Corporate Social Responsibility And Brand Equity Of Malaysian Top 100 Brand Companies
In the recent economic systemic shifts perceived by the company value system from tangible to intangible assets, interest in brand equity receives growing attention from both practitioners and academics. Nevertheless, since most of these organisations accept these activities as part of their corporate social responsibility (CSR), corporations are also gradually implementing more ethical behaviours in relation to their communities. They are also acknowledging their crucial role in social, environmental and economic issues and the way in which they can enhance their companies’ brand equity. Having acknowledged the significance of CSR activities, the purpose of this paper is to provide a greater insight into how CSR practices affect company brand equity. Very few studies have examined this relationship in the context of Malaysian public listed companies (PLCs). Secondary data obtained through content analysis of Malaysian PLCs’ 2016 Annual Reports and a sample of Malaysia’s Top 100 Brands (whose names and brand equity values are set out on The Brand Finance website) was used to cover the assessment. The results showed that companies aggressively involved in CSR operations, especially environmental, community and workplace operations, found that this involvement enhanced their brand value. Reasonable CSR activities can effectively achieve high brand value. The findings are pertinent to both practice and theory.
Keywords: Corporate social responsibilityenvironmentalcommunityworkplacebrand equity
The notion of good works or corporate social responsibility (CSR) was originally described as the accountability of management for the community from which their profit derived. The concept has evolved over time and led to a multitude of ideas such as corporate social efficiency, corporate social responsiveness, corporate philanthropy, accountable businesses, accountable entrepreneurship and corporate citizenship (Kim et al., 2017; Pakseresht, 2010). CSR activities are essential for businesses today, not just to meet the interests of their investors and society (Tuan, 2012), company strategies (Pakseresht, 2010; Ding et al. (2016) and environmental or social goals (Rhoua et al., 2016). CSR practices benefit companies by improving brand equity (BE) and gaining a strong brand reputation and image that could result in a competitive advantage and positive economic results (Pakseresht, 2010; Rhoua et al. 2016; Bajic & Yurtoglu, 2018). In addition, prior studies (Chomvilailuk & Butcher, 2010; Hoeffler & Keller, 2002) recognised CSR as one of the enablers that influence brand building. Thus, many companies have participated in CSR activities such as employee benefits and environmental protection to persuade and attract new and loyal clients while at the same time strengthening their brand confidence (Rhoua et al., 2016). Ultimately, the CSR activities of many businesses address the many requirements of the stakeholders of the firm.
The stakeholder principle enlightens us that an organisation is not only obligated to satisfy the interests of shareholders, but also the wants of a variety of people or businesses and is thus responsible for creating and maintaining good relations (Jones, 2005). These responsibilities can be defined as legal, moral or fiduciary responsibilities for their stakeholders (Clarkson, 1995). Therefore, this theory validates the concept of corporate citizenship (Clarke & Clegg, 1998). Additionally, past research has proven that weak or conversely strong moral responsibility developed by a company for its stakeholders, can have a huge effect on the company’s performance in a positive or negative way (Greenley & Foxall, 1997). Previous studies have found that stakeholders can have a major effect on CSR activities and should be made operational (Godfrey & Hatch, 2006; Piercy & Lane, 2009), especially in view of the marketing benefits of CSR for stakeholder relations (Hult et al., 2011; Maignan & Ferrell, 2004; Russo & Perrini, 2009). As a result, CSR practises are now regarded as extremely significant by individuals with authority in business (Pivato et al., 2008; Piercy & Lane, 2009). In the meantime, Sen et al. (2006) asserted that CSR are influencing stakeholders to buy products and improve their overall relationship with the firm.
