examine confirmatory factor analysis. This CFA explained the factor loading of the set

of observed factors on its latent factor (Hoyle, 1995). In addition, this technique is also used to

test hypotheses related to different variables. This study followed the SEM technique already

tested CSR and performance relationship (Jain et al., 2016; Valmohammadi, 2014).

This method of research analysis is considered as technique of second-generation which provides

comparatively better causal results between different variables. It is different from old and

traditional regression analysis of first generation (Urbach & Ahlemann, 2010). Researchers and

statistician believes that SEM can provide better and more authentic findings than just simple

regression which will lead to reduction in measurement error and bias (Urbach & Ahlemann,

2010).

3.7 Pilot Testing

In this study, firstly questionnaires are finalized and then given to experts like Ph.D. scholars,

Doctors and Professors in university for proofreading. Secondly, expert's option also taken

working in the corporate sector. Then the first draft of the questionnaire got ready to make

distribution among the sample respondents belonging to commercial banks. The total of 30

questionnaires was distributed for pilot testing. These were analyzed for reliability testing to

make sure that there are possible issues of reliability in the data. Obtained data had shown better

results initially, and indicated that the values of Cronbach alpha are in between defined limits of

0.7 to 0.9 (O'Leary-Kelly & Vokurka, 1998) while it can be considered reliable if greater than

0.6 (Sekaran, 2006), so the further questionnaires were also distributed for data collection.

64

3.8 Ethical Consideration

The ethical aspects of data collection are important and researchers, experts, and practitioners

have major attraction in describing how and why data is collected. There are different ethical

considerations that are required during the data collection, such as the potential harm of the

respondent, the lack of secrecy and informed consent, and the leakage of information (Bryman &

Bell, 2015). There are possibilities of reducing the quality of the data due to the absence of the

considerations mentioned above (Saunders et al., 2011). It is necessary to comply with the legal

requirements, if applicable, in the collection and use of data (Bryman & Bell, 2015). Finally, the

approval must be considered for the use of the scale from the scale developers in case of

adopting or adapting.

65

CHAPTER 4

EMPIRICAL STUDY

4.1 Introduction

This section contained measurement models, descriptive statistics, model fitness, inter-item

correlation, normality, demographics, correlations matrix, direction relationships, simple and

sequential mediation, and moderation. Study investigated the implications of corporate social

responsibility on financial and non-financial performance in Pakistani banks. Survey-based

strategy was adopted to examine this relation and structured questionnaires were distributed

among respondents using different sources.

4.2 Assessment of Measurement Models

In the structural equation modeling, it is first necessary to consider a confirmatory factor analysis

for the observed variables fitness toward latent factor. In this study, the measurement model of

each variable is applied to analyze its goodness, fitness, reliability and validity.

4.2.1 Measurement Models of Corporate Social Responsibility

Measurement model explains the fitness of each item using descriptive statistics, model fitness,

and inter-item correlation.

4.2.1.1 Descriptive Statistics

Descriptive statistics indicated the normality of data including mean and standard deviations.

Moreover, Skewness and kurtosis are also indicated in the description of data. Cronbach Alpha

indicated the reliability of data which is showing the alpha values in the last column of the

below-mentioned table.

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Table 4.2.1.1 Descriptive Statistics of CSR

Mean Std. Dev Skew Kurt Cronbach Alpha

CSR1 3.74 1.03 -0.543 -0.172 0.849

CSR2 3.58 1.06 -0.385 -0.605 0.854

CSR3 3.58 1.01 -0.648 0.216 0.850

CSR4 3.70 1.04 -0.621 -0.117 0.855

CSR5 3.82 1.13 -0.914 0.139 0.846

CSR6 3.69 0.94 -0.393 -0.097 0.848

CSR7 3.51 1.11 -0.624 -0.248 0.845

CSR8 3.57 1.12 -0.592 -0.336 0.854

CSR9 3.72 1.15 -0.794 -0.109 0.846

CSR10 3.80 0.95 -0.741 0.494 0.848

CSR11 3.52 0.93 -0.399 -0.163 0.847

CSR12 3.54 0.98 -0.686 0.286 0.854

CSR13 3.55 1.09 -0.667 -0.092 0.858

The descriptive statistics table indicated 460 as the total number of respondents who have

participated in this primary research. This study used five Likert scales for research and all items

showed minimum values with 1 and maximum values with 5. Mean values indicated the average

of total responses; they have shown for thirteen items. The highest values are 3.82 and the

minimum mean value is 3.42. The highest values are positive indication and lead to strongly

agree with the measurement item and vice versa. All items of CSR have showed mean value

above 3, which showed that most respondents are leading to agree and strongly agree.

The standard deviation is an amount that expresses how much the members of a group differ

from the mean of the group. This study indicated that standard deviations of majority values are

closer to 1, which means that out of a total of five, 20% of people are deviating from mean

values. Few values are less than one that showed that divergent responses are lower in those

items. Skewness is a measure of the asymmetry of the probability distribution of a random

variable of about its mean. The asymmetry value can be positive or negative, or even undefined.

67

The threshold level could be close to zero and in this study, the values of asymmetry of CSR are

closer to zero, but almost all values are negative. Negative values indicated that at the initial

stage, the data trend is negative and CSR data is negatively skewed.

Kurtosis is a measure of whether the data are heavy or light tail in relation to a normal

distribution. It also indicates the sharpness of the peak of the frequency distribution curve. The

threshold value level of kurtosis is 3 and in this study, all values are between "-3 < 0 > +3". It is

an indication of the normality of the data. Cronbach's alpha is known as a reliability test and

historical studies indicated that its value should be between 0.70 and 0.90, but the data will also

be considered as reliable if its value is greater than 0.60. In the case of CSR, the Cronbach's

Alpha value is between the thresholds. It is another indication of the reliability of the data.

4.2.1.2 Assessment of Overall Fitness

CFA-I is conducted to examine the best fit of the measurement model. It is noticed that all the

measurement items of CSR are showing statistical significance of regression weights. Multiple

squared correlation coefficients (R2) indicate the strong internal consistency and uni-

dimensionality of the scale. This first order CFA indicated that all the thirteen items are not

meeting criteria of best fit of measurement model of CSR in total collected data. Values of Chi-

square (χ²) and normed chi-square (χ²/df) are showing greater which indicates at first order CFA

level. Chi-square and normed chi-square are 319.9 which is small preferred and 4.923 which

should less than 5 respectively (Schumacker & Lomax, 2004).

68

Table 4.2.1.2: Fit levels of Original CSR Measurement Model

Index Threshold Level Original Model

Statistic Fitness Level

χ² Small preferable 319.9 Poor

χ²/df ≤ 5.0 5.270 Poor

RMR ≤ .08 0.067 Good

CFI ≥ .90 0.823 Poor

GFI ≥ .90 0.906 Good

NFI ≥ .90 0.790 Poor

RMSEA ≤ .10 0.092 Good

There are other few values which are used for goodness and fitness of the model suggested by

multiple experts. These are also showing deviated values from their threshold levels which are an

indication of unfitness of measurement model of CSR. RMR explains the square root of means

of covariance residuals which is actually obtained from the differences of corresponding

elements of observed and predicted covariance matrix. Its value will be considered as best fitted

if closer to zero while possibly up to 0.05 (Steiger, 2000) and 0.08 (Browne & Cudeck, 1989). In

this study value of RMR is 0.067 which just closer to a threshold level.

Comparative fit index (CFI) is obtained from the comparison of the null model to the proposed

model in which factors are proposed to be uncorrelated. Model fit which is obtained by the

difference of observed and predicted covariance matrix known as chi-square index (Shevlin &

Miles, 1998). The goodness of Fit statistic (GFI) is considered as a substitute of chi-square test

which computes the proportion of variance based estimated population covariance (Tabchnick &

Fidell, 2006). Threshold levels of CFI and GFI are considered as 0.90 in case of the higher

sample while in case of lower sample values could be possibly up to 0.95 is considered more

appropriate (Shevlin & Miles, 1998). In this measurement scale, the CFI value is less than the

threshold level which clearly indicates that the model is not properly fitting with the analysis.

69

Normed fit index (NFI) is measured using the difference of chi-square and target model and its

value could be possible in between 0 and 1. It is obtained by dividing the difference of values of

chi-square of the null and targeted model by the chi-square value of the null model. Moreover,

NFI indicates the 90% fitness and improvement of the interesting model with respect to the null

model. Value of NFI could deviate as the sample size reduces (Ullman, 2003). Value of NFI is

0.790 which is lower than the threshold level which indicated that this measurement model is not

good and fit.

RMSEA is another measure of model fitness which indicates the fitness of a measurement model

with respect to chosen parameter estimates and it should fit with the population covariance

matrix (Byrne, 1994). This value could possibly deviate from 0.8 to 0.10 which fit show the

model fitness at a lower level but best fit of model its value should be lower than 0.8

(MacCallum et al, 1996). The measurement model of CSR is showing RMSEA value 0.092 and

first order CFA of CSR indicated that RMSEA is crossing the highest cut-off level which is

dangerous and there exists a clear issue in the measurement model which should be overcome.

70

Figure I: First-Order CFA of the Original Model of Corporate social responsibility

Generally, it is presumed that there exists an issue in the data which is making issues in

measurement model goodness and fitness. Few of estimations of Chi-square, CFI, and NFI are

veering off from their cut-off or threshold level which demonstrated that the CSR model is not

good and fit. The poor measurement model fitness required to revise the correlations between

items, path estimates and modification indices. Subsequently, after meditation and arduous hit-

and-trial, it was chosen to hold just eight estimation items to obtain best-fitted measurement

model of CSR.

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Figure II: First-Order CFA of the Updated Model of Corporate Social Responsibility

There were total thirteen items were started and finally, only eight items are be processed for

best fit of the model. The standardized estimates (λ) of the final measurement model of CSR are

statistically significant and contributing to determine the other factors. It is noticed that all the

eight items are loading on specified construct and showing significance in factor loading and

squared correlation. The important thing is that standardized estimates are within the threshold

level of one and all variances are a significant positive. Table of assessment of measurement

model fitness is indicating that all standards of goodness and fitness have approximately

achieved.

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Table 4.2.1.3: Comparative Fitness levels of CSR Measurement Model

Index Threshold Level Original Model Updated Model

Statistic Fitness Level Statistic Fitness Level

χ² Small preferable 319.9 Poor 101.02 Good

χ²/df ≤ 5.0 4.923 Good 5.000 Good

RMR ≤ .08 0.067 Good 0.049 Good

CFI ≥ .90 0.823 Poor 0.860 Supported

GFI ≥ .90 0.906 Good 0.945 Good

NFI ≥ .90 0.790 Poor 0.833 Supported

RMSEA ≤ .10 0.092 Good 0.100 Good

The value of chi-square is 101.02 which are much lower than the original model and normed chi-

square showing 5.0 which is at the cut off value. RMR which explains the square root of means

of covariance residuals which is actually obtained from the differences of corresponding

elements of observed and predicted covariance matrix. Its value is as well lower than the

threshold level which supports the goodness and fitness of the measurement model. CFI, GFI,

and NFI also supporting the model fitness as these values are also meeting the threshold level

standards. RMSEA is another measure of model fitness which indicates the fitness of a

measurement model with respect to chosen parameter estimates and it should fit with the

population covariance matrix (Byrne, 1994). RMSEA value is also equal to a threshold level

which supports to model goodness and fitness. Generally, it is presumed that there exists no issue

in the data which would possibly lead to measurement model goodness and fitness.

73

4.2.1.3 Assessment of Inter-Item Correlation and Reliability

In the above-mentioned description of model fitness indicated that all the eight factors of CSR

are statistically significant. Factor loading on the unobserved variables of CSR are in between

threshold ranges with the least value of estimates is 0.40. Items are correlated with each other at

a 99% confidence interval. In all the cases correlation level deviated and least correlation is

noticed between CSR2 and CSR5 which is significant and correlated with

and CSR6 and CSR7 are statistically and significantly correlated with each other at 99%

confidence interval with .

Table 4.2.1.3: Inter-Item Correlation of CSR Measurement Model

CSR1 CSR2 CSR3 CSR4 CSR5 CSR6 CSR7 CSR8 Cronbach Alpha

CSR1 1.000

CSR2 .269**

1.000

CSR3 .309**

.187**

1.000

CSR4 .167**

.142**

.425**

1.000

0.747

CSR5 .295**

.161**

.180**

.228**

1.000

CSR6 .329**

.282**

.481**

.229**

.290**

1.000

CSR7 .235**

.217**

.349**

.176**

.080 .467**

1.000

CSR8 .322**

.235**

.293**

.269**

.267**

.272**

.365**

1.000

**Correlation is significant at the 0.01 level

The corrected item-total correlation of all eight items was in the brackets in range, which is

greater than the threshold value for acceptability. The Cronbach alpha for these eight items of

CSR is exceeding the threshold level of 0.70 which is an indication of the reliability of data used

in this measurement model study. Generally, it could be concluded that CSR is a reliable scale

used for final analysis.

