Ripple Reaction towards Corporate Social Responsibility and Profitability: A Sustainable Model for Emerging Economy

Abstract

Corporate social responsibility (CSR) plays a vital role in improving the firm performance. Many researches have been done in this context but the relationship among the CSR, inflation and performance is not explored yet. Hence the purpose of this study is to demonstrate how corporate social responsibility and inflation affect firm profitability in the 30 manufacturing industries of China over the period 2011 to 2023. This study checks the impact of CSR, inflation, leverage and firm size on profitability using the bivariate regression, ordinary least square and heterogeneous model. The study's findings indicate that: (1) firm profitability are significantly impacted by CSR; (2) profitability is significantly impacted by inflation. Leverage and firm size also affect the firm performance. A crisis of trust can result from inflation, which seriously damages a company's relationships with its stakeholders, including employees, customers, and other parties. This is especially true at a time when a lot of people are accusing businesses of artificially boosting prices in order to increase profits. If the companies are interested to enhance their profits, then ultimately they should focus on CSR and environmental activities.