The brand definition became well known and an important instrument for business success in the 1980s (Aydin & Ulengin, 2015; Pakseresht, 2010) as it conveyed and told a product to both company managers and customers. The product name became a sign of a commitment by following a product brand that the expectation of the consumer would be fulfilled and served as a protection against rivals copying or imitating the product (Aydin & Ulengin, 2015). Brands are to generally add benefits and the figure of these values forms equity (Pakseresht, 2010), a point completely endorsed by Wang (2010), who defined the additional economic value that a brand provides to a business, specifically from an economic perspective, as a result of BE. As a well-recognized brand can also bring tremendous corporate value and have a positive impact on clients' minds, it is advisable to perceive brand growth as an opportunity for future returns (Aydin & Ulengin, 2015). Furthermore, in the long term, a brand offers a valuable intangible financial asset that allows a company to build trust and loyalty among its customers (Pakseresht, 2010). As a result, it is anticipated that a business with a strong brand and high BE would have improved corporate results (Aydin & Ulengin, 2015; Bajic & Yurtoglu, 2018).
Nowadays, companies are facing considerable pressure from the government and the public to do good works and therefore, the majority of global companies has concentrated on CSR activities. In marketing literature (Bhattacharya, 2017; Golob & Podnar, 2018; Yang & Basile, 2019), CSR activities are clearly connected to BE and this relationship has forced companies to put more effort into CSR activities. Importantly, since strong brands are often related to marketing performance and is applied to assess the premium value that a customer can pay during a merger or acquisition process, the degree of rivalry has also forced businesses to control their brands (Campbell, 2002; Tiwari, 2010). A good brand is useful for corporate decision makers to achieve better financial terms and add value to the organisation in different crises, dynamic markets and adverse business circumstances (Tiwari, 2010; Dutordoir et al., 2015). It clearly demonstrates, therefore, that brands are one of the most significant intangible assets for a business. Importantly, one of the products of CSR operations is BE. Importantly, BE is one of the outcomes of CSR activities and with this in mind, this research is to investigate the impact of CSR activities on BE among Malaysia’s Top 100 Brands using a financial-based BE approach.
Many past studies have proven that, in general terms, CSR affects BE (Benoit-Moreau & Parguel, 2007; 2011, Wang, 2010; Tuan, 2012, Wang et al., 2015; Singh & Islam, 2017; Lv et al., 2019) and specific CSR activities on BE (Fatma et al., 2015; Lv et al., 2019). Empirical studies have also revealed that a company employing CSR practices is able to strengthen its brand (Iqbal et al., 2013). In fact, many past studies by Pakseresht (2010), Torres et al. (2012), Iqbal et al. (2013), Fatma, Rahman and Khan (2015), Bhattacharya and Kaursar (2016) and Woo and Jin (2016) have evaluated the link between CSR and BE in both developed and developing countries. In developing countries like Malaysia, however, there has been minimal study into the relationship between CSR activities and BE (Choongo, 2017; Yang & Basile, 2019; Tilt, 2016). Therefore, in the Malaysian context, a limited research on the impact of CSR activities on BE motivated the authors to undertake this present study.Malaysia offers a unique business background to conduct research unravelling the relation between CSR and BE. Very few studies have delved into this relation in emerging economies that are characterized by high degree of inequality information and lower disclosure level.
This research aims to answer the questions as below:
Is there an effect of corporate social responsibility activities (environmental, community and workplace) on brand equity?
Purpose of the Study
This investigation is to analyse the impact on brand equity among Malaysia's Top 100 Brands in 2016 of CSR activities, namely environmental, community and workplace activities. The findings of this study could help the management of PLCs in Malaysia to engage, strategize and communicate their CSR activities and their benefits for BE. Indirectly, stakeholders will also benefit from CSR activities undertaken by these companies. Therefore, this study proposes the following hypothesis to explore more on this specific element of CSR:
H1: There is a relationship between environment and brand equity.
H2: There is a relationship between community and brand equity.
H3: There is a relationship between workplace and brand equity.