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4.2.2 Measurement Models of Corporate Reputation




Descriptive statistics indicating the normality of data including mean, standard deviations.




Table 4.2.2.1 Descriptive Statistics of Corporate Reputation


CR1 3.67 1.25 -0.884 -0.155 0.733

CR2 3.56 1.09 -0.443 -0.402 0.686

CR3 3.55 0.95 -0.39 -0.105 0.724

CR4 3.62 1.00 -0.736 0.360 0.726

CR5 3.53 1.14 -0.634 -0.307 0.774




of total responses; they have shown for five items. The highest values are 3.67 and the minimum

mean value is 3.53. The highest values are a positive indication and lead to strongly agree with

the measurement item and vice versa. All items of corporate reputation have shown a mean value





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values. Few values are less than one that showed that divergent responses are lower in those

items. Skewness is a measure of the asymmetry of the probability distribution of a random


The threshold level could be close to zero and in this study, the values of the asymmetry of

corporate reputation are closer to zero, but almost all values are negative. Negative values

indicated that at the initial stage, the data trend is negative and corporate reputation data is

negatively skewed.






be considered as reliable if its value is greater than 0.60. In the case of corporate reputation, the

Cronbach's Alpha value is between the thresholds and its value for all the items 0.69-0.77. It is

another indication of the reliability of the data.


First order confirmatory factor analysis is conducted to examine the best fit of the measurement

model. It is noticed that all the measurement items of corporate reputation are showing statistical

significance of regression weights. Multiple squared correlation coefficients (R2) indicate the

strong internal consistency and uni-dimensionality of the scale. This first order CFA indicated

that all the 5 items are not properly fit measurement model of corporate reputation in total

collected data. Values of Chi-square and normed chi-square are showing greater which indicates

76

at first order CFA level. Chi-square and normed chi-square are 48.50 which is small preferred

and 9.70 which should less than 5 respectively (Schumacker & Lomax, 2004).

Table 4.2.2.2: Fit levels of Original CR Measurement Model




χ²/df ≤ 5.0 9.700 Poor

RMR ≤ .08 0.063 Good

CFI ≥ .90 0.960 Good

GFI ≥ .90 0.930 Good

NFI ≥ .90 0.923 Good

RMSEA ≤ .10 0.138 Poor


multiple experts. These are also showing deviated from their threshold levels which are an

indication of unfitness of measurement model of corporate reputation. RMR explains the square

root of means of covariance residuals which is actually obtained from the differences of

corresponding elements of observed and predicted covariance matrix. Its value will be

considered as best fitted if closer to zero while possibly up to 0.05 (Steiger, 2000) and 0.08

(Browne & Cudeck, 1989). In this study value of RMR is 0.063 which is closer to a threshold

level. Comparative fit index (CFI) and Goodness of Fit statistic (GFI) are just closer to a

threshold level and 0.90 in case of the higher sample while in case of lower sample values could

be possibly up to 0.95 is considered more appropriate (Shevlin & Miles, 1998). In this

measurement scale, the values are close to a threshold level which indicated that the model could

possible fitted with the analysis.

Normed fit index (NFI) is measured using the difference of chi-square and the target model, the

value of NFI could deviate as the sample size reduces (Ullman, 2003). Value of NFI is 0.923

which is more than the threshold level which indicated that this measurement model is good and

77

fit. RMSEA is another measure of model fitness and its value should be lower than 0.8

(MacCallum et al, 1996). The measurement model of corporate reputation is showing RMSEA

value 0.138 and first order CFA of corporate reputation indicated that RMSEA is crossing the

highest cut-off level which is dangerous and there exists a clear issue in the measurement model

which should be overcome.

Figure I: First-Order CFA of the Original Model of Corporate Reputation

Generally, it is presumed that there exists an issue in the data which is making issues in

measurement model goodness and fitness. The estimations of Chi-square, normed chi-square and

RMSEA are veering off from their cut-off or threshold level which demonstrated that corporate

reputation model is not properly good and fit. The poor measurement model fitness required to

revise the correlations between items, path estimates and modification indices. Subsequently,

after meditation and arduous hit-and-trial, it was all estimation items to obtain best-fitted

measurement model of corporate reputation, CR5 and few questionnaires were dropped and only

405 questionnaires remain which will be utilized for final analysis.

78

Figure II: First-Order CFA of the Updated Model of Corporate Reputation

The standardized estimates of final measurement model of corporate reputation are statistically

significant and contributing to determine the other factors. It is noticed that all the four items are

loading on specified construct and showing significance in factor loading and squared

correlation. The important thing is that standardized estimates are within the threshold level of

one and all variances are a significant positive. Table of assessment of measurement model

fitness is indicating that all standards of goodness and fitness have approximately achieved.

Table 4.2.2.3: Comparative Fitness levels of CR Measurement Model




χ²/df ≤ 5.0 9.700 Poor 2.681 Good

RMR ≤ .08 0.063 Good 0.016 Good

CFI ≥ .90 0.960 Good 0.994 Good

GFI ≥ .90 0.930 Good 0.997 Good

NFI ≥ .90 0.923 Good 0.990 Good

RMSEA ≤ .10 0.138 Poor 0.065 Good

79


square showing 2.681 which is lower than the cut off value. RMR which explains the square

root of means of covariance residuals which is actually obtained from the differences of

corresponding elements of observed and predicted covariance matrix. Its value is as well lower

than the threshold level which supports the goodness and fitness of the measurement model. CFI,

GFI, and NFI also supporting the model fitness as these values are also meeting the threshold

level standards. RMSEA is another measure of model fitness which indicates the fitness of a

measurement model with respect to chosen parameter estimates and it should fit with the

population covariance matrix (Byrne, 1994). RMSEA value is also lower than the threshold level

which supports to model goodness and fitness. Generally, it is presumed that now there is no

issue in the data which would possibly lead to measurement model goodness and fitness.


In the above-mentioned description of model fitness indicated that all the four factors of

corporate reputation are statistically significant. Factor loading on the unobserved variables of

corporate reputation is in between threshold ranges with the least value of estimates is 0.40.

Table 4.2.2.4: Inter-item Correlation of CR Measurement Model

CR1 CR2 CR3 CR4 Cronbach Alpha

CR1 1.000

CR2 0.513**

1.000

0.774

CR3 0.261**

0.435**

1.000

CR4 0.133**

0.345**

0.319**

1.000


80

Items are correlated with each other at a 99% confidence interval. In all the cases correlation

level deviated and least correlation is noticed between CR1 and CR4 which is significant and

correlated with and CR1 and CR2 are statistically and significantly

correlated with each other at 99% confidence interval with . The

corrected item-total correlation of all items was in the brackets in range of 0.401–0.669, which is

greater than the threshold value of .30 for acceptability. The Cronbach alpha for three items of

corporate reputations is exceeding the threshold level of 0.70 which is an indication of the

reliability of data used in this measurement model study. Generally, it could be concluded that

corporate reputation is a reliable scale used for final analysis.

81

4.2.3 Measurement Models of Innovation








Table 4.2.3.1 Descriptive Statistics of Innovation


IP1 3.56 1.23 -0.723 -0.388 0.646

IP2 3.42 1.03 -0.339 -0.285 0.629

IP3 3.51 1.09 -0.548 -0.226 0.615

IP4 3.59 1.04 -0.661 0.039 0.606

IP5 3.65 1.07 -0.705 0.047 0.642






the measurement item and vice versa. All items of innovation have shown a mean value above 3,

which showed that most respondents are leading to agree and strongly agree.




82

values. Skewness is a measure of the asymmetry of the probability distribution of a random


The threshold level could be close to zero and in this study, the values of asymmetry of

Innovation are closer to zero, but almost all values are negative. Negative values indicated that at

the initial stage, the data trend is negative and innovation data is negatively skewed.






be considered as reliable if its value is greater than 0.60. In the case of innovation, the


another indication of the reliability of the data but still it an indication of weak reliability.



model. It is noticed that all the measurement items of innovation are showing statistical



that all the 5 items are not properly fit measurement model of innovation in total collected data.

Values of Chi-square and normed chi-square are showing greater which indicates at first order

CFA level. Chi-square and normed chi-square are 65.910 which is small preferred and 13.18

which should less than 5 respectively (Schumacker & Lomax, 2004).

83

Table 4.2.3.2: Fit levels of Original IP Measurement Model




χ²/df ≤ 5.0 13.18 Poor

RMR ≤ .08 0.084 Moderate

CFI ≥ .90 0.828 Poor

GFI ≥ .90 0.941 Good

NFI ≥ .90 0.819 Poor




indication of unfitness of measurement model of innovation. RMR's value will be considered as

best fitted if closer to zero while possibly up to 0.05 (Steiger, 2000) and 0.08 (Browne &

Cudeck, 1989). In this study value of RMR is 0.084 which is moderately high from a threshold

level. Comparative fit index (CFI) and Goodness of Fit statistic (GFI) are just closer to a

threshold level and 0.90 in case of the higher sample while in case of lower sample values could

be possibly up to 0.95 is considered more appropriate (Shevlin & Miles, 1998).

In this measurement scale, the GFI value is good enough to threshold level but CFI and NFI are

lower which indicated that the model could possible unfit with the analysis. RMSEA is another

measure of model fitness and its value should be lower than 0.8 (MacCallum et al, 1996). The

measurement model of Innovation is showing RMSEA value 0.163 and first order CFA of

innovation indicated that RMSEA is crossing the highest cut-off level which is dangerous and

there exists a clear issue in the measurement model which should be overcome.

84

Figure I: First-Order CFA of the Original Model of Innovation

Overall it is presumed that there exists an issue in the data which is making issues in

measurement model goodness and fitness. The estimations of Chi-square, normed chi-square,

CFI, NFI, and RMSEA are veering off from their cut-off or threshold level which demonstrated

that Innovation model is not properly good and fit. The poor measurement model fitness required

to revise the correlations between items, path estimates and modification indices. Subsequently,

after meditation and arduous hit-and-trial, it was all estimation items to obtain best-fitted

measurement model of Innovation, IP1 and few questionnaires were dropped and only 405

questionnaires have remained which will be utilized for final analysis.

85

Figure II: First-Order CFA of the Updated Model of Innovation

The standardized estimates of final measurement model of Innovation are statistically significant

and contributing to determine the other factors. It is noticed that all the four items are loading on

specified construct and showing significance in factor loading and squared correlation. The

important thing is that standardized estimates are within the threshold level of one and all

variances are a significant positive. Table of assessment of measurement model fitness is

indicating that all standards of goodness and fitness have approximately achieved but still there

exist an issue in the value of RMSEA which exceeding than the threshold level.

Table 4.2.3.3: Comparative Fitness levels of IP Measurement Model




χ²/df ≤ 5.0 13.18 Poor 4.001 Poor

RMR ≤ .08 0.084 Moderate 0.049 Good

CFI ≥ .90 0.828 Poor 0.927 Good

GFI ≥ .90 0.941 Good 0.980 Good

NFI ≥ .90 0.819 Poor 0.920 Good

RMSEA ≤ .10 0.163 Poor 0.072 Poor


square showing 4.001 which is greater than the cut off value. It is an indication of possible

variations in the model or data in a final model of this study. RMR's value is as well lower than

the threshold level which supports the goodness and fitness of the measurement model. CFI,

GFI, and NFI also supporting the model fitness as these values are also meeting the threshold

level standards. RMSEA value is also less than threshold level which is supporting to model

goodness and fitness. Generally, it is presumed that now there are few issues in the data which

would possibly lead to measurement model poor fitness.

86



innovation are statistically significant. Factor loading on the unobserved variables of innovation

are in between threshold ranges with the least value of estimates is 0.40. Items are correlated

with each other at a 99% confidence interval. In all the cases correlation level deviated and least

correlation is noticed between IP2 and IP5 which is significant and correlated with

and IP4 and IP5 are statistically and significantly correlated with each other at 99%

confidence interval with .

Table 4.2.3.4: Inter-Item Correlation of IP Measurement Model

IP2 IP3 IP4 IP5 Cronbach Alpha

IP2 1.000

IP3 .322**

1.000

0.726

IP4 .264**

.310**

1.000

IP5 .205**

.221**

.456**

1.000


The corrected item-total correlation of all items was in the brackets in range of 0.356–0.483,

which is greater than the threshold value of .30 for acceptability. The Cronbach alpha for three

items of Innovation is exceeding the threshold level of 0.726 which is an indication of the

reliability of data used in this measurement model study. Generally, it could be concluded that

Innovation is a reliable scale used for the final analysis.

87

4.2.4 Measurement Models of Financial Performance




Descriptive statistics indicating the normality of data including mean, and standard deviations.



below-mentioned table. The descriptive statistics table indicated 460 as the total number of

respondents who have participated in this primary research. This study used five Likert scales for

research and all items showed minimum values with 1 and maximum values with 5. Mean values

indicated the average of total responses; they have shown for five items. The highest values are

3.82 and the minimum mean value is 3.58. The highest values are a positive indication and lead

to strongly agree with the measurement item and vice versa. All items of financial performance

have shown a mean value above 3, which showed that most respondents are leading to agree and

strongly agree.

