An Empirical Assessment of the Relationship between Corporate Social Responsibility and Corporate Financial Performance among listed Firms in Nigeria

Abstract

This study sought to investigate the relationship between the Corporate Social Responsibility (CSR) and financial performance of listed firms in Nigeria. The specific objectives of the study were to determine the level of CSR disclosure among the listed firms and the extent of the relationship between CSR and financial performance as well as the direction of their relationship. The population of the study consists of firms listed on the Nigerian stock exchange among from which a sample of 84 firms was selected. Content analysis of the annual reports of the selected firms for six years ranging from the year 2011 to the year 2016 was done to obtain information on CSR disclosure on four measurement categories of CSR. Return on Assets (ROA) was used as the measurement of financial performance. Descriptive statistics, a unit root test and a Granger’s causality test were used to test if a significant causal relationship exists amongst the two variables. Against the popular view that more socially firms were more profitable, this study found no significant relationship between corporate social responsibility and financial performance among the firms and no causal relationship hence, the hypotheses of a uni/bi-directional relationship between the variables of CSR and financial performance was not accepted. This study concludes that organizational efforts aimed at improving the governance of firms through CSR may still be fruitful in improving the firm’s acceptance and brand image which might have a positive impact on the financial position in the long term.