A content analysis was used in this study to review company annual reports and to assess the degree of CSR activities reported by the top 100 PLC brands in Malaysia. Content analysis was regarded, as suggested by Wolfe (1991) and Choi (1999), as an effective approach to examine the magnitude of disclosures. The company's 2016 annual reports of the Top 100 brands in Malaysia from the website of Bursa Malaysia were reviewed for reports of CSR activities. Due to the 2016 annual reports of eight firms unable to be obtained from Bursa Malaysia and their business websites, it is unable to present a complete set of 100 PLCs. Finally, only 92 companies were included. In certain instances, each company's annual report consists of financial and non-financial reports of the company and some information about the CSR activities of the companies are available in those reports (Rowbottom & Lymer, 2010). The present study adopted 13 checklist items from Anas et al. (2015) and Abd Rahim (2016) to assess CSR activities. Four items were used primarily to assess environmental CSR, five items were used for group CSR and four items for CSR in the workplace. In addition, the current study focuses on three pillars of CSR as business operations would impact the triple bottom line, individuals, climate and benefit. A score of “1” was given if any item on the checklist was mentioned by a company in their annual report, whereas a score of “0” denoted the absence of a CSR.
BE value was to measure the value of the brands in its league tables, using the Royalty Relief Approach (The Brand Finance Group, 2016). Calculation relates to the possible potential income that could be attributed to a brand and then deciding a rate of royalty that would be charged for the use of the brand, i.e. what the owner would have to pay for the use of the brand, assuming it was not already owned. Within the branded company, brand value is described as 'the value of the trademarks (and associated intellectual property marketing and goodwill attached to it)' (The Brand Finance Group, 2016). Furthermore, given the formula below, Brand Finance was used to calculate the brand value adopted for this analysis.
Brand Strength Index (BSI) x Brand ‘Royalty Rate’ x Brand Revenues = Brand Value
Based on The Brand Finance Community (2016), six procedures are needed to measure brand value. On a scale from 0 to 100, I calculate the brand intensity, based on the number of characteristics such as emotional relationship, economic performance and sustainability. This score is referred to as the Brand Strength Rating, (ii) for the respective brand sectors, the royalty rate ranges have been determined. This was achieved by evaluating comparable licencing agreements from the comprehensive licencing agreement database of Brand Finance, (iii) measuring the royalty rate where the brand strength score was added to the royalty rate range to achieve a royalty rate. For example, if the royalty rate range in a brand’s sector is 1-5 percent with a brand strength score of 80 out of 100, an appropriate royalty rate for the use of this brand would be 4.2 percent, (iv) Brand-specific revenue was calculated to measure the proportion of parent company revenue attributable to a specific brand, (v) Historical sales, equity analyst estimates and economic growth rates were used to assess the projected brand specific sales, and (vi) To extract brand revenues, the royalty rate was added to the forecast revenues, then the brand revenues were discounted post-tax to a net present value equal to the brand value.
This research analysed the CSR activities of 92 firms from Top 100 Brands of Malaysia. The first the consequence of the normality Kolmogorov-Smirnov and Shapiro-Wilk values were shown in Table
Environmental CSR is at .300 with respect to standard deviation values and is followed by neighbourhood CSR (.248), workplace CSR (.252) and 5097.22 BE. For community CSR, the smallest standard deviation was recorded, indicating that the percentage of disclosures by companies for community CSR is less scattered and highly clustered around the average. Thus, almost all businesses registered as many as 3 out of 5 things on the checklist. The largest standard deviation, on the other hand, is BE, meaning that the companies' BE is more scattered and less oriented around the average. Therefore, the BE of most firms varies from each other and there is a massive difference between them. Moreover, Table
The coefficient of association between CSR activities and BE is shown in Table
On another note, (correlation coefficient = .409; Sig. (2-tailed) = .000) was also confirmed by Hypothesis 3. This suggests that CSR in the workplace is associated positively to BE. Therefore, in order to ensure the protection and efficiency of human resources, one must aim in providing effective working culture (Jones et al., 2005; Singh et al., 2017). Eventually, this would lead to the retention of staff, brand preference and customer loyalty to the products of the company (Esmaeilpour & Barjoei, 2016; Liu et al., 2014; Williams & Adams, 2013). The results are comparable to those of Wang et al. (2015), Farooq et al. (2015), Mensah et al. (2017), Yang and Basile (2019) and Lv et al. (2019), who discovered a substantial positive link between CSR and BE in the workplace. In short, all forms of CSR activities implemented by 92 PLCs from 100 Top Brands of Malaysia in 2016 correlate positively with BE in 2016 and thus the stakeholder hypothesis is well supported with previous studies (Anas et al., 2015; Lv et al., 2019; Yang & Basile, 2019).
