Examining the Impact of Corporate Social Responsibility on Financial Performance: Evidence from Small and Medium-Sized Enterprises in Hanoi

Abstract

This study examines the effect of corporate social responsibility (CSR) on the financial performance (FP) of small and medium-sized enterprises (SMEs) in Hanoi, Vietnam, through the mediating role of corporate reputation (REP). Drawing on stakeholder theory, signaling theory, the resource-based view, legitimacy theory, and the creating-shared-value perspective, CSR is conceptualized using Turker's (2009) four-dimension, stakeholder-based scale — CSR toward social and non-social stakeholders, employees, customers, and government. Survey data were collected from 300 owners/managers of SMEs operating in Hanoi and analyzed using partial least squares structural equation modeling (PLS-SEM) in SmartPLS 3, with bootstrapping (5,000 resamples) and blindfolding procedures. The measurement model demonstrated satisfactory reliability and validity (Cronbach's alpha 0.752-0.875; AVE 0.625 0.728; HTMT below 0.85), corroborated by exploratory factor analysis (KMO = 0.887; six factors, 67.03% variance explained). Results show that all four CSR dimensions positively and significantly influence REP (β = 0.133-0.298, p < 0.01), and REP in turn is the strongest predictor of FP (β = 0.469, p < 0.001), fully mediating the CSR-FP relationship as specified in the model. Firm size is the only significant control variable. CSR toward social/non-social stakeholders exerts the strongest effect, while CSR toward government exerts the weakest, a pattern explained through legitimacy theory as a "hygiene-factor" effect. The study contributes cross-cultural validation of Turker's scale in an emerging-economy SME context and offers evidence-based, prioritized managerial recommendations for CSR investment under resource constraints.