Table 4.2.4.1 Descriptive Statistics of Financial Performance


FP1 3.726 1.143 -0.891 0.220 0.730

FP2 3.822 1.005 -0.750 0.249 0.735

FP3 3.589 1.005 -0.466 -0.205 0.783

FP4 3.800 0.921 -0.970 1.357 0.831





88


The threshold level could be close to zero and in this study, the values of asymmetry of financial

performance are closer to zero, but almost all values are negative. Negative values indicated that

at the initial stage, the data trend is negative and financial performance data is negatively

skewed.






be considered as reliable if its value is greater than 0.60. In the case of financial performance, the


another indication of the reliability of the data but still it an indication of weak reliability.



model. It is noticed that all the measurement items of financial performance are showing

statistical significance of regression weights. Multiple squared correlation coefficients (R2)

indicate the strong internal consistency and uni-dimensionality of the scale. This first order CFA

indicated that all the 4 items are not properly fit measurement model of financial performance in

total collected data. Values of Chi-square and normed chi-square are showing greater which

indicates at first order CFA level. Chi-square and normed chi-square are 14.103 which is small

preferred and 7.051which should less than 5 respectively (Schumacker & Lomax, 2004).

89

Table 4.2.4.2: Fit levels of Original FP Measurement Model



χ² Small preferable 14.103 Moderate

χ²/df ≤ 5.0 7.051 Poor

RMR ≤ .08 0.030 Good

CFI ≥ .90 0.983 Good

GFI ≥ .90 0.985 Good

NFI ≥ .90 0.980 Good




indication of unfitness of measurement model of financial performance. RMR, CFI, GFI, and

NFI values are showing best fitting of measurement model of financial performance (Steiger,

2000; Browne & Cudeck, 1989; MacCallum et al, 1996; Shevlin & Miles, 1998). The

measurement model of Financial Performance is showing RMSEA value 0.115 and first order

CFA of financial performance indicated that RMSEA is crossing the highest cut-off level which

is dangerous and there exists a clear issue in the measurement model which should be overcome.

90

Figure I: First-Order CFA of the Original Model of Financial Performance

Overall it is presumed that there exist few issues in the data which is making issues in


and RMSEA are veering off from their cut-off or threshold level which demonstrated that

financial performance model is not properly good and fit. The poor measurement model fitness

required to revise the correlations between items, path estimates and modification indices.

Subsequently, after meditation and arduous hit-and-trial, it was all estimation items to obtain the

best-fitted measurement model of financial performance, few questionnaires were dropped and

only 405 questionnaires remain which will be utilized for final analysis.

Figure II: First-Order CFA of the Updated Model of Financial Performance

The standardized estimates of final measurement model of Financial Performance are


four items are loading on specified construct and showing significance in factor loading and


91



achieved the threshold level.

Table 4.2.4.3: Comparative Fitness levels of FP Measurement Model



χ² Small preferable 14.103 Moderate 3.213 Good

χ²/df ≤ 5.0 7.051 Poor 3.213 Good

RMR ≤ .08 0.030 Good 0.014 Good

CFI ≥ .90 0.983 Good 0.996 Good

GFI ≥ .90 0.985 Good 0.996 Good

NFI ≥ .90 0.980 Good 0.994 Good

RMSEA ≤ .10 0.115 Poor 0.074 Good

The values of chi-square and normed chi-square are 3.213 which are much lower than the

original model and less than the cut off value. It is an indication of fitness in the model or data in

a final model of this study. RMR's value is as well lower than the threshold level which supports

the goodness and fitness of the measurement model. CFI, GFI, and NFI also supporting the

model fitness as these values are also meeting the threshold level standards. RMSEA value is

also less than threshold level which is supporting to model goodness and fitness. Generally, it is

presumed that now there are no issues in the data which would possibly lead to measurement

model goodness and fitness.


In the above-mentioned description of model fitness indicated that all the four factors of financial

performance are statistically significant. Factor loading on the unobserved variables of financial

performance is in between threshold ranges with the least value of estimates is 0.40. Items are

92

correlated with each other at a 99% confidence interval. In all the cases correlation level deviated

and least correlation is noticed between FP3 and FP4 which is significant and correlated with

and FP1 and FP2 are statistically and significantly correlated with each

other at 99% confidence interval with .

Table 4.2.4.4: Inter-Item Correlation FP Measurement Model

FP1 FP2 FP3 FP4 Cronbach Alpha

FP1 1.000

FP2 .714**

1.000

0.785

FP3 .412**

.520**

1.000

FP4 .433**

.367**

.399**

1.000




items of financial performances is exceeding the threshold level of 0.785 which is an indication

of the reliability of data used in this measurement model study. Generally, it could be concluded

that Financial Performance is a reliable scale used for final analysis.

93

4.2.5 Measurement Models of Non-Financial Performance








Table 4.2.5.1 Descriptive Statistics of Non-financial performance


NFP1 3.804 1.130 -0.928 0.260 0.691

NFP2 3.763 0.823 -0.336 0.004 0.682

NFP3 3.637 0.871 -0.753 1.023 0.681

NFP4 3.652 0.977 -0.664 0.327 0.670

NFP5 3.685 1.002 -0.861 0.502 0.673

NFP6 3.722 0.962 -0.512 0.029 0.718






the measurement item and vice versa. All items of non-financial performance have shown a

mean value above 3, which showed that most respondents are leading to agree and strongly

agree.



94




The threshold level could be close to zero and in this study, the values of asymmetry of non-

financial performance are closer to zero, but almost all values are negative. Negative values

indicated that at the initial stage, the data trend is negative and non-financial performance data is

negatively skewed.






be considered as reliable if its value is greater than 0.60. In the case of non-financial

performance, the Cronbach's Alpha value is between the thresholds and its value for all the items

0.67-0.72. It is another indication of the reliability of the data but still it an indication of weak

reliability.



model. It is noticed that all the measurement items of non-financial performance are showing

statistical significance of regression weights. Multiple squared correlation coefficients (R2)

indicate the strong internal consistency and uni-dimensionality of the scale. This first order CFA

indicated that all the 6 items are not properly fit measurement model of non-financial

performance in total collected data. Values of Chi-square and normed chi-square are showing

95

greater which indicates at first order CFA level. Chi-square and normed chi-square are 110.85

which is small preferred and 12.317 which should less than 5 respectively (Schumacker &

Lomax, 2004).

Table 4.2.5.2: Fit levels of Original NFP Measurement Model



χ² Small preferable 110.85 Moderate

χ²/df ≤ 5.0 12.317 Poor

RMR ≤ .08 0.070 Good

CFI ≥ .90 0.805 Poor

GFI ≥ .90 0.925 Good

NFI ≥ .90 0.797 Poor




indication of unfitness of measurement model of non-financial performance. Values of CFI and

NFI are showing poor fitness because these are less than a threshold level. RMR and GFI values

are showing best fitting of measurement model of non-financial performance (Steiger, 2000;

Browne & Cudeck, 1989; MacCallum et al, 1996; Shevlin and Miles, 1998). The measurement

model of Non-financial Performance is showing RMSEA value 0.157 and first order CFA of

non-financial performance indicated that RMSEA is crossing the highest cut-off level which is

dangerous and there exists a clear issue in the measurement model which should be overcome.

96

Figure I: First-Order CFA of the Original Model of Non-financial Performance

Overall it is presumed that there exist few issues in the data which is making issues in


CFI, NFI, and RMSEA are veering off from their cut-off or threshold level which demonstrated

that non-financial performance model is not properly good and fit. The poor measurement model

fitness required to revise the correlations between items, path estimates and modification indices.

Subsequently, after meditation and arduous hit-and-trial, it was all estimation items to obtain

best-fitted measurement model of non-financial performance, NFP 6 and few questionnaires

were dropped and only 405 questionnaires have remained which will be utilized for final

analysis.

97

Figure II: First-Order CFA of the Updated Model of Non-financial Performance

The standardized estimates of final measurement model of Non-financial Performance are


five items are loading on specified construct and showing significance in factor loading and




achieved the threshold level.

Table 4.2.5.3: Comparative Fitness levels of NFP Measurement Model



χ² Small preferable 110.85 Moderate 1.749 Good

χ²/df ≤ 5.0 12.317 Poor 1.749 Good

RMR ≤ .08 0.070 Good 0.011 Good

CFI ≥ .90 0.805 Poor 0.997 Good

GFI ≥ .90 0.925 Good 0.998 Good

NFI ≥ .90 0.797 Poor 0.994 Good

RMSEA ≤ .10 0.157 Poor 0.043 Good

98

The values of chi-square and normed chi-square are 1.749 which is much lower than the original

model and less than the cut off value. It is an indication of fitness in the model or data in a final

model of this study. RMR's value is as well lower than the threshold level which supports the

goodness and fitness of the measurement model. CFI, GFI, and NFI also supporting the model

fitness as these values are also meeting the threshold level standards. RMSEA value is also less

than threshold level which is supporting to model goodness and fitness. Generally, it is presumed

that now there are no issues in the data which would possibly lead to measurement model

goodness and fitness.


In the above-mentioned description of model fitness indicated that all the four factors of non-

financial performance are statistically significant. Factor loading on the unobserved variables of

non-financial performance is in between threshold ranges with the least value of estimates is

0.40. Items are correlated with each other at a 99% confidence interval. In all the cases

correlation level deviated and least correlation is noticed between NFP1 and NFP5 which is

significant and correlated with and NFP1 and NFP2 are statistically and

significantly correlated with each other at 99% confidence interval with .

Table 4.2.5.4: Inter-Item Correlation of NFP Measurement Model

NPF1 NPF2 NPF3 NPF4 NPF5 Cronbach Alpha

NPF1 1.000

NPF2 .446**

1.000

NPF3 .218**

.367**

1.000

0.745

NPF4 .133**

.248**

.337**

1.000

NPF5 .167**

.188**

.221**

.406**

1.000


99



items of non-financial performances is exceeding the threshold level of 0.785 which is an

indication of the reliability of data used in this measurement model study. Generally, it could be

concluded that Non-financial Performance is a reliable scale used for final analysis.

100

4.2.6 Measurement Models of Stakeholder Pressure




Descriptive statistics indicating the normality of data including mean, standard deviations.




Table 4.2.6.1 Descriptive Statistics of Stakeholder Pressure


SP1 3.441 1.403 -0.409 -1.083 0.712

SP2 3.567 1.202 -0.481 -0.657 0.718

SP3 3.376 1.039 -0.333 -0.198 0.785

SP4 3.452 1.054 -0.625 0.049 0.818


participated in this research. This study used five Likert scales for research and all items showed

minimum values with 1 and maximum values with 5. Mean values indicated the average of total

responses; they have shown for four items. The highest values are 3.56 and the minimum mean

value is 3.37. The highest values are a positive indication and lead to strongly agree with the

measurement item and vice versa. All items of stakeholder pressure have shown a mean value






101


The threshold level could be close to zero and in this study, the values of asymmetry of

stakeholder pressure are close to zero, but almost all values are negative. Negative values

indicated that at the initial stage, the data trend is negative and stakeholder pressure data is

negatively skewed.

Kurtosis is a measure which indicates the sharpness of the peak of the frequency distribution

curve. The threshold value level of kurtosis is 3 and in this study, all values are between "-3 < 0

> +3". It is an indication of the normality of the data. Cronbach's alpha is known as a reliability

test and historical studies indicated that its value should be between 0.70 and 0.90, but the data

will also be considered as reliable if its value is greater than 0.60. In the case of stakeholder

pressure, the Cronbach's Alpha value is between the thresholds and its value for all the items

0.71-0.81. It is another indication of the reliability of the data but still it an indication of weak

reliability.



model. It is noticed that all the measurement items of stakeholder pressure are showing statistical



that all the 4 items are properly fitting to measurement model of stakeholder pressure in total

collected data. Values of Chi-square and normed chi-square are showing lower which indicates

at first order CFA level. Chi-square and normed chi-square are 1.426 which is small preferred

and 0.713 which should less than 5 respectively (Schumacker & Lomax, 2004).

102

Table 4.2.6.2: Fit levels of Original SP Measurement Model



χ² Small preferable 1.426 Good

χ²/df ≤ 5.0 0.713 Good

RMR ≤ .08 0.011 Good

CFI ≥ .90 1.000 Good

GFI ≥ .90 0.998 Good

NFI ≥ .90 0.998 Good



multiple experts. These are showing properly fitted to their threshold levels which are an

indication of fitness of measurement model of stakeholder pressure. Values of RMR, CFI, GFI,

and NFI are showing good fitness because these are matching the threshold level (Steiger, 2000;

Browne & Cudeck, 1989; MacCallum et al, 1996; Shevlin and Miles, 1998). The measurement

model of Stakeholder pressure is showing RMSEA value 0.000 and first order CFA of

stakeholder pressure indicated that RMSEA is matching cut-off level which is best fitted and

there exists no issue in the measurement model.