The study’s primary objective was to analyse the relationship in 2016 between the three CSR activities and BE among the Top 100 Brands of Malaysia. The results indicate that all CSR activities have a strong and positive connexion with BE, namely environmental, community and workplace activities. It clearly shows that the BE value will also be increased if the firm reports on more of its CSR operations. Importantly, CSR activities would help improve the BE, which in the highly competitive environment of top brands are one of the elements of competitive advantage and success for a business. In addition, it has shown the Stakeholder Hypothesis has the advantage for the development of a high BE value. There are a few drawbacks to this study. First, only the CSR activities of 92 PLCs were assessed in the current research in 2016, so future studies could expand the period of the study of the impact of CSR activities on BE. Furthermore, this research included only content review, so it is important in future studies to collect input from market leaders or key executives. Finally, a future study could incorporate a mixed BE measurement approach and combine the findings of financial-based BE with consumer-based BE.
- Abd Rahim, N. (2016). Assessing the influence of ethical leadership behaviors, leadership styles and leadership roles as determinants of online corporate social responsibility (CSR) disclosures in Malaysia [Doctoral dissertation]. University of Gloucestershire.
- Abdolvand, M., & Charsetad, P. (2013). Corporate social responsibility and brand equity in industrial marketing. International Journal of Academic Research in Business and Social Sciences, 3(9), 273-284.
- Anas, A., Abdul Rashid, H., & Annuar, H. (2015). The effect of award on CSR disclosures in annual reports of Malaysian PLCs. Social Responsibility Journal, 11(4), 831-852.
- Aydin, G., & Ulengin, B. (2015). Effects of brand equity on firm's financial performances in consumer goods industries. Journal of Business, Economics & Finance, 4(3), 332-333.
- Bajic, S., & Yurtoglu, B. (2018). Which aspects of CSR predict firm market value? Journal of Capital Markets Studies, 2(1), 50-69.
- Benoit-Moreau, F., & Parguel, B. (2007). Societal communication and brand equity. Thought leaders international conference on brand management. Proceedings of the 36th European Marketing Academy Conference.
- Benoit-Moreau, F., & Parguel, B. (2011). Building brand equity with environmental communication: An empirical investigation in France. EuroMed Journal of Business, 6(1), 100-116.
- Bhattacharya, S., & Kaursar, A. (2016). Study on corporate social responsibility as strategic instrument for creating sustainable corporate brand value: An analysis with structural equation modelling. Management and Labour Studies, 41(2), 88-106.
- Bhattacharya, S. (2017). Does corporate social responsibility contribute to strengthen brand equity? An empirical study. International Review on Public and Nonprofit Marketing, 14(4), 513-533.
- Campbell, M. C. (2002). Building brand equity. International Journal of Medical Marketing V, 2(3), 208-218.
- Choi, J. S. (1999). An investigation of the initial voluntary environmental disclosures made in Korean semi-annual financial reports. Pacific Accounting Review, 11(1), 3-102.
- Chomvilailuk, R., & Butcher, K. (2010). Enhancing brand preference through corporate social responsibility initiatives in the Thai banking sector. Asia Pacific Journal of Marketing and Logistics, 22(3), 397-418.
- Choongo, P. A. (2017). Longitudinal study of the impact of corporate social responsibility on firm performance in SMEs in Zambia. Sustainability, 9, 1300. https://doi.org/10.3390/su9081300
- Clarke, T., & Clegg, S. (1998). Changing paradigms: The transactions of management knowledge for the 21st century. Harper Collins Business.
- Clarkson, M. B. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20(1), 92-117.
- Ding, D. K., Ferreira, C., & Wongchoti, U. (2016). Does it pay to be different? Relative CSR and its impact on firm value. International Review of Financial Analysis, 47, 86-98.
