eThesis - School of Business electronic theses

In this research Finnish multinational companies' (MNCs) engagement to corporate social responsibility (CSR) is examined based on the large Finnish MNCs voluntary engagement in the United Nations (UN) Global Compact initiative. The focus of this study is firstly, to analyse the factors affecting the decision of Finnish MNCs to join the UN Global Compact and secondly, the implications of UN Global Compact participation on the company's financial performance. The factors are analysed based on their effect on CSR in this research are research and development (R&D) intensity, internationalization level, and firm size in terms of assets and personnel. Company participation in UN Global Compact is compared to company financial performance in terms of return on assets (ROA).

Accounting data was gathered from the annual reports of 24 large publicly listed Finnish MNCs between 2003 and 2012. Two regression analyses were performed. Firstly, t-test were used to predict the financial performance from UN Global Compact participation and the factors related to UN Global Compact engagement; Secondly, z-test were used to predict the likelihood of UN Global Compact participation from the factors related to UN Global Compact engagement. Statistical significance was tested at 5%.

Based on the empirical analysis it was found that UN Global Compact participation has a negative correlation with financial performance. Additionally, it was found that firm size had a positive correlation with UN Global Compact engagement, while internationalization level and R&D intensity were insignificant. The results of this study imply that participating in the UN Global Compact may scatter CSR resources too far from the company's core competence and therefore act as a financial burden for the company.