COOPERATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE OF MONEY DEPOSIT BANK IN NIGERIA

COOPERATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE OF MONEY DEPOSIT BANK IN NIGERIA

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​​​​​​​Background to the Study

Competition from nonbank financial institutions, technological advancements, rising non- performing assets, rising consumer expectations, rising profitability requirements, and other factors have all contributed to a challenging environment for the banking business (Ranajee, 2018; Goyal 2019; Singh 2019). To make the Nigerian banking industry more globally competitive and to boost its contribution to the Nigerian economy, it is very critical to measure the performance of the banking sector.

The World Bank backed reforms in Nigeria's DMB after determining that, based on data from 2000–2005, the sector would become more intermediation efficient (Cook, 2011). The effectiveness of business strategies and procedures in both market and non-market contexts contributes to overall performance. Thus, there is a discussion on how much consideration firm directors and management should give to social and environmental factors. Organizational success in either a market or non-market setting is determined by the strategy and operations employed by the company. In light of this, there is a lively discussion on whether or not company boards and management should take social and environmental concerns into account at all. Quantitative metrics were used to evaluate business success prior to the early 20th century. Many large organizations evaluate their success based on a variety of metrics, including return on capital employed, return on equity, profitability, liquidity, and turnover. In response to increasing rivalry at both the firm and industry levels, however, businesses have begun to place more emphasis on qualitative rather than quantitative measures of success. Small businesses have always been at the forefront of what we now call "CSR" (CSR) because they recognize the importance of giving back to the communities in which they operate..

According to Kenneth, Bongo, Chris, and Amao (2006), CSR has its roots in the 17th and 18th century Quaker movement, when business philosophy began to place more value on social and environmental concerns than on financial gain alone., but also the value that a company might bring to society. Business and society, in their view, are inseparable; they need one another to thrive. The CSR issue is becoming increasingly important in the field of business administration (Fiori et al. 2007).

As a multifaceted term that includes many distinct aspects, measuring CSR has proven to be challenging (Waddock and Graves, 1997). Problems with managing stakeholders (such providing adequate working conditions for employees) and cultural support are two examples. Companies often apply a very broad definition of CSR because they utilize it as a public relations tool. Many people and groups—from government officials to environmental activists to regular consumers—have called on businesses to act in more ethical and sustainable ways. However, whether CSR aids a company's financial performance is the central question for shareholders in a corporate environment. It's unclear from the most up-to-date studies whether or not successful CSR initiatives actually improve bottom lines (CFP). Recent studies have supported either negative (Mittal et al., 2008) or mixed results, so while a favorable consensus appears to be building, it is still weak (Margolis et al., 2009). (Schreck, 2011). Companies are proving that effective management of corporate responsibility is crucial to reaching their objectives, and this is especially true for major organizations where enhancements in compliance, reputation, and relationships have been shown to boost shareholder value and profitability. Whether or not a corporation actually reaps any benefits from being socially responsible depends heavily on the variables that lead to it being so.

When making choices, CSR takes into account both social and environmental impacts. Deliberately incorporating public interest into business decision making and adhering to a triple bottom line of People, Planet, and Profit are hence key to CSR. (2009) Harpreet Several different definitions of CSR exist. Commonly referred to as the "triple bottom line," these definitions encompass the interconnected spheres of economics/governance, ecology, and society. The idea behind the triple bottom line is that corporations care about more than just making a profit for their shareholders (Mirfazli 2008).