Figure I: First-Order CFA of the Original Model of Stakeholder pressure

103

Overall it is presumed that there exist no issues in the data which could possibly create issues in


CFI, GFI, NFI, and RMSEA are meeting criteria of their cut-off or threshold level which

demonstrated that stakeholder pressure model is properly good and fit. But actually, in the whole

measurement models, 405 questionnaires are used for overall analysis, so here I am going to test

again on 405 questionnaires which will be utilized for final analysis.

Figure II: First-Order CFA of the Updated Model of Stakeholder pressure

The standardized estimates of final measurement model of Stakeholder pressure are statistically

significant and contributing to determine the other factors. It is noticed that all the four items are

loading on specified construct and showing significance in factor loading and squared

correlation. The important thing is that standardized estimates are within the threshold level of

one and all variances are a significant positive. Table of assessment of measurement model

fitness is indicating that all standards of goodness and fitness have approximately achieved the

threshold level.

104

Table 4.2.6.3: Comparative Fitness levels of SP Measurement Model



χ² Small preferable 1.426 Good 6.226 Good

χ²/df ≤ 5.0 0.713 Good 3.113 Good

RMR ≤ .08 0.011 Good 0.020 Good

CFI ≥ .90 1.000 Good 0.991 Good

GFI ≥ .90 0.998 Good 0.993 Good

NFI ≥ .90 0.998 Good 0.987 Good

RMSEA ≤ .10 0.000 Good 0.072 Good

The values of chi-square and normed chi-square are 6.226 and 3.113 respectively which are

lower than the original model and less than the cut off value. It is an indication of fitness in the

model or data in a final model of this study. RMR's value is as well lower than the threshold

level which supports the goodness and fitness of the measurement model. CFI, GFI, and NFI also

supporting the model fitness as these values are also meeting the threshold level standards.

RMSEA value is also less than threshold level which is supporting to model goodness and

fitness. Generally, it is presumed that now there are no issues in the data which would possibly

lead to measurement model goodness and fitness.



stakeholder pressure are statistically significant. Factor loading on the unobserved variables of

stakeholder pressure is in between threshold ranges with the least value of estimates is 0.40. All

the items are correlated with each other at a 99% confidence interval. In all the cases correlation

level deviated and least correlation is noticed between SP3 and SP4 which is significant and

correlated with and SP1 and SP2 are statistically and significantly

correlated with each other at 99% confidence interval with .

105

Table 4.2.6.4: Inter-Item Correlation of SP Measurement Model

SP1 SP2 SP3 SP4 Cronbach alpha

SP1 1.000

SP2 .690**

1.000

0.783

SP3 .452**

.510**

1.000

SP4 .452**

.397**

.312**

1.000




items of stakeholder pressures is exceeding the threshold level of 0.785 which is an indication of

the reliability of data used in this measurement model study. Generally, it could be concluded

that Stakeholder pressure is a reliable and valid scale used for final analysis.

106

4.3 Assessment of Structural Model

The structural model is incorporated at the second stage which provides the overall goodness,

fitness, and reliability of collected data and the hypothesized structural model.

4.3.1. Normality

The normality tests are carried out to fulfill the basic assumptions of any statistical tool that

explains the suitability of the data for the analysis and the technique. Proper attention has given

to this problem and in a review of multiple books and articles, it is noticed a lot of tests could be

possibly incorporated for removal of issues in sample data. There are several ways to verify

normality, such as descriptive statistics, the P-P plot and the histogram, etc., and these are carried

out to analyze non-normality in particular circumstances (Thode, 2002). Normality tests are

applied to check the normal distribution of random variables. Different types of tests are

conducted to verify that data is normal and there is no issue of errors. It is important to make

ensure that the instrument which has used in this study is accurate and truly measuring the

variable. It is important to make ensure that the instrument which has incorporated in this study

is accurate and truly measuring the variable.

4.3.1.1. Descriptive Statistics of Overall Selected Variables

Descriptive statistics indicate the mean and standard deviation. Moreover, it is used for purpose

indicating normality of data using Skewness, and kurtosis. There are a total of 405 respondents

which have taken part in this research after removing inadequate and inappropriate

questionnaires. Mean and median indicated that the trend of data is going toward strongly agree

as per average of results.

107

Table 4.3.1.1 Descriptive Statistics Overall

Mean Std. Dev Skew Kurt

CSR 3.731 0.443 -0.482 0.554

FP 3.882 0.688 -0.750 0.325

NFP 3.823 0.502 -0.805 0.888

CR 3.738 0.618 -0.255 0.457

IP 3.670 0.638 0.462 -0.174

SP 3.644 0.828 -0.591 0.420

Skewness is a measure of symmetry, or all the more unequivocally, the absence of symmetry. An

appropriation, or information set, is symmetric in the event that it appears to be identical to one

side and right of the inside point. Skewness infers about the positive and negative spread of data

and in this study the spread of data gone toward the negative. Kurtosis deals about the flatness of

data spread. Kurtosis is a measure of whether the information is left or right side with respect to

an ordinary dispersion.

4.3.1.2. Histogram and P-P Plot

It is a diagram comprising of rectangles whose region is corresponding to the recurrence of a

variable and whose width is equivalent to the class interim. Histograms are used to explain the

representation of data in numerical ranges with equal size. Normally, it seems that the graphical

representation of the data and the independent factors are represented on the Y axis and the

dependent factors are represented on the X axis. There will be a representation of shaded

rectangles with respect to the variable zone. (Cooper et al., 2003). Histogram of CSR, financial

performance, non-financial performance, corporate reputation, innovation, and stakeholder

pressure have shown in the appendixes. P-P plot matches the empirical cumulative distribution

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function of a data with a specified theoretical cumulative distribution function (Cooper et al.,

2003). Normal P-P plot and detrended normal P-P plot are shown in the appendixes. All the

diagrams of the histogram, normal P-P plot and detrended p-p plot have indicated the normality

of dataset which has used in this study.

4.3.2. Linearity

Linearity is a situation where a dependent variable has a linear relationship with one or more

independent variables and, thus, can be computed as the linear function of the independent

variables. Linearity could be possibly seen using a graph known as scatter plot in which the

values of two variables are plotted along two axes, the pattern of the resulting points revealing

any correlation present. Scatter plot has shown in appendix between CSR and financial

performance, CSR and non-financial performance, CSR and corporate reputation, CSR and

innovation, CSR and stakeholder pressure, corporate reputation and financial performance,

corporate reputation and non-financial performance, innovation and financial performance,

innovation, and non-financial performance.

4.3.3. Multicollinearity

In this study, linearity was considered as a regression assumption. The linear relationship

between the variables is explained as a graphic representation of the standardized residuals. It

explained the linear or curvilinear relationship between variables. It is necessary for the

regression analysis; those variables should be distributed normally. It is necessary that

independent factors should not be strongly correlated with each other. Firstly, the variance

inflation factor (VIF) test was applied to verify the multicollinearity and the VIF value must be

less than 10 (Coenders & Saez, 2000). Secondly, multicollinearity can be tested by the tolerance

test, which means the influence of the prediction factors towards other predictors. Tolerance is

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measured by T = 1 - R² and fitness standards for tolerance are T> 0.2 and T> 0.01, which

confirms that there is no problem of multicollinearity in the factors (Coenders & Saez, 2000).

Table 4.3.3.1: Tolerance Level for Multicollinearity

FP NFP CR IP SP

NFP .713

.650 .640 .625

CR .724 .750

.786 .713

IP .694 .718 .765

.723

SP .860 .851 .840 .876

FP .794 .699 .689 .704

*If tolerance level is T>0.20, T>0.10, then there will be no issue of Multicollinearity

Multicollinearity occurs when the independent variables are not independent of each other. It

could possibly be detected using different methods but correlation and VIF test are most

common. If the value of the correlation between variables greater than 0.80, it is possible that

variables are facing the issue of multicollinearity (Rovny, 2009).

Table 4.3.3.2: VIF Level for Multicollinearity

FP NFP CR IP SP

NFP 1.403

1.539 1.562 1.599

CR 1.381 1.334

1.272 1.403

IP 1.440 1.392 1.308

1.384

SP 1.163 1.175 1.190 1.141

FP 1.259 1.430 1.451 1.421

*If VIF level is VIF<3.00, VIF<10.00, then there will be no issue of Multicollinearity

In homoscedasticity, it is also assumed that variance of error terms is similar across the

independent variables. In the linear relationship assumption, plot the standardized residuals

versus the predicted Y' values which can show whether points are equally distributed across all

values of the independent variables or not. Appendixes from 4.4.3.1 to 4.4.3.5 are showing the

scatter plot which clearly indicated that data is aligned with the line and there is no issue of data

in the whole analysis.

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4.3.4. Demographics

Demographics of this research are based on employees working in the banking sector of

Pakistan. Characteristics of respondents are based on 405 responses which are collected from

managerial employees working in Pakistan with numerous branches. In this study, the primary

target is to check the relationship between CSR and financial performance in well-reputed banks.

The respondents taken for this study were the branch managers of banking sectors working in

Federal, central and south regions.

Table 4.4.4.1: Demographics of Sample

Characteristics Quantity % Characteristics Quantity %

Gender

Age

Male 332 82.0 In between 20 – 30 Years 180 44.4

Female 73 18.0 In between 30 – 40 Years 145 35.8

Qualification In between 40 – 50 Years 79 19.5

Bachelor 109 26.9 More than 50 Years 1 0.20

Master 199 49.1

M.Phil. 92 22.7 Experience

Other Certifications 5 1.30 In between 0-5 Years 260 64.2

In between 6-10 Years 65 16.0

Designation In between 11-15 Years 51 12.6

Branch Manager 405 100.0 More than 16 Years 29 7.20

There are a total of 405 respondents in which the majorities are male, while the proportion of

women workers is around 18%. According to the second characteristics of the qualification, most

of the respondents are master qualified while experienced persons are the bachelor and even in a

third number; many people are M.Phil. The responses of the subject research work were received

from the branch managers, which participated in this research activity. According to the age

characteristic, the majority of the respondents were falling in the range of fewer than 30 years

and only one respondent was over 50 years old. With respect to experience, young people who

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work usually have less than five years of banking experience, while 29 respondents have more

than sixteen years of experience.

4.3.5. Reliability and Validity Analysis

A reliability analysis was performed to verify that the data is reliable or not. Cronbach Alpha

explains that the value should be between 0.7 and 0.9, which is considered more reliable. The

values of almost all the variables in this research are falling in the range of 0.7 to 0.9, which is

good and the data is reliable, which could be used for the analysis described. Cronbach's value of

financial performance is the highest with 0.785. For convergent validity, CR and AVE values are

explained in below mentioned table which considered as fall in category of acceptable

benchmarks.

Table 4.3.5.1: Reliability and Validity Analysis

Variable Scale Developed

By

Total

No. of

Items

Final

Items

Cronbach

Alpha CR AVE

Corporate Social

Responsibility Turker, 2009 13 8 0.747 0.758 0.611

Corporate Reputation Weiss, Anderson, &

MacInnis, 1999 5 4 0.774 0.816 0.596

Innovation Manu, 1992 5 4 0.726 0.801 0.506

Stakeholder Pressure Delmas & Toffel,

2008 4 4 0.783 0.760 0.514

Financial Performance Govindarajan, 1984 4 4 0.785 0.797 0.579

Non-financial

Performance Govindarajan, 1984 6 5 0.745 0.814 0.593

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4.3.6. Goodness and Fitness

First order confirmatory factor analysis was conducted to examine the best fit of the structural

model. It was noticed that all the factors of the structural model are showing statistical



that values of Chi-square and normed chi-square are showing relevancy. Chi-square and normed

chi-square are 757.72 which is small preferred and 3.093 which should less than 5 respectively

(Schumacker & Lomax, 2004).

Table 4.3.6.1: Good and Fitness levels of Final Structural Model

Index Threshold Level Model


χ² Small preferable 757.72 Good

χ²/df ≤ 5.0 3.093 Good

RMR ≤ .08 0.059 Good

GFI ≥ .90 0.875 Supporting



multiple experts. These are also showing relevancy with their threshold levels which are an

indication of the fitness of the structural model of this study. RMR explains the square root of

means of covariance residuals which is actually obtained from the differences of corresponding

elements of observed and predicted covariance matrix. Its value will be considered as best fitted

if closer to zero while possibly up to 0.05 (Steiger, 2000) and 0.08 (Browne & Cudeck, 1989). In

this study value of RMR is 0.059 which within the threshold level.

The goodness of Fit statistic (GFI) is considered as a substitute of chi-square test which

computes the proportion of variance based estimated population covariance (Tabchnick and

Fidell, 2006). The threshold level of GFI is considered as 0.90 in case of the higher sample while

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in case of lower sample values could be possibly up to 0.95 is considered more appropriate

(Shevlin & Miles, 1998). In this structural scale, the value is closer to the threshold level which

clearly indicates that the model is properly fitting with the analysis. Values of CFI, NFI, and TLI

could also be considered for evaluating goodness and fitness of model.