- Dutordoir, M., Verbeeten, F. H., & Beijer, D. D. (2015). Stock price reactions to brand value announcements: Magnitude and moderators. International Journal of Research in Marketing, 32, 34-47.
- Esmaeilpour, M., & Barjoei, S. (2016). The impact of corporate social responsibility and image on brand equity. Global Business and Management Research: An International Journal, 8(3), 55-66.
- Fatma, M., Rahman, Z., & Khan, I. (2015). Building company reputation and brand equity through CSR: The mediating role of trust. International Journal of Bank Marketing, 33(6), 840-856.
- Farooq, O., Aguenaou, S., & Amor, M. A. (2015). Corporate social responsibility policy and brand value. The Journal of Applied Business Research, 31(6). https://doi.org/10.19030/jabr.v31i6.9463
- Feng, Y., Yoon, Y., & He, Y. (2016). The impact of corporate social responsibility on brand value: An empirical study of Top 100 Global Brands. International Journal of Business and Social Sciences, 7(10), 61-71.
- Godfrey, P. C., & Hatch, N. W. (2006). Researching corporate social responsibilities: An agenda for the 21st century. Journal of Business Ethics, 70, 87-98.
- Golob, U., & Podnar, K. (2018). Researching CSR and brands in the here and now: An integrative perspective. Journal of Brand Management, 26(1), 1-8.
- Greenley, G. E., & Foxall, G. R. (1997). Multiple stakeholder orientation in UK companies & the implications for the companies performance. Journal of Management Studies, 34(2), 259-284.
- Hoeffler, S., & Keller, K. L. (2002). Building brand equity through corporate societal marketing. Journal of Public Policy and Marketing, 21(1), 78-89.
- Hult, T. M., Mena, J. A., Ferrel, O. C., & Ferrel, L. (2011). Stakeholder marketing: A definition & conceptual framework. Academy of Marketing Science Review, 1(1), 44-65.
- Iqbal, F., Qureshi, A. R., Shahid, N., & Khalid, B. (2013). Impact of corporate social responsibility (CSR) on brand equity (B.E). Unpublished Degree Final Year Project Paper, University of Central Punjab.
- Jones, P., Comfort, D., & Hillier, D. (2005). Corporate social responsibility and the UK's top ten retailers. International Journal of Retail & Distribution Management, 33(12), 882-892.
- Jones, R. (2005). Developing a stakeholder model for brand equity. Journal of Brand Management, 13(1), 10-32.
- Khojastehpour, M., & Johns, R. (2014). The effect of environmental CSR issues on corporate/brand reputation and corporate profitability. European Business Review, 26(4), 330-339.
- Kim, H. L., Rhou, Y., Uysal, M., & Kwon, N. (2017). An examination of the links between corporate social responsibility (CSR) and its internal consequences. International Journal of Hospitality Management, 61, 26-34.
- Kippenberger, T. (1996). The environment as stakeholder: Does it make sense to develop a corporate environmental policy? The Antidote, 1(2), 21-22.
- Liu, M. T., Wong, I. A., Shi, G., Chu, R., & Brock, J. L. (2014). The impact of corporate social responsibility (CSR) performance and perceived brand quality on customer-based brand preference. Journal of Services Marketing, 28(3), 181-194.
- Lv, W., Wei, Y., Li, X., & Lin, L. (2019). What dimension of CSR matters to organizational resilience? Evidence from China. Sustainability 11(2019), 1561. https://doi.org/10.3390/su11061561
- Maignan, I., & Ferrell, O. C. (2004). Corporate social responsibility and marketing: An integrative framework. Journal of the Academy of Marketing Sciences, 32(1), 13-19.
- Mensah, H. K., Agyapong, A., & Nuertey, D. (2017). The effect of corporate social responsibility on organizational commitment of employees of rural and community banks in Ghana. Cogent Business & Management, 1-19.
- Oberseder, M., Schlegelmilch, B. B., & Murphy, P. E. (2013). CSR practices and consumer perceptions. Journal of Business Research, 66(10), 1839-1851.