Multinational corporations' (MNCs') involvement in Nigeria's extractive industries, particularly the oil industry, gave rise to CSR (CSR) in the country. Oil spills, gas flaring, militancy/community agitation, and the dumping of toxic waste materials into rivers are all examples of CSR violations that have occurred as a result of this industry's operations. These actions ruined farming and fishing, the backbones of the local economies, leading to widespread poverty and unrest. Within its National Economic Empowerment and Development Strategy (NEEDS), the Nigerian government has defined the role of the private sector, stating that "the private sector will be expected to become more proactive in creating productive jobs, enhancing productivity, and improving the quality of life." Further, it is expected to act ethically by contributing to Nigeria's economic and social growth. 2004 Nigerian National Planning Commission. According to Santis et al. (2016), accounting data shows what is really happening in the company and is less erratic than market indications. This study used ROE, ROA, and EPS as financial performance (FP) indicators (Esteban-Sanchez et al., 2017). Researchers used a variety of methods to assess and report the company's sustainability, including the Environmental, Social, and Corporate Governance (ESG) score, the Global Reporting Initiative (GRI), the Kinder, Lydenberg, and Domini (KLD Social Index), and the Integrated Reporting Initiative (IRI), with mixed results. The majority of these indices are restricted to developed countries and cannot be used to assess emerging markets (Yoon et al., 2018). This paper seeks to add to the existing body of work in this area by investigating the extent to which CSR influences the financial performance of a sample of Nigerian Deposit Money Banks (DMB).

Statement of the Problem

There is a pressing need in modern society for businesses to have clearly defined social responsibilities and ethical frameworks. The fact that more and more of the world's most successful companies are integrating CSR initiatives into their daily operations lends credence to this idea. The rising profile of CSR activities indicates that top-level management now views these policies as fundamental to running the company. Applying social ethical norms to responsible business activity is a massive effort that senior management of organizations must take on. Companies that make CSR central to their operations are laying the groundwork for future success. Consequently, they are not contributing to the common good. Some argue that CSR (CSR) has a detrimental effect on organization performance (OP) since it requires significant financial outlays, which may reduce profitability despite its relevance and growing acknowledgment by firms (Olanipekun, 2015). A number of studies have examined the correlation between CSR and success, but most have narrowed their focus to financial metrics while ignoring other important performance indicators. In addition, most prior studies have treated CSR activities as one cohesive whole, rather than subdividing them into Social Projects, Employee Welfare, and Education Aids. Thus, the purpose of this research is to classify CSR activities and financial performance factors such return on assets (ROA), return on equity (ROE), and earnings per share (EPS) to evaluate the effect of CSR activities on the performance of chosen Nigerian DMB.

​​​​​​​Objectives of the Problem

The main objective of this study is to examine the impact of CSR on financial performance of selected Nigerian banks. The specific objectives are to:

1. examine the impact of CSR on ROE of selected Nigerian banks;
2. examine the impact of CSR on ROA of selected Nigerian banks;
3. examine the impact of CSR on EPS of selected Nigerian banks.

​​​​​​​Research Question

The study sought to find answers to the following research questions:

• To what extent has CSR impacted on the ROE of selected Nigerian banks?

• To what extent has CSR impacted on the ROA of selected Nigerian banks?

• To what extent has CSR impacted on the EPS of selected Nigerian banks;

​​​​​​​Hypotheses of the Study

In order to address the research questions one to three raised, the following hypotheses stated in null forms were advanced for this study.

• Ho1: - CSR does not have any significant effect on ROE of selected Nigerian banks

• Ho2: - CSR does not have any significant effect on the ROA of selected Nigerian banks

• Ho3: -CSR does not have any significant effect on the EPS of selected Nigerian banks

