Long-Run Relationship of Corporate Social Responsibility and Cost of Capital of Quoted Companies in Nigeria Stock Exchange: Nigeria Evidence

Ofogbe Nyore Sandra,Anisiuba Chika Anastesia,Nnamani Chidiebere,Ifeoma Maria Ihegboro,Ojiakor Ijeama P,Ruth Lass

doi:10.13189/ujaf.2021.090506

Ofogbe Nyore Sandra, Anisiuba Chika Anastesia + Show 4 more

Open Access

https://doi.org/10.13189/ujaf.2021.090506

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Abstract

There has been moderately scarce literature on the relationship between company social responsibility (CSR) and the cost of capital (COC) in Nigeria. Numerous studies have analysed the association between the CSR of the companies quoted within the Nigeria Stock Exchange (NSE) relating to their overall performance neglecting the COC component. This study examined the long-run relationship between CSR dimensions (Corporate social performance (CSP), environmental performance (ENP) and corporate governance (CGP) dimensions and cost of debt (COC). It seeks to investigate if CSR has, in the long run, reduce the cost of capital. Annual panel data of 96 companies for the duration; 2005-2020 quoted in the NSE were selected judgmentally. Thomson Reuther Index (TRI) was used as a measure of CSR, whilst the cost of equity (COE) and cost of debt (COD) were used as a measure of COC. Panel ARDL model was adopted to analyse the long-run relationship between CSR and COC. Findings revealed that companies that spend on CSR have a better chance of accessing capital at a reduced cost. The results support the findings of scholars works, especially in the developed countries. In conclusion, companies that spend on CSR have a better chance of accessing capital at a better and low cost. Based totally on the findings, the researcher advocates an on-stop investment on issues that concerns CSR as this may, if consistent, ease the getting of funds at a reduced cost in the long run.

Highlights

Company social responsibility (CSR) all over the world has turned out to be exceptionally essential as supported by the growth in academic works of literature highlighting the practical reasons for firms to integrate CSR into their practices (Joëla, [42])
The result revealed that performing CSR to a very great extend leads to better access to capital and reduces the COC for the period
This study expanded the frontier of knowledge in Nigeria by investigating the long-run relationship between CSR and the COC: cost of equity (COE) and Cost of debt (COD)

Summary

Introduction

Company social responsibility (CSR) all over the world has turned out to be exceptionally essential as supported by the growth in academic works of literature highlighting the practical reasons for firms to integrate CSR into their practices (Joëla, [42]). Barbara and Maria [11] stipulated in their work that a growing range of companies have focused attention on corporate responsibility issues. Universal Journal of Accounting and Finance 9(5): 946-960, 2021 image related issues and a better relationship between all stakeholders. CSR, according to Oikonomou, Brooks, & Pavelin, [53] is a way a company consider the environmental, social and governance factors in their business decision and processes in conjunction with the strength of their relationship with various stakeholders. CSR, in the past years, turn out to be the most crucial subject issue in business. Even though there is considerable research on CSR in Nigeria, most of them centre on the connection between CSR and the overall performance of companies

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