Social Responsibility Costs and Financial Performance in Manufacturing Companies in Nigeria: A Panel Research Design

N Ofurum Chijioke,E Okonya Bossco,N Amobi Blessing,J Ogunyemi Odunayo

doi:10.6007/ijarafms/v9-i4/6752

Abstract

This paper ascertained the relationship between social responsibility cost (SRC) and financial performance of manufacturing companies listed on Nigeria stock exchange. The study employed a panel research design with a sample of three manufacturing companies in Nigeria namely: Nigeria Breweries Plc, Dangote Cement Plc and Floor Mills Nigeria. Secondary data sources were utilized for the study using the firms’ annual report. Social responsibility cost was proxied with the companies’ voluntary donations to the society while profit after tax and return on assets where used as measures of financial performance. Breusch-Pagan LM and Pesaran scaled LM cross-sectional dependency test and Jarque-BeraTest of normality were the diagnostic tests employed to certify the suitability of the data for panel regression. Pooled Panel Least Squares regression of used as the method of data analysis using Eviews 9. The study found that social responsibility cost has neutral effect on profit after tax and return on assets after controlling for firms’ size.

Highlights

The effect of corporate social responsibility costs on financial performance is becoming all the time more crucial to a broad range of corporate stakeholders; notwithstanding the fact that companies investment in social responsibility activities have not been easy to manage
The focus of this study is to examine the relationship between these social responsibility cost and financial performance of the firms
All social donations made by the companies were used as social responsibility cost of the firm (SRC) while profit after tax and return on assets were used as financial performances indexes

Summary

Introduction

The effect of corporate social responsibility costs on financial performance is becoming all the time more crucial to a broad range of corporate stakeholders; notwithstanding the fact that companies investment in social responsibility activities have not been easy to manage. It is believed to be one the tools that organizations must implement to ensure and main a peaceful business environment This suggests that the corporate social responsibilities of the firm is not limited to internal stakeholders such as the employees, managers, the board of directors, investors but are covers individuals not inside a business itself but who are interested in or are impacted by its performance such as: regulators, consumers, investors, suppliers, communities etc. Whereas social responsibility cost has been on the increase from year to year, there is no consensus from results of previous empirical studies on the nature of relationship social responsibility cost has with profitability While researchers such as Handayani et al (2017), Amole et al (2012) and others argued that CSR has a positive and significant impact on financial performance of firms, Ashnie (2011) and others argued that a negative and significant relationship exist between CSR and financial performance. The researchers wish to empirically examine the relationship between the two variables using manufacturing companies listed in Nigeria stock exchange

Methods

Results

Conclusion