- Pakseresht, A. (2010). Brand equity and corporate responsibility-A review of brand valuation methods. Unpublished Master Thesis. Swedish University of Agricultural Sciences.
- Piercy, N. F., & Lane, N. (2009). Corporate social responsibility: Impacts on strategic marketing and consumer value. The Marketing Review, 9(4), 335-360.
- Pivato, S., Misani, N., & Tencati, A. (2008). The impact of corporate social responsibilities on consumer trust: The case of organic food. Business Ethics: A European Review, 17(1), 3-10.
- Rhoua, Y., Singal, M., & Koh, Y. (2016). CSR and financial performance: The role of CSR awareness in the restaurant industry. International Journal of Hospitality Management, 57, 30-39.
- Rowbottom, N., & Lymer, A. (2010). Exploring the use and users of narrative reporting in the online annual report. Journal of Applied Accounting Research, 11(2), 90-108.
- Russo, A., & Perrini, F. (2010). Investigating stakeholder theory and social capital: CSR in large firms and SMEs. Journal of Business ethics, 91(2), 207-221.
- Sen, S., Bhattacharya, C. B., & Korschun, D. (2006). The role of corporate social responsibility in strengthening multiple stakeholder relationships: A field experiment. Journal of the Academy of Marketing science, 34(2), 158-166.
- Singh, P. J., Sethuraman, K., & Lam, J. Y. (2017). Impact of corporate social responsibility dimensions on firm value: Some evidence from Hong Kong and China. Sustainability, 9(9), 1532. https://doi.org/org/10.3390/su9091532
- Singh, K. S. D., & Islam, M. A. (2017). Validating an instrument for measuring brand equity of CSR driven organizations in Malaysia. Management & Marketing. Challenges for the Knowledge Society, 12(2), 237-251.
- The Brand Finance Group. (2016). The brand finance top 100 Malaysia brands 2016. http://brandfinance.com/images/upload/brand_finance_malaysia_100.pdf
- Tilt, C. A. (2016). Corporate social responsibility research: The importance of context. International Journal of Corporate Social Responsibility, 1(2), 1-9. https://doi.org/10.1186/s40991-016-0003-7
- Tiwari, M. K. (2010). Separation of brand equity and brand value. Global Business Review, 11(3), 421-434.
- Torres, A., Bijmolt, T. H., Tribó, J. A., & Verhoef, P. (2012). Generating global brand equity through corporate social responsibility to key stakeholders. International Journal of Research in Marketing, 29(1), 13-24.
- Tuan, L. T. (2012). Corporate social responsibility, leadership and brand equity in healthcare service. Social Responsibility Journal, 8(3), 347-362.
- Wang, H.-M. D. (2010). Corporate social performance and financial-based brand equity. Journal of Product and Brand Management, 19(5), 335-345.
- Wang, H.-M. D., Chen, P.-H., Yu, H.-K. T., & Hsio, C.-Y. (2015). The effects of corporate social responsibility on brand equity and firm performance. Journal of Business Research, 68, 2232-2236.
- Williams, S. J., & Adams, C. A. (2013). Moral accounting? Employee disclosures from a stakeholder accountability perspective. Accounting, Auditing & Accountability Journal, 26(3), 449-495.
- Wolfe, R. (1991). The use of content analysis to assess corporate social responsibility. In J. E. Post (Ed.), Research in corporate social performance and policy, 12, 281-307. JAI Press.
- Woo, H., & Jin, B. (2016). Culture doesn’t matter? The impact of apparel companies’ corporate social responsibility practices on brand equity. Clothing and Textiles, 34(1), 20-36.
- Yang, J., & Basile, K. (2019). The impact of corporate social responsibility on brand equity. Marketing Intelligence & Planning, 37(1), 2-17.
- Yang, J., Basile, K., & Letourneau, O. (2020). The impact of social media platform selection on effectively communicating about corporate social responsibility. Journal of Marketing Communications, 26(1), 65-87. https://doi.org/10.1080/13527266.2018.1500932
This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
About this article
Cite this paper as:
Click here to view the available options for cite this article.