Financial Performance: The Role of Corporate Governance and CSR Across Firm Sizes and Industries in India

Abstract

Present research explores the complex interplay between “Corporate Governance (CG)”, “Corporate Social Responsibility (CSR)” as well as “Corporate Financial Performance (CFP)” in Indian firms with a specific focus on the moderating roles of firm size and industry type. Recognizing the increasing stakeholder expectations and regulatory pressures, the research investigates whether CG and CSR—individually and interactively enhance financial outcomes. Drawing on agency and stakeholder theories, the study develops CG and CSR indices from the annual report disclosures of 55 companies across various industries and a composite financial performance index (CFPI) through factor analysis. Findings reveal that while CG alone does not significantly impact CFP, CSR represents a strong positive association and partially mediates the CG-CFP relationship. The analysis reveals that CSR’s impact is more pronounced in mid-sized firms and select industries such as FMCG and automobile. These findings have important implications for accounting practices, suggesting that CG mechanisms enhance financial transparency indirectly through CSR pathways. The study contributes to emerging market literature by proposing an integrated model of CG–CSR–CFP and recommending alignment with evolving ESG and financial reporting standards.