The Complementary Effects of Islam and CSR: Some Empirical Evidence

Abstract

This paper empirically investigates what has been claimed in the literature; that there are no significant differences between the Islamic and Western schools of business ethics. A proxy for the Western school is corporate social responsibility (CSR) while in the Islamic school, a reasonable approximation would be Shariah-compliance (SC). But because financial performance is not the main priority in CSR and SC, this study examines the effects CSR and SC has on firm resilience and firm risk. The regression estimates using an emerging market sample show that both CSR and SC improves firm resilience besides reducing firm risk in the following year. The findings empirically validate the claims made in the literature; that business ethics, Islamic or otherwise, are similar in substance and form. By empirically examining this claim, this study paves the way for a convergence of values and practices besides fostering greater unity between cultures.