Corporate Social Responsibility and Financial Performance of Deposit Money Banks in Nigeria

Abstract

This study examines the effect of CSR on financial performance in the Nigerian banking industry. Thirteen banks were studied. Annual reports and financial statements of the banks for the period of ten years after recapitalisation (2005-2014) were analysed. The banks’ financial performance indices—ROA, ROE, ROD—and PAT as well as CSR expenditure were measured and analysed. The data were analysed using regression analyses of STATA version 13. The results of the overall model of the multiple regression, indicating the simultaneous effect of Banks’ financial performance on CSR expenditure, the findings indicated that previous financial performance had significant positive effect on current CSR expenditure at p-value=0.0000. However, when the financial performance indices were individually analysed, the results were mixed. For example, previous ROA and ROD reveals negative effect at -4.0535(0.080) -3.655622(0.090) and -2.990002(0.169) and -9.7102(0.000), - 7.648551(0.000) and -8.77916(0.001), respectively. However, previous ROE and PAT revealed regression coefficients and p-values of 0.083(0.022), 0.062(0.070) and 0.038(0.281) and 0.258(0.000), 0.213(0.000), and 0.162(0.004) respectively, both indicated significant positive effect on CSR expenditure. In the second model of simple linear regression, the results revealed the existence of strong positive effects between the investigated variables, the p-values were thus, 0.002, 0.000, 0.023 and 0.000 for ROA, ROE, ROD and PAT, respectively, indicating that previous CSR expenditure has a significant positive effect on current financial performance in the Nigerian banking sector. Based on these results, the study, therefore, concluded that there is positive relationship between banks’ CSR activities and their financial performance. Thus, banks should be more committed to CSR for better financial performance and for social benefit of the society and; should diversify CSR programs.