RMSEA is another measure of model fitness which indicates the fitness of a structural model

with respect to chosen parameter estimates and it should fit with the population covariance

matrix (Byrne, 1994). This value could possibly deviate from 0.8 to 0.10 which fit show the

model fitness at a lower level but best fit of model its value should be lower than 0.8

(MacCallum et al, 1996). The structural model of corporate social responsibility is showing

RMSEA value 0.072 and first order CFA of the study indicated that RMSEA is within the

highest cut-off level which is favorable and there exists no issue in the structural model which

should be overcome. Generally, it is presumed that there exists no issue in the data which would

possibly lead to structural model goodness and fitness.

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4.3.7. Correlation Matrix

Correlation matrix has utilized for the portrayal of the relationship between CSR and financial

performance. It provided the level of relationship between dependent and independent factors.

Correlation framework could be helpful in light of the fact that it showed the analytical

relationship among factors. It explained that there are 0.416 significant and positive relations

between CSR and financial performance. Moreover, CSR has 0.467 significant and positive

relations with non-financial performance. Stakeholder pressure as a moderator was significantly

influencing all the factors, and innovation and corporate reputation as mediator are as well as

influencing the CSR and financial performance.

Table 4.3.7: Correlation Matrix

CSR IP CR SP FP NFP

CSR 1.000

IP .323**

1.000

CR .502**

.390**

1.000

SP .299**

.269**

.173**

1.000

FP .416**

.264**

.356**

.306**

1.000

NFP .467**

.316**

.437**

.307**

.518**

1.000


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4.4 Hypothesis Testing

The hypothesis testing is used to examine whether there is sufficient evidence in a sample of data

to infer that a specific condition is valid for the entire population. In this study, I want to examine

direct relationships, simple mediation, sequential mediation, and the impact of moderation on the

relationship between CSR and financial, non-financial performance.

4.4.1 Direct Relationship

The direct relation investigates the amount of variation in one variable due to the variation in

another variable. This relationship could possibly be negative, positive and unrelated. The first

step is to examine the impact of corporate social responsibility on financial and non-financial

performance in the Pakistani banking sector.

4.4.1.1 Corporate Social Responsibility and Financial Performance

The first part of the direct relationship is to examine the relationship between CSR and financial

performance among Pakistani banks. Historical research proposed mixed results regarding the

relationship between CSR and financial performance. Research studies (Miller, 2016, Jain et al.,

2016, Ahamed et al., 2014) proposed significant positive relationships between CSR and

financial performance, while (Nollet et al., 2016) proposed a negative relationship, but

(Madorran & Garcia, 2016) did not examine any relationship between CSR and financial

performance. The following hypothesis is constructed on the basis of the research studies

mentioned above;

H1: There is a significant impact of corporate social responsibility on financial performance.

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Figure I: Impact of CSR on Financial Performance

The structural equations modeling is applied to support the hypothesis and the first-order

confirmatory factor analysis indicated that out of thirteen items of CSR, only eight items will be

in the best fit category and should be processed for further analysis. The financial performance

contained four items since these have shown the best fitness in the measurement model. The

direct relationship indicated that there is a significant and positive relationship between CSR and

financial performance. This finding was supported by multiple studies, as they already tested the

significant and positive relationship between these two factors (Miller, 2016; Jain et al., 2016;

Ahamed et al., 2014).

The coefficient of CSR indicated that with a unit of improvement in CSR will lead to an increase

of 0.299 units in financial performance. The probability value and the t-statistics are in the range

of significance level, which means that CSR acts as a contributing factor in financial

performance. There is no problem of multicollinearity as tested by the Variance Inflation Factor

(VIF). F-statistics is showing a significant level which is the indication of model goodness and

117

fitness. R-square is indicating that approximately 17% of changes in financial performance are

coming due to CSR in the regression analysis.

Table 4.4.1.1: CSR and Financial Performance

IV DV Β S.E T-Value P-Value

CSR FP 0.299 0.129 2.323 0.020

F-Stat

84.40

P-value 0.000

R2

0.173

Adj-R

2 0.171

VIF 1.000 Tolerance 1.000

*VIF<3.00, T>0.20, F-Value < 0.10, *Significant at 0.05 level

This finding provided a platform for corporate and management staff to enhance CSR activities

that lead to enhanced financial performance in the banking sector. In addition, the findings

confirm the concepts of stakeholder theory which grounds that organizations must provide

benefits to their stakeholders that ultimately are beneficial to the organizations themselves.

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4.4.1.2 Corporate Social Responsibility and Non-Financial Performance

The main part of this section is examined the direct relationship between CSR and non-financial

performance among Pakistani banks. Historical research proposed mixed results regarding the

relationship between CSR and financial performance. Research studies (Becchetti & Trovato,

2011, Ahmed et. al., 1998, Gil et al., 2001; Luthans, Hodgetts, & Thompson, 1984; Owen &

Scherer, 1993) proposed significant positive relationships between CSR and non-financial

performance. There is no relationship between CSR rating and non-financial performance in the

banking sector (Vitaliano & Stella, 2006). The following hypothesis is constructed on the basis

of the research studies mentioned above;

H2: There is a significant impact of corporate social responsibility on non-financial

performance.

Figure II: Impact of CSR on Non-Financial Performance

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The structural equations modeling is applied to support the hypothesis and the first-order

confirmatory factor analysis indicated that eight items of CSR and five items of non-financial

performance will be in the best fit category and should be processed for further analysis. The


non-financial performance. This finding was supported by multiple studies, as they already tested

the significant and positive relationship between these two factors (Becchetti & Trovato, 2011,

Mishra & Suar, 2010; Ahmed et. al., 1998, Gil et al., 2001), but contradicts from the study of

(Vitaliano & Stella, 2006).

Table 4.4.1.2: CSR and Non-Financial Performance


CSR NFP 0.224 0.100 2.248 0.025

F-Stat

112.34

P-value

0.000

R2

0.218

Adj-R

2

0.216

VIF 1.000 Tolerance 1.000

*VIF<3.00, T>0.20, F-Value < 0.10, *Significant at 0.05 level

The coefficient of CSR indicated that with a unit of improvement in CSR will lead to an increase

of 0.224 units in non-financial performance. The probability value and the t-statistics are in the

range of significance level, which means that CSR acts as a contributing factor in non-financial

performance. There is no problem of multicollinearity as tested by the VIF test, autocorrelation

as tested by Durban Watson. F-statistics is showing a significant level which is the indication of

model goodness and fitness. R-square is indicating that approximately 22% of changes in non-

financial performance are coming due to CSR in the regression analysis. This finding provided a

platform for corporate and management staff to enhance CSR activities that lead to improved

personal development, cost reduction (Freeman 1997), in the banking sector. The discoveries

120

affirm the ideas of stakeholder theory which grounds that associations must give advantages to

their partners that at last are useful to the associations themselves.

4.4.1.3 Remaining Direct Relationships

Corporate social responsibility directly influenced financial and non-financial performance. In

direct relationships, CSR also influenced innovation and corporate reputation. The coefficient of

the above-mentioned relation was 0.451 and 0.328 respectively. Kim and You (2013) analyzed

that CSR acted as a driving force of innovation in automobile industries. The integration of CSR

as a strategic component creates value, novel ideas and innovation opportunities that lead to

strong long-term performance. This innovative CSR is the key to strategic CSR and the creation

of new values for different stakeholders and shareholders. Cegarra-Navarro et al., (2016)

concluded that CSR significant and positively contributed toward innovation.

Table 4.4.1.3: Direct Relationships


CSR Innovation 0.289 0.115 2.516 0.012*

CSR CR 0.279 0.075 3.737 0.000**

Innovation CR 0.825 0.330 2.498 0.012*

Innovation FP 1.526 0.666 2.293 0.022*

CR NFP -0.082 0.237 -0.348 0.728

Innovation NFP 1.266 0.563 2.247 0.025*

CR FP -0.076 0.286 -0.265 0.791

*VIF<3.00, T>0.20, F-Value < 0.01, *p<0.05, **p<0.01

Famiyeh, et al. (2016) proposed that CSR contributed by companies improves their reputation as

well as their overall performance. The finding indicated that not only operational competitive

capabilities can influence organizational performance in terms of return on investment, sales

growth, market share, and overall profitability, but those soft investments such as social

responsibility and a good reputation can also have a positive impact significant in companies in

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general performance. It is therefore important for managers to pay critical attention to social

responsibility initiatives, such as investments in projects that make the world a better place, care

for the safety of employees and clients, respect for human rights and other investments to

improve society and the environment. In the below mentioned figure, there is explained a

combine structural model which enlightened all the direct relationships.

The innovation influenced corporate reputation, financial and non-financial performance with the

coefficients 0.622, 0.566 and 0.740, respectively. Miller (1988) proposed that innovation and

technological advancement lead to the establishment of corporate reputation among consumers.

The implication for managers is that reputation based on innovation is only sustainable if it is

positively linked with integrity and courage (Chun, 2006). Corporate reputation was included as

the second mediator that showed no significant influence on financial and non-financial

performance. These findings also support the stakeholder theory, since the pressures of different

stakeholder groups determine the organizational decisions (Famiyeh, et al., 2016).

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4.4.2 Simple Mediation

Mediation model is that which tries to distinguish and clarify the procedure that underlies an

unobserved relationship between predicted and predicting variable by means of the incorporation

of a third theoretical variable, known as a mediator. This mediation could be simple and

sequential as mediating variables increases. Innovation and corporate reputation are playing a

mediating role between CSR and financial, non-financial performance.

4.4.2.1 Innovation mediating the relationship of Corporate Social Responsibility and


Monetary maintainability grasps general parts of an association that must be regarded keeping in

mind the survival to stay in the market for a long time. These aspects incorporate technological

advancement and innovation (Baumgartner & Ebner, 2010). Heikkurinen & Bonnedahl, (2013)

proposed that an economic advancement contends that associations have an obligation regarding

undertaking key duty about CSR. Another key area tackled by the sustainable development

discourse is the role of innovations in enhancing sustainability (Matos & Silvestre, 2013; Boons

et al., 2013).

In this context, once an innovation is implemented, it provides an organization with benefits that

have the potential of sustaining its viability in a global economy. Wagner, (2010) analyzed the

link between innovation with high social benefits and corporate social performance. Cegarra-

Navarro et al., (2016) conducted in this study focuses on the role of a company's innovation

culture in linking economic and social responsibilities with financial performance. So,

innovation could mediate between the relationship of CSR and financial performance. The

following hypothesis is constructed on the basis of the research studies mentioned above;

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H3: Innovation mediates the relationship of corporate social responsibility and

financial performance.

Figure I: Innovation mediates between CSR on Financial Performance

The structural equations modeling was applied to test the hypothesis and simple mediation

divided into three subparts. Firstly, it is tested that CSR in influencing the innovation positively

and standardized regression weight is 0.514. It means that with one unit change in CSR will lead

to 0.514 unit changes in innovation. The first relation is significant which means mediation is

possible (Baron & Kenny, 1986). Secondly, the impact of innovation is tested on financial

performance. The empirical analysis concluded that innovation is significantly contributing to

financial performance. Innovation is positively contributing to 0.142 variations in financial

performance (Martinez-Conesa, et al., 2017).

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Table 4.4.1.1: Mediation I

IV DV Β S.E T-Value P-Value LLCI ULCI

1 CSR IP 0.514 0.075 6.850 0.000 0.366 0.661

2 IP FP 0.142 0.046 0.002 0.000 0.051 0.232

3 CSR FP 0.574 0.072 7.797 0.000 0.429 0.718

Effect SE T-Value P-Value LLCI ULCI

Total Effect

0.646 0.074 9.187 0.000 0.508 0.785

Direct Effect 0.574 0.074 7.797 0.000 0.429 0.718

Effect Boot SE

Boot

LLCI

Boot

ULCI

Indirect Effect 0.073 0.034 0.018 0.150

Effect SE Z-Value P-Value

Sobel Test 0.073 0.026 2.770 0.006

1 2 3

R2

0.104 0.192 0.173

F-Statistics

46.89 47.76 84.40

P-Value 0.000 0.000 0.000

Simple mediation explained that the weight of total effect of CSR on financial performance was

0.646 (p< .01, 95% CI [0.508, 0.785]), while the weight of indirect effect when controlling

innovation was 0.073 (p< .01, 95% CI [0.018, 0.150]. The table also exhibited that innovation

carried 57% of the total effect of CSR on financial performance. There are multiple models

developed by Preacher and Hayes while for simple mediation Model 4 is used. A comparison of

estimates in the figure revealed that there was evidence for partial mediation as CSR' total effect

reduced a little but still remained significant when controlling for the mediator „innovation'. The

significant probability value of the Sobel test indicated that there is existing mediation in the

model and the reduction in the standardized regression weight indicates partial mediation since it

is observed that the standardized regression weight is greater than zero.

