Corporate Social Responsibility and Firm Performance the Mediating role of Stakeholder Trust

Abstract

This study examines the impact of Corporate Social Responsibility (CSR) on firm performance by focusing on the mediating role of stakeholder trust. The study was conducted among small and medium-sized enterprises (SMEs) registered in Khyber Pakhtunkhwa, Pakistan. Drawing on stakeholder theory, a conceptual framework was developed and empirically tested. Data were analyzed using structural equation modeling (SEM) and mediation analysis with SmartPLS 4. The results indicate that CSR has a positive and significant effect on firm performance. Furthermore, stakeholder trust significantly mediates the relationship between CSR and firm performance, demonstrating that CSR initiatives enhance organizational performance by building stronger trust with key stakeholders. Overall, all hypothesized relationships were supported, confirming the importance of stakeholder trust as a key mechanism through which CSR contributes to improved firm performance. This study adds to the CSR literature by providing empirical evidence from SMEs in an emerging economy context and demonstrates that by prioritizing CSR and building trust with stakeholders, managers, and policymakers can strengthen firm performance and support sustainable business growth in practice.

Keywords: Corporate Social Responsibility; Firm Performance; Stakeholder Trust; Small and Medium-Sized Enterprises (SMEs); Structural Equation Modeling; SmartPLS 4; Khyber Pakhtunkhwa; Pakistan