Significance of the Study

However, the importance of CSR to the success and reliability of DMB is poorly appreciated. The concept of internal control was defined and debated as early as 1905. (Heier, Dugan, & Sayer, 2005). However, during the last decade, CSR has become a very important and topical subject in business, notably as a result of high-profile corporate scandals and failures (Deloitte & Touche, 2009; Rezaee, 2007). (Deloitte & Touche, 2009; Rezaee, 2007). There have been repeated requests over the years for industries to exercise greater CSR in their day-to-day operations in light of such blunders. Consequently, shareholders have put pressure on governments, legislators, regulators, and standard-setting agencies to reduce the likelihood of further financial losses (International Federation of Accountants [IFAC], 2006). Since there has never been widespread agreement on how best to quantify CSR, doing so has been a perpetual challenge. In many cases, indicators of success are based on the user's own subjective assessment. In a similar vein, there is little consensus on the measurement instrument to employ when attempting to gauge monetary performance. Therefore, this research set out to assess CSR's impact on the bottom lines of a selection of Nigerian DMB that are publicly traded on the Nigerian stock exchange. This study set out to fill a gap in the literature by analyzing the effect of CSR on banking performance in Nigeria. This is despite the fact that the banking industry is crucial to Nigeria's continued economic development. Since the banking sector consumes so much energy and paper, and produces so much waste, its contribution to sustainable development is being called into question at a time when companies are placing a greater emphasis on CSR (CSR) efforts. CSR initiatives provide an opportunity to make a direct or indirect impact on societal well-being. Bank managers should prioritize environmental protection and sustainability over short-term profit maximization, argue Siueia and Wang (2017), because of the sector's importance to a country's economy. Beyond the realm of business theory and literature, the results of this investigation will yield a knowledge- based system that managers and auditors may use as a decision-aid in spotting problems with Social Performance and avoiding their unfavorable outcomes. Institutional investors count on top management to oversee material risks and put safeguards in place. Effective Corporate Financial Performance is an essential instrument for the sustainable growth of firms, and its importance should not be underestimated by corporate leaders. As a result of meeting their CSR obligations, which include contributing to the betterment of the communities in which they operate, this instrument would have a beneficial social impact. A government's ability to provide jobs and social amenities is directly tied to its ability to collect tax money from businesses.

​​​​​​​Scope of the Study

The purpose of this article is to investigate how CSR (CSR) affects the success of selected Nigerian DMB; many previous works focused on financial performance measures. This study adds to the literature on whether CSR has an impact on other parts of the economy, and it corroborates previous findings on CSR and financial performance and the stakeholder theory.

1.9 Operational Definition of Terms

Banking sector: an industry and section of the economy devoted to holding of financial assets and investing as a leveraged way to create more wealth. The banking business is an economic subsector focused on the accumulation of capital through the storage and investment of financial assets.

Corporate Financial Performance: refers to an all-encompassing analysis of a company's assets, liabilities, equity, expenses, revenue, and overall profitability. Using standard business calculations, it provides users with pinpoint accuracy when estimating a company's viability.

Corporate Social Responsibility CSR) is used to describe a business's efforts to improve society and the environment. The core concept underpinning CSR is the belief that businesses should work toward social good in addition to making a profit.

Sustainable development: development which seeks to produce a sustainable economic growth while ensuring future generations ability to do the same by not exceeding the regenerative capacity of nature.

Deposit Money Banks (DMB): A financial institution permitted by the regulatory body to mobilize the deposits from the surplus unit and route the proceeds through loans to the deficit unit, among other things.

Return On Assets (ROA): Financially speaking, a company's profitability in relation to its total assets can be measured by looking at its return on assets (ROA). Business leaders, market researchers, and financiers can all utilize Return on Assets (ROA) to gauge an organization's proficiency in turning its resources into cash. Management's ability to maximize profits through the efficient use of resources is shown by this metric. Revenue is divided by average total assets.

Return On Equity: Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. this is an estimate of the ability of a cooperation to make profits from each unit of shareholder’s stock. How much money a cooperative may expect to make off of each share of equity. It exemplifies the profit-making potential of investing capital for enterprises.

Earnings Per Share (EPS): Earnings per share (EPS) is a company's net profit divided by the number of common shares it has outstanding. Earnings per share (EPS) is a popular method of valuing a business, as it reveals how much money a firm generates for each of its shares of stock. Investors will pay a higher price for a company's stock if they determine that its earnings per share (EPS) are larger than its share price.

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