These findings have practical implications because inventive devices and innovative channels of

correspondence allow stakeholders (e.g supervisors and consumers) to share resources with each

other and encourage them to provide feedback. Such responses will result in the adjustment of

125

CSR exercises, activities, policies and practices that will be financially and not financially

beneficial (Cegarra-Navarro et al., 2016). Durban Watson, Tolerance and VIF tests indicated that

the data is normal and significant F statistics indicated the goodness and fitness of the model. R-

square is showing that 10% of the variation in the model is coming due to CSR and innovation.

Sobel test, Arorian and Goodman Test are performed to verify the existence of mediation in the

regression model.

126

4.4.2.2 Innovation mediating the relationship of Corporate Social Responsibility and Non-


Corporate social responsibility influences organizational performance, financial and non-

financial performance, and brand performance. In this context, innovation is mediating between

CSR and non-financial performance. So, innovation could mediate between the relationship of

CSR and non-financial performance (Mishra & Suar, 2010). The following hypothesis is

constructed on the basis of the research studies mentioned above;

H4: Innovation mediates the relationship of corporate social responsibility and non-financial

performance.

Figure I: Innovation mediates between CSR on Non-Financial Performance


divided into three subparts. Firstly, it is tested that CSR in influencing the innovation positively

and standardized regression weight is 0.514. It means that with one unit change in CSR will lead

127

to 0.514 unit changes in innovation. The first relation is significant which means mediation is

possible (Baron & Kenny, 1986). Secondly, the impact of innovation is tested on non-financial

performance. The empirical analysis concluded that innovation is significantly contributing to

non-financial performance. Innovation is positively contributing to 0.132 variations in financial

performance (Martinez-Conesa, et al., 2017).

Table 4.4.2.2: Mediation II

IV DV β S.E T-Value P-Value LLCI ULCI

1 CSR IP 0.514 0.075 6.850 0.000 0.366 0.661

2 IP NFP 0.132 0.033 4.044 0.000 0.068 0.195

3 CSR NFP 0.462 0.052 8.915 0.000 0.360 0.563


Total Effect

0.529 0.050 10.60 0.000 0.431 0.627

Direct Effect 0.432 0.052 8.915 0.000 0.359 0.563

Effect Boot SE

Boot

LLCI

Boot

ULCI

Indirect Effect 0.068 0.036 0.014 0.153


Sobel Test 0.068 0.020 3.454 0.001

1 2 3

R2

0.104 0.249 0.218

F-Statistics

46.89 66.49 112.34

P-Value 0.000 0.000 0.000

Simple mediation explained that the weight of total effect of CSR on non-financial performance

was 0.529 (p< .01, 95% CI [0.431, 0.627]), while the weight of indirect effect when controlling

innovation was 0.068 (p< .01, 95% CI [0.014, 0.153]. The table also exhibited that innovation

carried 57% of the total effect of CSR on non-financial performance. A comparison of estimates

in the figure revealed that there was evidence for partial mediation as CSR‟ total effect reduced a

little but still remained significant when controlling for the mediator „innovation‟. The

significant probability value of the Sobel test indicated that there is existing mediation in the

128

model and the reduction in the standardized regression weight indicates partial mediation since it

is observed that the standardized regression weight is greater than zero.

These findings have practical implications because inventive devices and innovative channels of

correspondence allow stakeholders (e.g supervisors and consumers) to share resources with each

other and encourage them to provide feedback. Such responses will result in the adjustment of

CSR exercises, activities, policies and practices that will be not financially beneficial (Cegarra-

Navarro et al., 2016). Durban Watson, Tolerance and VIF tests indicated that the data is normal

and significant F statistics indicated the goodness and fitness of the model. R-square is showing

that 10.4% of the variation in the model is coming due to CSR and innovation. Sobel test,

Arorian and Goodman Test are performed to verify the existence of mediation in the regression

model.

129

4.4.2.3 Corporate Reputation mediating the relationship of Corporate Social Responsibility

and Financial Performance

CSR influences organizational performance, financial and non-financial performance, and brand

performance. In this context, corporate reputation is mediating between CSR and financial

performance. So, corporate reputation could mediate between the relationship of CSR and

financial performance (Mishra and Suar, 2010). The following hypothesis is constructed on the

basis of the research studies mentioned above;

H5: Corporate reputation mediates the relationship of corporate social responsibility and


Figure I: Corporate reputation mediates between CSR on Financial Performance


divided into three subparts. Firstly, it is tested that CSR in influencing the corporate reputation

130

positively and standardized regression weight is 0.701. It means that with one unit change in

CSR will lead to 0.701 unit changes in corporate reputation. The first relation is significant

which means mediation is possible (Baron & Kenny, 1986). Secondly, the impact of corporate

reputation is tested on financial performance. The empirical analysis concluded that corporate

reputation is significantly contributing to financial performance. Corporate reputation is

positively contributing 0.493 variations in financial performance.

Table 4.4.2.3: Mediation III


1 CSR CR 0.701 0.060 11.65 0.000 0.582 0.818

2 CR FP 0.219 0.057 3.818 0.000 0.106 0.332

3 CSR FP 0.493 0.080 6.162 0.000 0.336 0.650


Total Effect

0.646 0.074 9.187 0.000 0.508 0.785

Direct Effect 0.493 0.080 6.162 0.000 0.336 0.650

Effect Boot SE

Boot

LLCI

Boot

ULCI

Indirect Effect 0.153 0.048 0.078 0.239


Sobel Test 0.153 0.424 3.616 0.000

1 2 3

R2

0.252 0.202 0.173

F-Statistics

135.7 50.91 84.40

P-Value 0.000 0.000 0.000



corporate reputation was 0.153 (p< .01, 95% CI [0.078, 0.239]. The table also exhibited that

corporate reputation carried 15% of the total effect of CSR on financial performance. A

comparison of estimates in the figure revealed that there was evidence for partial mediation as

CSR‟ total effect reduced a little but still remained significant when controlling for the mediator

„corporate reputation‟. The significant probability value of the Sobel test indicated that there is

131

existing mediation in the model and the reduction in the standardized regression weight indicates

partial mediation since it is observed that the standardized regression weight is greater than zero.

These findings have practical implications as the organizational reputation improved will lead to

building confidence among top management. This context will improve the working

performance which affects the sale and trading, in turn, financial performance increases. Durban

Watson, Tolerance and VIF tests indicated that the data is normal and significant F statistics

indicated the goodness and fitness of the model. R-square is showing that 25.2% of the variation

in the model is coming due to CSR and corporate reputation. Sobel test, Arorian and Goodman

Test are performed to verify the existence of mediation in the regression model.

132

4.4.2.4 Corporate Reputation mediating the relationship of Corporate Social Responsibility

and Non-Financial Performance


performance. In this context, corporate reputation is mediating between CSR and non-financial

performance. So, corporate reputation could mediate between the relationship of CSR and

financial performance. The following hypothesis is constructed on the basis of the research

studies mentioned above;

H6: Corporate reputation mediates the relationship of corporate social responsibility and

non-financial performance.

Figure I: Corporate Reputation mediates between CSR on Non-Financial Performance


divided into three subparts. Firstly, it is tested that CSR in influencing the corporate reputation

positively and standardized regression weight is 0.701. It means that with one unit change in

133

CSR will lead to 0.701 unit changes in corporate reputation. The first relation is significant

which means mediation is possible (Baron & Kenny, 1986). Secondly, the impact of corporate

reputation is tested on non-financial performance. The empirical analysis concluded that

corporate reputation is significantly contributing to non-financial performance. Corporate

reputation is positively contributing 0.375 variations in non-financial performance.

Table 4.4.2.4: Mediation IV


1 CSR CR 0.701 0.060 11.650 0.000 0.582 0.818

2 CR NFP 0.219 0.039 5.495 0.000 0.141 0.297

3 CSR NFP 0.375 0.056 6.735 0.000 0.267 0.485


Total Effect

0.529 0.049 10.590 0.000 0.431 0.627

Direct Effect 0.373 0.056 6.760 0.000 0.265 0.484

Effect Boot SE

Boot

LLCI

Boot

ULCI

Indirect Effect 0.154 0.030 0.097 0.219


Sobel Test 0.154 0.031 4.955 0.000

1 2 3

R2

0.252 0.273 0.197

F-Statistics

135.7 75.34 112.3

P-Value 0.000 0.000 0.000



corporate reputation was 0.154 (p< .01, 95% CI [0.097, 0.219]). The table also exhibited that

corporate reputation carried 15% of the total effect of CSR on non-financial performance. A

comparison of estimates in the figure revealed that there was evidence for partial mediation as

CSR‟ total effect reduced a little but still remained significant when controlling for the mediator

„corporate reputation‟. The significant probability value of Sobel test indicated that there is

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existing mediation in the model and the reduction in the standardized regression weight indicates

partial mediation since it is observed that the standardized regression weight is greater than zero.

These findings have practical implications as the organizational reputation improved will lead to

building confidence among top management. This context will improve the working

performance which affects the sale and trading, in turn, non-financial performance increases.

Durban Watson, Tolerance and VIF tests indicated that the data is normal and significant F

statistics indicated the goodness and fitness of the model. R-square is showing that 25.2% of the

variation in the model is coming due to CSR and corporate reputation. Sobel test, Arorian and

Goodman Test are performed to verify the existence of mediation in the regression model.

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4.4.3 Sequential Mediation


performance. In this context, innovation and corporate reputation are mediating between CSR

and financial performance. So, innovation and corporate reputation could mediate between the

relationship of CSR and financial performance. The following hypothesis is constructed on the

basis of the research studies mentioned above;

H7: Innovation and corporate reputation mediates the relationship of corporate social

responsibility and financial performance

Figure I: Sequential mediation between CSR on Financial Performance

Preacher and Hayes, (2004) method were applied to test the hypothesis of sequential mediation.

Firstly, it is tested that CSR in influencing the innovation positively and standardized regression

weight is 0.513. It means that with one unit change in CSR will lead to 0.513 unit changes in

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innovation. The first relation is significant which means mediation is possible Preacher and

Hayes, (2004). Secondly, the impact of innovation was tested on corporate reputation. The

empirical analysis concluded that corporate reputation is significantly contributing to financial

performance. Innovation is positively contributing to 0.100 variations in financial performance

(Martinez-Conesa, et al., 2017).

Table 4.4.3.1: Mediation V


1 CSR IP 0.513 0.075 6.848 0.000 0.366 0.661

2 CSR CR 0.586 0.061 9.858 0.000 0.466 0.705

3 IP CR 0.224 0.038 5.825 0.000 0.148 0.299

4 IP FP 0.100 0.048 2.108 0.036 0.007 0.194

5 CR FP 0.184 0.059 3.094 0.002 0.067 0.301

6 CSR FP 0.466 0.081 5.774 0.000 0.307 0.625


Total Effect

0.646 0.070 9.19 0.000 0.508 0.784

Direct Effect 0.466 0.081 5.773 0.000 0.307 0.625

Effect Boot SE

Boot

LLCI

Boot

ULCI

Total Indirect

0.180 0.045 0.096 0.275

CSR→IP→FP

0.052 0.032 0.003 0.125

CSR→IP→CR→FP

0.021 0.009 0.008 0.046

CSR→CR→FP 0.108 0.036 0.046 0.187

1 2 3 4

R2

0.104 0.31 0.218 0.173

F-Statistics

46.89 90.37 35.71 84.40

P-Value 0.000 0.000 0.000 0.000

Sequential mediation explained that the weight of total effect of CSR on financial performance

was 0.646 (p< .01, 95% CI [0.508, 0.784]), while the weight of second indirect effect when

controlling innovation and corporate reputation was 0.021 (p< .01, 95% CI [0.008, 0.046]. The

table also exhibited that innovation carried 46% of the total effect of CSR on financial

performance. There are multiple models developed by Preacher and Hayes while for serial

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mediation Model 6 is used. A comparison of estimates in the figure revealed that there was

evidence for partial mediation as CSR' total effect reduced a little but still remained significant

when controlling for the mediator „innovation'. The significant probability value of the Sobel test

indicated that there is existing mediation in the model and the reduction in the standardized

regression weight indicates partial mediation since it is observed that the standardized regression

weight is greater than zero.

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H8: Innovation and corporate reputation mediates the relationship of corporate social

responsibility and non-financial performance

Preacher and Hayes, (2004) method were applied to test the hypothesis of sequential mediation.

Firstly, it is tested that CSR in influencing the innovation positively and standardized regression

weight is 0.513. It means that with one unit change in CSR will lead to 0.513 unit changes in

innovation. The first relation is significant which means mediation is possible Preacher and

Hayes, (2004). Secondly, the impact of innovation was tested on corporate reputation. The

empirical analysis concluded that corporate reputation is significantly contributing to financial

performance. Innovation is positively contributing to 0.100 variations in financial performance

(Martinez-Conesa, et al., 2017).

