The Impact of Worker-related Corporate Social Responsibility (CSR) Initiatives on Financial Performance: A Study on Employee Turnover and Firm Profitability

Abstract

In today’s business landscape, firms are increasingly expected to demonstrate social responsibility not only to external stakeholders but also internally to their employees. Worker-related Corporate Social Responsibility (CSR), which includes training investments, workplace benefits, staff costs, and indefinite contracts, is often viewed as a strategy to reduce employee turnover and enhance profitability. This thesis examines the influence of such CSR practices on employee turnover and the subsequent impact on firm profitability, using a quantitative approach based on Belgian firms' social balance sheet data. Guided by Stakeholder Theory and Signaling Theory, the research analyzes data from 21,839 firms over a five-year period (2020-2024), employing regression analysis via RStudio software, while controlling for firm size, the average number of full-time employees, industry classification, and year effects. The findings reveal that, in the full sample and small firms subsample, staff costs per employee, workplace benefits per employee, and the proportion of indefinite contracts are significantly and negatively associated with turnover, while training investments show no significant effect. In large firms, staff costs, training investments, and indefinite contracts significantly reduce turnover, but workplace benefits do not. Furthermore, turnover is significantly and negatively associated with next year’s profitability in the overall sample and among small firms, but this relationship is insignificant in large firms. These results suggest that the CSR, turnover and profitability relationship is context dependent, with firm size influencing which CSR practices have the strongest retention impact. They also point to the possibility that non-financial factors, such as employee perceptions and organizational culture, shape how CSR initiatives translate into performance outcomes. The final chapter highlights theoretical and managerial implications, study limitations, and recommendations for future research.