Indian Journal of Science and Technology

Abstract

Objectives: Socially responsible activities of firms play an imperative part in enhancing financial effectiveness and specially serve as an important mediator into the causal association between financial effectiveness and corporate governance. Therefore, the aim of the current project is to assess the association between financial effectiveness and corporate governance and then analyze the mediating function that corporate social responsibility takes in the causal relation of financial effectiveness with corporate governance. Methods/Statistical Analysis: To investigate the causal linkages from the components of corporate governance to financial effectiveness, OLS regression analyses were employed to test statistical significance. To examine statistically the mediating effect of corporate social responsibility, this research applied the procedures suggested^1. Findings: The empirical results indicated that, good corporate governance is an important force leading to improved financial effectiveness, where managerial independence, ownership concentration and chief executive officer - chairperson duality are positively related to financial effectiveness. In addition, socially responsible activities of firms were evidenced as an important mediating factor affecting the relation of financial effectiveness with corporate governance. Socially responsible activities fully interfere with the effect of ownership concentration in the managerial board on financial effectiveness. In contrast, they just partially mediate the influences of managerial independence and chief executive officer - chairperson duality on financial effectiveness. Application/Improvements: This research offer researchers of management as well as business directors with a more comprehensive understanding on the complicated associations among financial effectiveness, corporate social responsibility and corporate governance. These will help executive officers to be more socially responsible and to decide on more appropriate corporate governance practices, which could improve financial effectiveness.

Keywords: Corporate Governance, Financial Effectiveness, Social Responsibility, Vietnam