A model to explain how an organization’s corporate social responsibility (CSR) contributes to corporate image and financial performance: By using structural equation modeling (SEM)

Corporate Social Responsibility (CSR) has grown to be an issue of much concern in the 21st century for domestic and international business arena. It has been complied that many of studies on the relationship between CSR and financial performance have concentrated on large industry. Small and Medium-sized Enterprises of manufacturing industry have received less attention in this area. To best of our knowledge, there are no peer-reviewed studies that integrated model to explain how an organizations‘ CSR contributes to financial performance through mediating effect of corporate image. The objective of this study is to build and test a theoretical model to identify the mediating effect of corporate image in the linkage between CSR and financial performance in the manufacturing firm‘s context. The study population consisted of the 36073 manufacturing companies for this study. The stratified sampling was used where each manufacturer represents a stratum. A sample was then drawn from each stratum that meet the criteria. Self-administered questionnaire was used as a tool to gather data. Data were collected from 392 firms across Bangladesh. Furthermore, several hypotheses were generated to examine the model. Structural Equation Modeling (SEM) was employed to determine significant determinants affecting financial performance. The study revealed that corporate social responsibility is having significantly positive influence on corporate image and financial performance. Moreover, corporate image also affects positively and significantly to financial performance. Empirical results indicated that corporate image mediates the relationship between CSR and financial performance. The study recommends, manufacturing firms should engage in doing corporate social responsibility activities and develop good corporate image to ensure successful corporate performance in competitive environment. The study‘s sample was drowning from one sector (manufacturing) which might limit the generalizability of these findings to other sectors. Future studies should verify these findings across sectors. The research findings can be a basis for further research to validate and develop better models to explain firm performance in the large-scale manufacturing firms related to CSR and corporate image initiative.