Study on corporate social responsibility disclosure's influence on company's profitability in Malaysia

The purpose of this study is to investigate the relationship between Corporate Social Responsibility (CSR) as disclosed in the financial report of public listed companies in Malaysia and corporate financial performance which is represented by return on equity (ROE). A sample of 130 company's annual reports were analyzed to represent a sample data on CSR disclosure index and ROE for the period of study between 2007 and 2009.
In addition, this study also adopted the debt ratio to act as a controlled variable. Finding of this study reveal the CSR as well as the debt ratio have significant and negative relationships with the ROE. The negative impact of the CSR on the ROE does not really support the stakeholder theory as what this study has hypothesized in the beginning.
Nevertheless, these results may be affected by the costs of the CSR activities which could have caused an increase in companies' expenses, hence reducing companies' profit.