Figure I: Sequential mediation between CSR on Non-Financial Performance

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Sequential mediation explained that the weight of total effect of CSR on non-financial

performance was 0.529 (p< .01, 95% CI [0.431, 0.627]), while the weight of second indirect

effect when controlling innovation and corporate reputation was 0.022 (p< .01, 95% CI [0.010,

0.043]. The table also exhibited that innovation carried 46% of the total effect of CSR on

financial performance. A comparison of estimates in the figure revealed that there was evidence

for partial mediation as CSR' total effect reduced a little but still remained significant when

controlling for the mediator „innovation'. The significant probability value of the Sobel test

indicated that there is existing mediation in the model and the reduction in the standardized

regression weight indicates partial mediation since it is observed that the standardized regression

weight is greater than zero.

Table 4.4.3.2: Mediation VI

IV DV Β S.E T-Value P-Value LLCI ULCI

1 CSR IP 0.513 0.075 6.847 0.000 0.366 0.661

2 CSR CR 0.586 0.061 9.587 0.000 0.466 0.705

3 IP CR 0.224 0.038 5.825 0.000 0.148 0.299

4 IP NFP 0.089 0.033 2.705 0.007 0.024 0.154

5 CR NFP 0.188 0.041 4.564 0.000 0.107 0.269

6 CSR NFP 0.351 0.056 6.270 0.000 0.241 0.461


Total Effect

0.529 0.050 10.60 0.000 0.431 0.627

Direct Effect 0.351 0.056 6.270 0.000 0.241 0.461

Effect Boot SE

Boot

LLCI

Boot

ULCI

Total Indirect

0.178 0.037 0.108 0.251

CSR→IP→NFP

0.046 0.032 -0.005 0.120

CSR→IP→CR→NFP

0.022 0.008 0.010 0.043

CSR→CR→NFP 0.110 0.028 0.062 0.172

1 2 3 4

R2

0.104 0.31 0.286 0.219

F-Statistics

46.89 90.37 53.45 112.30

P-Value 0.000 0.000 0.000 0.000

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4.4.4 Moderation

4.4.4.1 Moderation I:

Preacher and Hayes, (2004) method were applied to test the hypothesis of moderation. Firstly, it

is tested that CSR in influencing the financial performance positively and standardized

regression weight is 0.825. It means that with one unit change in CSR will lead to 0.825 unit

changes in financial performance. Impact of stakeholder pressure was also tested on financial

performance. Interaction term showed a significant and positive relation which means

moderation is affecting. The empirical analysis concluded that stakeholder pressure is

significantly establishing the CSR and financial performance relationship.

H9: Stakeholder pressure moderates the relationship of corporate social responsibility and


Table 4.4.4.1: Moderation I


1 CSR FP 0.825 0.267 3.126 0.002 0.306 1.343

2 SP FP 0.468 0.185 6.004 0.000 0.746 1.473

3 Int-1 FP 0.815 0.286 3.515 0.000 0.232 0.069

Conditional Effect

I

0.595 0.082 7.268 0.000 0.434 0.756

II

0.528 0.076 6.929 0.000 0.378 0.677

III 0.461 0.113 4.056 0.000 0.237 0.683

R2 ΔR

2

0.212 0.002

F-Statistics

35.85 1.14

P-Value 0.000 0.000

In the context of conditional effect, the relationship among CSR and financial performance are

strongly significant and positive. As the influence of stakeholder pressure goes toward moderate,

it weakens the relation and value of coefficient goes down. But in the end, when the moderator is

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fully influencing, the coefficient goes down hugely (Saeidi et al., 2015; Chang, Oh &

Messersmith, 2013; Lioui & Sharma, 2012; Marshall & McCarthy, 2013; Zhu & Sarkis, 2007)

There are multiple models developed by Preacher and Hayes while for moderation, Model 1 is

used.

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4.4.4.2 Moderation II:

Preacher and Hayes, (2004) method was applied to test the hypothesis of moderation. Firstly, it is

tested that CSR in influencing the non-financial performance positively and standardized

regression weight is 0.830. It means that with one unit change in CSR will lead to 0.830 unit

changes in non-financial performance. Impact of stakeholder pressure was also tested on non-

financial performance. Interaction term showed a significant and positive relation which means

moderation is affecting. The empirical analysis concluded that stakeholder pressure is

significantly establishing the CSR and non-financial performance relationship.

H10: Stakeholder pressure moderates the relationship of corporate social responsibility and

non-financial performance.

Table 4.4.4.2: Moderation II


1 CSR NFP 0.830 0.201 4.141 0.000 0.436 1.224

2 SP NFP 1.109 0.185 6.004 0.000 0.746 1.473

3 Int-1 NFP 0.193 0.054 3.617 0.000 0.298 0.088

Conditional Effect

I

0.565 0.057 9.843 0.000 0.452 0.677

II

0.404 0.053 7.584 0.000 0.299 0.509

III 0.240 0.079 3.076 0.002 0.088 0.401

R2 ΔR

2

0.273 0.023

F-Statistics

50.09 13.08

P-Value 0.000 0.000

In the context of conditional effect, the relationship between CSR and non-financial performance

is very significant and positive. As the influence of stakeholder pressure moderates, the

relationship weakens and the value of the coefficient decreases. But in the end, when the

moderator is influencing completely, the coefficient drops enormously (Saeidi et al., 2015;

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Chang, Oh & Messersmith, 2013; Lioui & Sharma, 2012; Marshall & McCarthy, 2013; Zhu &

Sarkis, 2007).

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CHAPTER 5

DISCUSSION AND CONCLUDING REMARKS

5.1 Introduction:

Corporate social responsibility is emerging phenomenon and researchers, experts, and

practitioners have major attraction. Multiple researchers have studied in more than one aspect but

this study examined the implications of CSR on the financial and non-financial performance of

Pakistani banks. This section contained discussion, concluding remarks, theoretical, practical and

managerial implications, limitations, suggestions and recommendations, and future possible

directions.

5.2 Discussion

This quantitative analysis investigated the implication of CSR in financial and non-financial

performance in the Pakistani banking sector. The purpose of this study is to explain the extent of

the social conduct of banks that lead to affect financial performance. After the financial crisis of

2007-2008, social pressure convinced the organization to get involved in social activities. In the

first question, the main concern of the study is to examine the effect of CSR on financial and

non-financial performance. The direct relationship indicated that there is a significant and

positive relationship between CSR and financial performance. This finding was supported by

multiple studies since they proved a significant and positive relationship between these two

factors (Miller, 2016; Jain et al., 2016; Ahamed et al., 2014).

In the second hypothesis, the direct relationship indicated that there is a significant and positive

relationship between CSR and non-financial performance. This finding was supported by

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multiple studies, as they already tested the significant and positive relationship between these

two factors (Becchetti & Trovato, 2011; Mishra & Suar, 2010; Ahmed et. al., 1998; Gil et al.,

2001), but contradicts from the study of (Vitaliano & Stella, 2006). The findings in the present

investigation resolved the inconsistency of previous investigations with respect to whether the

connection between CSR and performance is positive, negative or impartial. Based on the

stakeholder theory (McWillians & Seigel, 2000), one would have expected that each of the four

measures of Carroll's CSR model would effectively affect performance.

These findings provided implications for business managers that could possibly improve

financial performance while performing better social acts for stakeholders. Another implication

is that the efforts made and the financial resources used to improve the social activities of the

organizations will be rewarded by improving financial performance. In addition, the findings

confirm the concepts of stakeholder theory which grounds that organizations must provide

benefits to their stakeholders that ultimately are beneficial to the organizations.

CSR also influenced innovation and corporate reputation. Kim and You (2013) analyzed that

CSR acted as a driving force for innovation in the automotive industries. The integration of CSR

as a strategic component creates value, new ideas and innovation opportunities that lead to a

solid long-term performance. This innovative CSR is the key to strategic CSR and the creation of

new values for different stakeholders and shareholders. Cegarra-Navarro et al. (2016) concluded

that CSR was significant and positively contributed to innovation. Famiyeh, et al. (2016)

proposed that CSR contributed by companies improves their reputation, as well as their overall

performance.

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Therefore, it is important that managers pay critical attention to social responsibility initiatives,

such as investments in projects that improve the world, taking care of the safety of employees

and customers, respect for human rights and other investments to improve society and

environment. Innovation influenced corporate reputation, financial and non-financial

performance. Miller (1988) proposed that innovation and technological advancement lead to the

establishment of a corporate reputation among consumers. The implication for managers is that

reputation based on innovation is sustainable, if positively related to integrity and courage

(Chun, 2006). Corporate reputation showed insignificant influence on financial and non-financial

performance. These findings also support the stakeholder theory, since pressures from different

stakeholder groups determine the decisions of the organization (Famiyeh, et al., 2016).

Innovation significantly contributed to the relationship of CSR, financial and non-financial

performance. These aspects incorporate technological advancement and innovation

(Baumgartner & Ebner, 2010). Heikkurinen & Bonnedahl, (2013) proposed that economic

advancement contends that organizations have a key obligation regarding CSR. The sustainable

development discourse is the role of innovations in enhancing sustainability (Matos and

Silvestre, 2013; Boons et al., 2013). In this context, once an innovation is implemented, it

provides an organization with benefits that have the potential of sustaining its viability in a

global economy. Wagner, (2010) analyzed the link between innovation with high social benefits

and corporate social performance.

Cegarra-Navarro et al., (2016) conducted in this study focuses on the role of a company's

innovation culture in linking economic and social responsibilities with financial performance.

So, innovation positively mediated between the relationship of CSR, financial and non-financial

performance (Martinez-Conesa, et al., 2017). These findings have practical implications because

147

inventive devices and innovative channels of correspondence allow stakeholders (e.g supervisors

and consumers) to share resources with each other and encourage them to provide feedback.

Such responses will result in the adjustment of CSR exercises, activities, policies and practices

that will be financially and not financially beneficial (Cegarra-Navarro et al., 2016).

This study examined the mediating influence of corporate reputation between CSR and financial

and non-financial performance. Corporate reputation contributed as a positive mediator that

partially affected the aforementioned relationship (DiSegni et al., 2015, Siltaoja 2006, Abdullah

& Abdul Aziz 2013). The finding indicates that not only operational competitive capabilities can

influence financial and non-financial performance, but soft investments such as social

responsibility and a good reputation can also have a significant positive impact on the company

performance (Schwaiger 2004; Dyer & Chu 2003). Therefore, it is important that managers pay

critical attention to social responsibility initiatives, such as investments in projects that make the

world a better place, taking care of the safety of employees and customers, respect for human

rights and other investments to improve society and the environment since they have the power

to improve the reputation and performance of their companies.

The moderation analysis explained that stakeholder pressure is influencing the relationship

between CSR and financial and non-financial performance. Researchers proposed that external

pressure is considered one of the key elements that affect the implementation of social practices.

The findings explained above indicated that stakeholder pressures have some moderating effects

for social practices and financial and non-financial performance (Haleem et al., 2015). These

findings are relevant to historical studies of similar relationships (Zhu & Sarkis, 2007, Marshall

& McCarthy, 2013). This study contradicted with (Ketidis et al., 2013) that they found no

moderating effect of the pressures in the construction industry.

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5.3 Conclusion

This study examined the implications of CSR on financial and non-financial performance with

moderating impact of stakeholder pressure and mediating influence of innovation and corporate

reputation of Pakistani banks. The main focus was on Pakistan, a representative member of the

group of developing countries, where such a study has yet to be carried out and where the

increasing internationalization of the country's largest firms should clearly illustrate the

importance of adopting far-reaching corporate social policies. This study will be significantly

beneficial to academicians focusing on CSR and to business pioneers, managerial personnel and

financiers who are concerned with the impact of CSR on firms' financial performance. This study

is identifying the relationship between social welfare and organizational performance which will

enlighten the benefits in term of environment, labor, economy, and philanthropy.

There were different ways of a survey which used for data collection in historical researches but

in this research five points, Likert scales used because these are respondent-friendly and provides

reliable data. The research instruments used in this study has adapted according to multiple

dimensions of CSR (Turker 2009), financial performance (Govindarajan, 1984), non-financial

performance (Govindarajan, 1984), stakeholder pressure (Yu & Ramanathan, 2015), innovation

(Delmas & Toffel, 2008), and corporate reputation (Weiss et al., 1999). These starts from 1)

strongly disagree to 2) disagree, 3) neutral, 4) agree, and 5) strongly agree. Primary data

collected from distributing pre-designed and verified structured questionnaires among branch

managers of banks and 460 respondents responded. Stratified sampling technique was used in

data collection.

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After editing and rectification, only 405 questionnaires could become eligible for analysis.

Firstly, reliability analysis conducted and after meditation and arduous hit-and-trial confirmatory

factor analysis was conducted. Measurement models made confirmation of goodness and fitness

of observed variables with their respective latent variable. Descriptive statistics, P-P Plot

Histogram, inter-item correlation, tolerance level, and VIF tests conducted to verify normality,

linearity, multicollinearity, and homoscedasticity in a different context. Correlation matrix

explained the significant and positive relationship between CSR and financial performance,

innovation, corporate reputation, and stakeholder pressure.

