Does intellectual capital efficiency improve the corporate social responsibility of Egyptian firms?

Abstract

Purpose

Corporate social responsibility (CSR) has been one of the main subjects for companies’ sustainability in contemporary years. Engaging in CSR practices has been recognized to be beneficial for firms since it might create value for firm in the market. The process of creating value in recent era has been controlled by firms’ hidden resources and simultaneously the concept of value added intellectual capital (VAIC). This paper aims to determine whether intellectual capital (IC) and each of its three constituents (human capital efficiency [HCE], capital employed efficiency [CEE] and structural capital efficiency [SCE]) can generate improvements in CSR in an emerging market.

Design/methodology/approach

Using the Egyptian Corporate Responsibility (S&P/EGX ESG) index and extracting accounting data from the annual reports of companies listed on this index, an empirical analysis that considers VAIC and its elements was accomplished on a sample of 267 firm-year observations for a nine-year period beginning in 2010.

Findings

The empirical results of the multivariate regression indicated that Egyptian companies active in using IC have more tendency to engage in CSR practices. In addition, it is shown that HCE positively influences CSR practices, while SCE has a negative association with such social activities, and CEE has no significant relationship with CSR activities.

Practical implications

The results of the research have some implications through offering an enhanced understanding of using IC and CSR practices that might be in favor of several investors, regulatory bodies and scholars concerned with firms’ social activities. Besides, it provides empirical evidence that the efficient use of IC provides advantages not only for the stockholders but also for the community.

Originality/value

To the best of the authors’ knowledge, this study is one of the first studies to investigate Egyptian firms for IC and CSR topics. In addition, this study provides empirical evidence on this relationship from the Egyptian environment that is different from other cultural and institutional environments in which previous studies were conducted.

Citation

Awad Bakry, A.E. (2022), "Does intellectual capital efficiency improve the corporate social responsibility of Egyptian firms?", Journal of Financial Reporting and Accounting, Vol. 20 No. 3/4, pp. 693-711. https://doi.org/10.1108/JFRA-09-2020-0269