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The Effect of Corporate Social Responsibility on Organizational Performance in Banking Industry in Malaysia

Corporate Social Responsibility (CSR) is a sustainable development that providing economic, social and environment benefits to all stakeholders through business approaches. The role of CSR is very important in organizational performance. The development of CSR interests in the banking industry is growing rapidly in the last decade.

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The purpose of this research is to investigate the relationship between the CSR that is ethical activities, environment activities, philanthropic activities and social web activities and organizational performances on banking industry in Malaysia.

This study used a structured questionnaire and distributed to all employee that work in banking industry. Therefore, we hope this research will help the increasing of organizational performance in banking industry.

Introduction

Malaysia has enjoyed tremendous growth in recent years, both in social and economic fields. The CSR have the main role and it is very important in the business community. CSR is the element that handles one of the most important issues that is sustainable development. According to Bhagwat (2011), due to the cost of failure is too high. The World Business Council for Sustainable Development (WBCSD) states that there is no way to avoid paying serious attention to CSR and sustainable economic development has been contributed by CSR

Privatization financial deregulation, globalization and technological advances have caused banking sector around the world to undergo major changes. According to Lipunga (2013), banking is crucial for everyday activities for core customers and businesses built not only on important financial elements but also in other intangibles such as trust and loyalty.

Corporate Social Responsibility (CSR) is a voluntary undertaking by a company during the process of pursuing a mission and fulfilling its obligations deemed to be a stakeholder, including workers, the environment and the community (Coombs and Holladay, 2012). According to Bursa Malaysia (2012) in (Darus, Mat Isa, Yusoff and Arshad, 2015), define CSR as an open and transparent business practice based on values of ethics and values respecting society, workers, the environment and shareholder.

 Problem Statement

The relationship between CSR and organizational performance has no evidence, including financial and non-financial performance. This is because documented evidence is less of an interest so the focus of the researcher is to find out the impact of CSR on the performance of organizations based on selected commercial banks as well as know whether this institution is aware of any benefit from the expenditure incurred. The main purpose is to know the policies set by the Government on CSR activities since business institutions that use CSR to avoid taxes in terms of decrease in payment of taxation because of the tax free of the activities of CSR activities in the banking industry.

Research Objective

  1.  To identify the effect of ethical activities on organizational performance
  2.  To identify the effect of environmental activities on organizational performance
  3. To identify the effect of philanthropic activities on organizational performance
  4. To identify the effect of social web activities on organizational performance

Research Questions

  1.  Is ethical activities effect on organizational performance?
  2. Is environmental activities effect on organizational performance?
  3. Is philanthropic activities effect on organizational performance?
  4. Is social web activities effect on organization performance?

Significant of Study

This study will be an important attempt to find out the effect of CSR on organization performance in banking industry in Malaysia. This study will help the employees in knowing the effect on corporate social responsibility in Malaysia and can increasing the organization performance in banking industry.

Scope and Limitation

This study is conducted in area of Malaysia. Sample are taken from those who are working in the banking industry. The analysis was made with the help of the secondary data collected from the employees that work in organization.

Literature Review

This chapter will review literature relevant to the study, specifically it will look at Theories and empirical studies. This part contain organization performance as the dependent variable and corporate social responsibilities as the independent variable.

Organization Performance

Various activities that are developed by organization to achieve organizational objectives. Hashem Salarzadeh (2015), said that the performance of an organization is believed to be able cover the broader areas including the connection between performance and organizational goals resources and satisfaction of the stakeholders. The performance represents one of the most important aspects that must be taken into account when talking about the internal marketing of a company.

Reaching performance to the highest level becomes more and more a challenge, given the continuous development of the companies and the continuous increase of the market standards (Raluca Iona, 2012). Based on study that conducted by Obusubiri (2006), found that CSR’s performance has a positive relationship with the portfolio.

In the study, positive relationships are cited by a good corporate image through CSR that makes the company selected by investors.

Corporate Social Responsibility

According to Khanifar et al., (2012) corporate policies and practices are influenced by stakeholder responsibility and the community is a CSR. According to Gilbert (2008), considers the institutional environment in which the company operates to influence CSR (Gilbert, 2008). CSR theories contribute to give back to the societies and the gains they get through it (Manas Chatterji, 2017). According to Green and Peloza (2011), consumers evaluate CSR actions, relating them to their interests, personal values and priorities.

Ethical Activities

Carrol (1999) stated that ethical activities can be considered as a components of CSR. Prior studies show that CSR practice serves as effective mechanism for firm to import their ethical activities and restore their shareholders trust (Jacob, 2012, Souto, 2009). Based on Karim and Khondar (2016) said, ethical behaviour can create values in intangible forms such as strategic planning, reputation and employee’s motivation.

Environment Activities

Environment activities is a concept, where companies integrate environmental concerns in their business operations and the interaction with stakeholders, without compromising economic performance (Nik Ramli, Nor Irwani, Shaiful Annuar, 2014). Companies would actively seek to integrate environmental consideration into their operation and activities. These includes promoting the advantages of eco-friendly products (Ramayah, Lee, ; Mohamad, 2010), encouraging eco-tourism; (Chiutsi, Mukoroverwa, Karigambe, ; Mudzengi, 2011) developing environment friendly behaviour through workplace climate (Nik Ramli, Naja, 2011) and many more.

Philanthropic Activities

Philanthropic is the core category of CSR activities (Onlaor ; Rotchanakitumnuai, 2010, Peloza ; Shang, 2011). Philanthropic is stated as the organization’s desire to promote the welfare of others, expressed especially by generous donation of money to good causes. Besides, Schnurbein et. al. (2016) said, corporate philanthropy generally takes on three different forms: corporate giving, corporate volunteering and corporate foundations. Figar ; Figar (2011) states that establishing philanthropy as company’s strategic activity in the framework of socially responsible economy gives valuable, immaterial importance and contributes to competitive advantage.

Social Web Activities

Social media is another element which is capable of organizing relationship between businesses and people readily (Colleoni, 2013). Social media is not regarded as a communication trend rather it enables strategic management approach regarding businesses (Sonja Dreher, 2014). The usage of social media allows businesses to develop better organizational strategies in customer base (M. Schroeder, 2014). Businesses benefit from corporate social responsibility by offering social value to target market and presenting uniqueness via activities (Holme, 2010).

CONCEPTUAL FRAMEWORK

Independent Variable Dependant Variable

CONCLUSION

From this study, it can be concluded that philanthropic responsibility in Malaysia has an impact on bank performance based on the organization performance. The study show tthat any increase in ethical activities will increase the performance of the bank based on the organization performance because there positive significant correlation coefficient at 0.010, P

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The Effect of Corporate Social Responsibility on Organizational Performance in Banking Industry in Malaysia. (2019, Jul 04). Retrieved October 12, 2019, from https://phdessay.com/the-effect-of-corporate-social/.