This study aims to examine the potential effect that corporate social responsibility (CSR) practices in general and business ethics, more specifically, can exert on the financial performance of companies using advanced machine learning (ML) techniques.
Based on a sample of 523 international firms headquartered in North America and Western Europe between 2005 and 2019, the research design employs advanced machine learning algorithms including LightGBM, CatBoost, XGBoost, NGBoost, Support Vector Machine, and Random Forest to assess the relationship between business ethics, CSR practices, and financial performance. In addition, the SHapley Additive exPlanations (SHAP) technique was used to provide comprehensive insights into feature contributions to individual predictions.
Findings indicate a growing interest in business ethics and societal practices over the past decade. The results have revealed that the adoption of an ethical and socially responsible approach is associated with financial performance.
This study provides actionable insights for multinational companies, emphasizing the role of business ethics and social responsibility practices in enhancing financial performance. It also holds significance for practitioners aiming to improve financial efficiency. By exploring the relationship between social effectiveness and financial efficiency, this research leverages ML techniques to offer a deeper understanding of this critical connection.
This study contributes to the field by using advanced ML techniques, including SHAP, to explore the relationship between business ethics and CSR practices on Financial Performance. The findings, particularly the superior accuracy of XGBoost among algorithms, provide valuable insights into the implications of business ethics and social practices on firm financial performance.
