Causal Mechanisms in Socially Responsible Human Capital Management and Corporate Financial Performance

Document Type : Research Paper

Authors

1 Prof., Department of Accounting, Faculty of Accounting and Financial Management, College of Management, University of Tehran, Tehran, Iran.

2 Ph.D. Candidate, Department of Accounting, Faculty of Accounting and Financial Management, College of Management, University of Tehran, Tehran, Iran.

10.22059/jipa.2025.399859.3750

Abstract

Objective
This study aims to examine the causal mechanisms underlying the relationship between Socially Responsible Human Resource Management (SRHRM) and corporate performance. Data were collected via at least 500 questionnaires administered to full-time employees in companies engaged in corporate social responsibility (CSR) actions. SRHRM fosters positive employee responses such as organizational commitment, trust, and creativity which are posited to enhance financial performance. These positive behaviors are largely driven by corporate HR policies that emphasize social responsibility, thereby motivating employees to exceed their formal job requirements.
Methods
This study represents one of the first attempts to apply a retroduction reasoning approach specifically within a quantitative framework to explore the causal link between SRHRM and financial performance. To achieve this, the study employs the back-door criterion from structural causal modeling. This method assumes that all confounding "back-door" paths from the independent to the dependent variable are conditionally controlled. Since confounders influence both variables, isolating them through conditional control is essential for identifying a pure causal effect. The analysis uses a Directed Acyclic Graph (DAG)-informed, regression-based causal inference framework to investigate the effect of SRHRM on firm value, measured by Tobin’s Q.
Results
The results indicate that SRHRM exerts a statistically significant and causally robust positive impact on Tobin’s Q across the full sample. Notably, interaction analyses reveal that this effect is moderated by firm characteristics: the impact of SRHRM is stronger in larger firms, likely due to superior resource alignment, scale efficiencies, and institutional readiness. Conversely, the effect is significantly diminished among older firms, suggesting organizational inertia or maturity may inhibit the absorptive capacity for strategic HR innovations. Subgroup analyses confirm this pattern. Large firms demonstrate the strongest, most stable effect; small firms show a null or slightly negative impact, indicating potential misalignment or implementation challenges; and old firms outperform young firms in SRHRM gains, implying that experience and market embeddedness facilitate more effective outcomes.
Conclusion
This study demonstrates the value of causal inference over traditional correlational methods in SRHRM research. Techniques such as DAG-informed regression and the back-door criterion simulate counterfactuals and rigorously control for confounders, distinguishing genuine causal impact from spurious association. Consequently, this approach yields findings with stronger internal validity, transforming descriptive patterns into actionable, policy-relevant insights. The results move beyond identifying what firms tend to do, providing evidence for what they should do to leverage SRHRM for enhanced firm value, contingent on organizational context.

Keywords

Main Subjects

References

 
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Journal of Public Administration
Volume 18, Issue 1
2026
Pages 174-202

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