A Contextual Pathway to Measuring the Relationship Between Corporations’ Profitability and Social Responsibility of Businesses (SRoB): A Theoretical Equation
Description
This research article (i.e., scholarly literature) continues prior research into analyzing how beneficial it is for firms to use nonfinancial social responsibility of businesses (SRoB) data as a method for profit generation. The prior research concluded that the extent of the relationship between corporations’ profitability and nonfinancial SRoB data (i.e., environmental, social, and governance [ESG] ratings) cannot be applied to the profitability measurement lens of how firms use their assets, shareholders’ equity, or how well corporations are in containing their operations and overhead costs. The increase or decrease of return on asset (ROA), return on equity (ROE), and net profit margin (NPM), plus the morally-framed nature of ESG ratings, are incomparable with that of ESG ratings. This research article continues the prior recommended research suggestion of involving accounting-based indicators and nonfinancial information by creating an instrument for social return. This article makes a theoretical equation to measure the relationship between corporations’ profitability and SRoB data.