Evaluating the effect of corporate social responsibility (CSR) on corporate financial performance” an applied study on Egyptian stock market

Abstract This research paper will look at the impact of CSR on corporate financial performance in the Egyptian stock market. The study employs the fixed-effects panel data regression analysis to examine 32 companies that are listed in the S&P/EGX ESG Index between 2017 and 2024, bringing 256 observations. The financial performance measures examined in the study include the return on assets (ROA), the return on equity (ROE), the return on sales (ROS), and the return on invested capital (ROIC). Findings indicate that CSR has a significant and positive influence on all the financial performance measures. The highest relationship was found in ROE (0.769), followed by ROS (0.680), ROIC (0.657), and ROA (0.586). All models were significant statistically, which shows strong evidence of a CSR-performance relationship in the emerging markets. The suggested work organizes the empirical evidence to the new market situation in Egypt, which is applicable to the gap in the researches on CSR-performance relations in the developing economies and can offer useful information to managers, investors and policy makers of the analogous markets. There are policy implications in the findings that are of importance to the emerging market regulators and policymakers. Governments must consider supportive structures such as tax breaks, subsidies and awards to promote the adoption of CSR since the practices have proven to improve corporate financial wellbeing and the expansion of social welfare goals in general. The fact that the S&P/EGX ESG Index has been able to find financially superior companies supports its further growth and implies that mandatory ESG reporting rules would help the market to work more efficiently because they would allow allocating more capital to socially responsible and high-performing companies. The outcomes present evidence-based reasons as to why policymakers in such emerging economies ought to consider CSR not as a means of regulation but as a mechanism of pursuing economic growth and societal progress at the same time.