ASSESSMENT OF THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON FINANCIAL PERFORMANCE OF THE BANKING INSTITUTION

ASSESSMENT OF THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON FINANCIAL PERFORMANCE OF THE BANKING INSTITUTION

ABSTRACT

This study was carried out on the impact of corporate social responsibility on financial performance of the banking institution. Although an enormous body of literature has emerged concerning the nexus between corporate social responsibility and profitability, actual empirical research designed to test the multitude of definitions, propositions, concepts and theories that have been advanced has produced mix results. In addition, much of the research done in the area has been incomplete and simplistic in methodology and epistemology. Many of the methodological quagmires in studying the nexus between corporate social responsibility and profitability stem from the fluid nature of the subject. With the increased concentration on the corporate social responsibility, firms are not only required to focus narrowly on generating profit returns for shareholders, but also asked to take responsibility for firms‘ other stakeholders. Hence, both having a decent social responsibility performance and adding profitability is significant for companies to achieve sustainable success in the long-term. This study therefore examines the effect of corporate social responsibility on the profitability of financial institutions in Nigeria. It uses panel data from 14 financial institutions over a period of 10 years (2006-2015) and tests for statistical significance using analysis of variance and multiple regression analysis. The results show that corporate social responsibility has significant and positive effect on net profit margin, return on total assets and return on equity, which were used to proxy for profitability. The study concludes that corporate social responsibility has positive and significant influence on profitability. The study recommends that banks should continue to invest in corporate social activities as much as practicable because they result into long run increase in profitability. Also, bank managers should leverage on social responsibility expenditures by ensuring that they are linked to profitable operations.

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