CSR and financial performance: are CSR practices a factor in reducing transaction costs?

Abstract

This article examines the role of Corporate Social Responsibility (CSR) in reducing transaction costs and improving the financial performance of companies. Based on transaction cost theory, the study explores how CSR practices such as transparency, stakeholder engagement, and litigation management can reduce costs associated with information search, negotiation, and contract execution. Through an empirical analysis of 358 Moroccan SMEs practicing CSR, the article uses Ridge regression to mitigate the effects of multicollinearity and extreme values, thus providing robust estimates of the impacts of CSR on transaction costs and financial performance. The results indicate that transparency practices and effective contract relations are particularly effective in reducing these costs, while CSR engagement requires deeper integration to demonstrate significant financial effects. CSR practices are not only beneficial from a social standpoint but also serve as an economic lever to improve the competitiveness and financial stability of companies.