Effect of Corporate Social Responsibility (CSR) on Financial Performance
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Abstract
The study evaluated the effect of Corporate Social Responsibility (CSR) on the Financial Performance of selected Deposit Money Banks in Nigeria. The research aimed to determine the extent to which different Corporate Social Responsibility (CSR) activities, including Legal, Social, Ethical, Economic, and Philanthropic Responsibilities, influence the profitability of these banks. This focus is grounded in the stakeholder theory, which suggests that organizations must address the needs of various stakeholders—beyond just shareholders—to ensure sustained growth and profitability. The study utilized a considerable amount of secondary data. The secondary data were generated from the Audited Annual Financial Statements of the Selected Deposit Money Banks (DMBs) in Nigeria listed on the Nigeria Stock Exchange (NSE) from 2014 to 2023. The study applied an ex-post facto research design to carry out the activities, including sourcing, presenting, analyzing, and interpreting the data generated. The population of the study consisted of all the Deposit Money Banks registered under the Central Bank of Nigeria (CBN) totaling twenty-eight (28) Deposit Money Banks. The sample size is ten (10) Deposit Money Banks (DMB) using a purposive, non-probability sampling technique for selecting the DMBs. The study used data derived from the banks' annual reports and applied various statistical analyses, including Descriptive Statistical Analysis and Ordinary Least Square (OLS) Regression Analysis, to evaluate the effect of Corporate Social Responsibility (CSR) activities on the Financial Performance of Banks. The findings indicate that most Corporate Social Responsibilities have a positive effect on profit after tax, albeit with different levels of significance. Social and Economic Responsibilities were particularly notable in their positive effects, suggesting that activities aimed at community development and economic sustainability provide substantial value to the banks' profitability. The Regression Analysis showed a positive effect of Corporate Social Responsibility (CSR) on Financial Performance. The study recommended that Banks adopt more rigorous Corporate Social Responsibility (CSR) reporting standards to foster transparency and accountability.