Moderating Role of Corporate Social Responsibility for the Effect of Managerial Ability on Financial Performance: Evidence from an Emerging Economy

Abstract

The present study endeavours to examine the moderating role of corporate social responsibility (CSR) in the interaction between managerial ability (M.A.) and firm performance (F.P.). For estimation, the study analysed an unbalanced panel of 219 non-financial listed firms on the Pakistan Stock Exchange (PSX) for 2008-2021. Fixed effect regression with robust standard errors clustered at the firm level is applied to address the concerns of heteroscedasticity and autocorrelation. Findings show that overall managerial ability enhances firm performance. Furthermore, research has established a positive correlation between CSR and a company's financial performance. In addition, the interaction between M.A. and CSR has a substantial positive correlation with F.P. The results reveal that CSR positively moderates the linkage between M.A. and F.P. and behaves as a complement. The ongoing research is limited to the non-financial sector; however, the study findings are unquestionably valuable for corporate investors and managers in the context of developing economies.