Effect of Corporate Social Responsibility on Profitability of Companies in Kyrgyzstan: 2010-2012

Abstract

The question of moral responsibility of private sector and its engagement into the social projects in the countries they function in has become quite an interesting topic relatively recently. It is both the governments’ pressure on the businesses and the private companies’ consciousness that gave rise to the social projects initiated by the businesses. On the one hand, it is straightforward that by contributing to the improvement of the environment in which the business exists the company may have bottom-line benefits for its reputation. Such initiatives may even be considered as marketing tools. On the other hand, are the awards always worth the costs? Such kind of an investment may not necessarily bring the expected returns. Numerous researchers have attempted to study the CSR-financial performance relationship and there have been various results depending on the countries of interest, number of companies, specific sectors, and other factors. In this paper the link between the spending on the Corporate Social Responsibility (CSR) and the profitability of the companies in Kyrgyzstan for the period from 2010 to 2012 is empirically tested. It is hypothesized that the sign is positive, but the results suggest a negative connection. In the future it is proposed to extend the sample size and improve the estimation techniques that may have led to the biased results in this work.