SEM was applied to identify afore-mentioned relationships and the direct relationship indicated

that there is a significant and positive relationship between CSR and financial performance. This

finding was supported by multiple studies, as they already tested the significant and positive

relationship between these two factors (Miller, 2016; Jain et al., 2016; Ahamed et al., 2014). The


non-financial performance. This finding was supported by multiple studies, as they already tested

the significant and positive relationship between these two factors (Becchetti & Trovato, 2011,

Mishra & Suar, 2010; Ahmed et. al., 1998, Gil et al., 2001), but contradicts from the study of

(Vitaliano & Stella, 2006).

CSR directly influenced financial and non-financial performance. In other direct relationships,

CSR also influenced innovation and corporate reputation (Kim & You, 2013; Cegarra-Navarro et

al., 2016; Famiyeh, et al., 2016). The innovation influenced corporate reputation (Chun, 2006),

financial and non-financial performance (Miller, 1988). Corporate reputation showed no

significant influence on financial and non-financial performance.

150

In a research analysis, simple mediations indicated that innovation played a significant mediation

role in the relationship between CSR, financial and non-financial performance. Moreover,

corporate reputation also mediated among CSR, financial and non-financial performance. In case

of sequential mediation, innovation and corporate reputation have strongly played a role as

mediating variable among CSR, financial and non-financial performance. Last but not least,

stakeholder pressure moderated and established relation of CSR, financial and non-financial

performance.

5.4 Contribution to the Knowledge

First of all, type of study was basic; therefore the prime contribution of research work is to build

the body of knowledge in context of banking sector of Pakistan. This study is conducted for

academic purpose and there is a unique relationship examined among variables. As per

knowledge of researcher, though evident found in developed countries while the impact of

corporate social responsibility through the linkage of sequential mediation on performance

examined and contributed to existing literature especially in the Pakistani context. Innovation

and corporate reputation examined as sequential mediation between CSR and performance.

Moreover, it provides a new perspective to understand the various potential determinants of

banks‟ financial and non-financial performance. This study proposed a significant contribution of

CSR related activities toward the financial and non-financial performance of the banking sector

of Pakistan. As proposed that if the banking industry improves their socially responsible

activities, it will automatically lead toward establishing trust among stakeholders and enhancing

their performance. This study is helpful in the dual aspect, to improve their socially responsible

activities and performance, and also be helpful academic purposive for research scholars.

151

Similarly, this research study contributed to the knowledge that the impact of the CSR concept is

tested in the banking sector of Pakistan. The results proved positive and showed that socially

responsible activities are necessarily beneficial to enhance the performance of the banking

industry. Thus, it can help students of management sciences to understand the relationship

between stakeholder's related CSR activities and performance. Finally, the study has contributed

to the gaps identified in CSR literature of developing economies by (Gangi, Mustilli & Varrone,

2018; Nyeadi, Ibrahim & Sare, 2018; Choongo, 2017; Crifo et al., 2016; Lee & Jung, 2016;

Gatsi et al., 2016; Lentner, Szegedi & Tatay, 2015; Chiu, 2014; Gao, 2011; Decker & Sale,

2009; Ip, 2008; Belal, 2001). The most important contribution is to validate the stakeholder

theory, in the context of developing economy. Generally it enriches the literature based on

corporate social responsibility. In this study a new model proposed of CSR and FP relationship

which has been deduced from past studies.

5.5 Implications

First of all, the corporate managers can avail the utility of findings to strengthen their corporate

financial planning. It will assist the management of banks to formulate stakeholder‟s centric

strategies to improve their level of satisfaction. Accordingly the proposed model is pragmatic to

build sound corporate reputation which has abundant material advantages, such as low cost of

doing business, low cost of capital, and competitive edge. In the context of practical

implications, it has significance for corporate managers in the relevance of CSR strategies. The

study findings are significant to professional business practices in the corporate group,

contributing an understanding of best strategies, knowledge, and experience related to CSR and

performance. The results of the study reflect the views of managers in the corporate group about

the best strategies that company managers use to establish an effective organizational strategy to

152

improve performance. Business managers who wish to improve corporate group performance

require information about the strategies on how effective CSR affects their financial and non-


For policymakers, different approaches may be adopted to encourage firms to increase CSR

investments. In some cases, policymakers can rely on firm initiatives instead of regulating or

encouraging CSR activities. This study contributes to positive social change by helping the bank

supervisors, executives, financial specialists, controllers, and government in enhancing the

release of their separate parts to the optimal allocation of assets to contending social exercises in

a way that may magnify performance and enhance the stakeholder welfare.

5.6 Limitations

1. This study was conducted on the banking sector in the identification of CSR impact of

the financial and non-financial performance. The first limitation is relevant to sample size

and population. In this study, primary data is collected from 405 respondents of Pakistani

banking respondents which could be small as compared to a total number of branches

working in Pakistan.

2. Secondly, the banking sector is taken as the targeted sector while about 34 other sectors

are also working. One and only one sector restricts the generalizability of any research

study. This study incorporated numerous aspects but it is possible that few aspects could

not include in processing due to time constraints. In the context of Pakistan, scholars are

not normally funded for research studies, so it is much difficult to consider multiple

sectors for analysis.

153

3. The third problem is related with the analysis in which the validity of data is not tested. In

this regard, the model is developed under the assumption that all the information used is

valid and reliable, and that the information provided by respondents is accurate, honest

and precise. If such information is not accurate, it could be skewed the overall placement

of a company on the model.

4. Fourth, although, samples are chosen from top eight major banks, there are still some

banks which don't have a sample in this study. Therefore, the sample data may not fully

reflect the current status of the Pakistani banking market, which would affect the

generalizability of the results to a certain extent.

5. The study was carried out in a single country (Pakistan), it may be inappropriate to

generalize the results to employees who work in other countries. Hence, to be able to

generalize the results, the hypotheses should be tested in other contexts. The results of the

study are important enough to open the door to studies in other countries.

6. Finally, a major methodological limitation of this study is that this study was not

longitudinal, which may make it harder to detect a subtle effect. A company that invests

today in CSR initiative might not receive a benefit from the program directly, but rather

through more subtle consumer loyalty derived from the idea and they are buying from a

company that is socially conscious. Therefore, if a longitudinal data across 2 or 3 times

become suitable, and a replication study may provide more robust findings or different

results.

5.7 Delimitations:

1. In this study, (Carroll, 2004) the dimensions are considered while the stakeholder aspect

of corporate social responsibility, including employees, customers, investors, the

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community, suppliers, the environment, could be used as an independent factor (Mishra

& Suar, 2010).

2. In the context of stakeholder pressure, only the environmental and social aspects are

incorporated, while there could possibly be the use of institutional pressure as a

moderating factor enriches future research studies (Zhu & Sarkis, 2007).

3. The research study is based on scales developed by multiple authors, so the analysis

section considered confirmatory factor analysis as the main source, while the exploratory

factor analysis could increase the validity of future studies if new scales are developed

with respect to the nature of the study.

5.8 Recommendations and Future direction:

This study identified the relation between CSR and financial performance but it is possible to

consider the other dimensions of CSR with respect to stakeholder aspect (Mishra & Suar, 2010).

1. Future research in the field of the above-mentioned relationship of CSR and financial

performance could proceed in following directions. First, given the limitation is relevant

to sample size and population. In a future study, sample size and targeted population

could be increased with respect to a total number of branches working in Pakistan.

2. Secondly, the banking sector is taken as a single targeted sector while about 34 other

sectors are also working. So, research studies on multiple sectors could enhance the

generalizability and application.

155

3. The third direction is related with the analysis in which the validity of data should

necessarily test. For this regard, exploratory factor analysis is the best source which will

validate the data before confirmatory factor analysis and structural model testing.

4. Fourthly, a major methodological limitation of this study could be detached with a

longitudinal study, which is necessary to detect a long-term and subtle effect (Harrison &

Freeman, 1999). Therefore, if a longitudinal data across 2 or 3 times will become

suitable, and a replication study may provide more robust findings or different results.

5. In stakeholder pressure, only two aspects like social and environmental are considered

but for generalizability other aspects could be incorporated in the analysis. There could

be possible total quality management as mediating variable in between CSR and

financial, non-financial performance.

6. Finally, there could possibly better contribution in the context of comparison of

developed and developing countries, financial and non-financial sectors, services,

merchandising and manufacturing sector with respect to the impact of corporate social

responsibility on financial and non-financial performance.

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Appendix 4.4.1.2. Histogram and P-P-Plot

of Corporate Social Responsibility


of Financial Performance

191


of Non-Financial Performance


of Corporate Reputation

192


of Innovation


of Stakeholder Pressure

193

Appendix 4.4.2.1. Scatter Plot of CSR and



Non-Financial Performance


Corporate Reputation


Innovation

194

Appendix 4.4.2.5. Scatter Plot of CSR and Stakeholder Pressure

Annexure 3.3.1

195

Questionnaire

Dear Sir/Madam,

I shall be thanks for giving me some moments for answer following questions regarding

my research studies on this topic,

“Implications of Corporate Social Responsibility on Financial and Non-Financial

Performance of Banking Sector of Pakistan: Moderating role of Stakeholder

Pressure and Mediating role of Innovation and Corporate Reputation”

*Please answer all the questions acting as focal person with respect to overall bank.

Section A

1. Gender?

Male Female

2. Age?

In between 20 – 30 Years In between 31 – 40 Years

In between 41 – 50 Years More than 50 Years

3. Qualification?

Bachelor Master

M.Phil. Other Certification

4. Experience in this bank?

In between 0-5 Years In between 6-10 Years

In between 11-15 Years More than 15 Years

5. Name of you bank?

------------------------------

196

Section B

1 2 3 4 5 ▼ ▼ ▼ ▼ ▼

Strongly Disagree

Disagree Neutral Agree Strongly Agree

Our bank 1 2 3 4 5

CSR1 Makes investment to create a better life for future generations.

CSR2 Thinks customer satisfaction is highly important.

CSR3 Provide high-quality products to its customers.

CSR4 Always pays its taxes on a regular and continuing basis.

Our bank 1 2 3 4 5

CSR5 Complies with legal regulations completely and promptly.

CSR6 Contributes to campaigns and projects that promote the well-being

of the society.

CSR7

Contributes to schools, hospitals, and parks according to the needs

of the society.

CSR8 Emphasizes the importance of its social responsibilities to the

society.

Our bank 1 2 3 4 5

CSR9 Encourages its employees to participate in voluntarily activities.

CSR10 Endeavors to create employment opportunities.

CSR11 Implements flexible policies to provide a good work & life balance

for its employees.

CSR12 Participates in activities which aim to protect and improve the

quality of the natural environment.

CSR13 Provide a safe and healthy working environment to all its

employees.

197

Section C

1 2 3 4 5 ▼ ▼ ▼ ▼ ▼

Strongly Disagree


Our bank 1 2 3 4 5

SP1 Customers put pressure on management in adopting

environmentally friendly practices

SP2 Stakeholder put pressure in adopting environmentally friendly

practices

SP3 Competitors action put pressure on management in adopting

environmental friendly practices

SP4 Marketing department puts pressure on management in adopting

environmental friendly practices

Our bank 1 2 3 4 5

IP1 New or improved products/services are is above the average within

industry

IP2 New or improved internal processes is above the average of industry

IP3 Top management emphasizes on research and development

IP4 Introduced new product lines in the last five year

IP5 Introduced important changes in products during the last five years.

Our bank 1 2 3 4 5

CR1 Treats customers as being a very professional organization

CR2 Is viewed by customers as a successful entity.

CR3 Reputation is highly regarded.

CR4 Customers view our firm as one that is stable

CR5 Is viewed as well-established by customers.

198

Section D

1 2 3 4 5

▼ ▼ ▼ ▼ ▼

Strongly Disagree


Our bank 1 2 3 4 5

FP-1 Return on asset is increased in last five years.

FP-2 Return on investment is increased in last five years.

FP-3 Market capitalization is increased in last five years.

FP-4 Earnings per share is increased in last five years.

Our bank 1 2 3 4 5

NFP-1 Workplace relations are seen satisfactory

NFP-2 New product development is satisfactory

NFP-3 Considered research and development as important

NFP-4 Emphasized on cost reduction programs.

NFP-5 Personal development of employees

NFP-6 Ensures employee health and safety

199

Annexure 3.3.2: Sample Size

Bank Name No of Branches Questionnaires Detail

Bank

Branches Federal Central South Targeted Distributed

Response

Received Discarded

Final

Used

Habib Bank

Limited 1703 46 539 222 807 150 98 1 97

National

Bank of

Pakistan

1519 36 724 278 1038 130 76 8 68

Muslim

Commercial

Bank

1444 42 416 234 692 100 55 1 54

United

Bank

Limited

1379 18 124 230 372 75 22 7 15

Allied Bank

Limited 1250 50 608 338 996 100 87 5 82

Bank

Alfalah

Limited

638 33 216 132 381 50 42 7 35

Bank Al-

Habib

Limited

605 24 221 187 432 55 45 14 31

Askari

Bank

Limited

516 37 138 139 314 40 35 12 23

Total 9054 286 2986 1760 5032 700 460 55 405

Total Banks 34

Total

Branches 12993

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