Enhancing Financial Performance through Social Responsibility Disclosure: A Study of Industrial Companies in Palestine

Social responsibility disclosure (SRD) has become a pivotal topic in various economic sectors as it develops firms’ reputations, attracts new customers, and raises their market shares. Therefore, many entities are concerned with clarifying their role in their communities by providing voluntarily financial support to achieve their goals, especially with the persistence of competitors in the market. However, institutions still have an awareness scarcity of the social responsibility importance and the return they can obtain from it, which can affect their performance and market indicators. Besides, there is limited research on its influence on financial performance in the context of Palestinian firms. Therefore, this study investigates how disclosing social responsibility activities can impact the financial performance of the industrial companies listed on the Palestine Stock Exchange (PEX) from 2018 to 2022. Panel data from annual reports are analyzed using SPSS. SRD is measured using an index from four main categories and 20 subcategories, while financial performance is assessed using Tobin’s Q and return on assets (ROA). The results indicate that SRD significantly impacts financial performance, evidenced by ROA and Tobin’s Q. However, no significant differences in SRD are found among Palestinian industrial companies during the study period. These results suggest that increasing SRD improves financial performance, leading to recommendations for promoting SRD practices through workshops and legislation.