Presently, the issues and debates surrounding corporate social responsibility and what it should be has become a topic of importance. The trends surrounding corporate social responsibility activities is fast becoming an interesting challenge for managers and head of companies alike. Heads of companies have sought out for how their CSR activities affect their financial health. The purpose of this study is to examine the relationship between CSR activities and their financial performance with reference to Nigerian listed companies.
Consequently, different theories underpin the possible relationship between CSR and financial performance. thereafter, prior research is examined which spotlights the possible relationship between CSR and financial performance. this study will make use one accounting based measure the return on assets along with a market based measure the Tobin’s Q that will be used in measuring financial performance of Nigerian companies. With the CSR variable being the independent variable and the financial performance measures being the dependent variables, two control variables firm size and leverage are used as moderators. This empirical study is conducted on 30 listed Nigerian companies over a period of 5 years from 2011 to 2015.
A disclosure index is constructed for the variable of corporate social responsibility. To check the developed hypothesis, two regression models are computed on the Stata program. The results recommend that there is no significant relationship between CSR and financial performance using the Tobin’s Q as a measure of performance. however, the second regression indicates a positive significant relationship between CSR and financial performance using return on assets as the accounting based measure.
Keywords: Corporate social responsibility (CSR), financial performance, Disclosure index, return on assets (ROA), Tobin’s Q, Nigerian listed companies.
TABLE OF CONTENTS
Chapter 1: Introduction………………………………………………………………………………………………. 6
1.1 Background of the study……………………………………………………………………………………. 7
1.2 Research question……………………………………………………………………………………………… 9
1.3 Research aim and objectives……………………………………………………………………………….. 9
1.4 Scope and limitation of the study………………………………………………………………………. 10
1.5 Motivation and originality of contribution………………………………………………………….. 10
chapter 2: Literature review……………………………………………………………………………………….. 11
2.1 Introduction……………………………………………………………………………………………………. 11
2.2 A review of different CSR dimensions………………………………………………………………. 12
2.2.1 Economic dimension of CSR………………………………………………………………………….. 12
2.2.2 Environmental dimension of CSR…………………………………………………………………… 13
2.2.3 Social dimension of CSR……………………………………………………………………………….. 14
2.3 CSR implementation in developing economies……………………………………………………….. 15
2.4 Limitations to the effective implementation of CSR in Nigeria…………………………………. 15
2.5 Review of empirical studies on the link between CSR and financial performance……….. 16
2.6 Identification of the gaps in the literature examined………………………………………………… 23
2.7 CSR theoretical framework………………………………………………………………………………….. 23
2.7.1 Legitimacy theory…………………………………………………………………………………………. 24
2.7.2 Stakeholder theory………………………………………………………………………………………… 24
2.8 Summary and conclusion of the chapter…………………………………………………………………. 25
Chapter 3: Research methodology………………………………………………………………………………. 26
3.1 Introduction……………………………………………………………………………………………………….. 26
3.2 The philosophical assumption of the study……………………………………………………………… 27
3.3 Description of the research design…………………………………………………………………………. 27
3.4 Data sources……………………………………………………………………………………………………….. 28
3.5 Research strategy………………………………………………………………………………………………… 28
3.6 Sample and data collection method……………………………………………………………………….. 29
3.6.1 Financial data…………………………………………………………………………………………………… 30
3.7 Operationalisation……………………………………………………………………………………………….. 30
3.7.1 Measuring of CSR……………………………………………………………………………………………. 30
3.7.2 CSR index construction…………………………………………………………………………………….. 31
3.7.3 Measuring of financial performance……………………………………………………………………. 33
3.7.4 Financial measurement………………………………………………………………………………………. 34
3.8 Hypotheses development……………………………………………………………………………………… 36
3.9 Regression models………………………………………………………………………………………………. 37
3.10 Conclusion……………………………………………………………………………………………………….. 38
Chapter 4: Data analysis, results and presentation…………………………………………………………. 40
4.1 Summary statistics………………………………………………………………………………………………. 40
4.2 Pooled ordinary least squares (OLS)……………………………………………………………………… 41
4.3 Pearson correlation matrix…………………………………………………………………………………….. 50
4.4 Hypothesis discussion………………………………………………………………………………………….. 51
Hypothesis 1………………………………………………………………………………………………………… 51
Hypothesis 2………………………………………………………………………………………………………… 52
4.5 Theoretical and practical implications…………………………………………………………………….. 54
4.6 Summary……………………………………………………………………………………………………………. 55
Chapter 5: Conclusion and recommendations………………………………………………………………. 57
5.1 Summary……………………………………………………………………………………………………………. 57
5.2 Contributions of the study……………………………………………………………………………………. 58
5.3 Suggestion for future research………………………………………………………………………………. 58
Chapter 6: Appendices………………………………………………………………………………………………. 60
Chapter 7: References……………………………………………………………………………………………….. 65
Chapter 1: Introduction
In line with the diminishing or fading role of legitimate governments in the world especially in developing economies as regards to the implementation of adequate guidelines to control for the activities of corporations and how it effects the world, pressure is being mounted on corporations by different stakeholders to evaluate the effects of their activities on the environment and society at large (Andrew, 2016). Accordingly, the 21st century has highlighted the irresponsibility’s that corporations portray in regards to their activities and how it effects the society as a whole (Dinsmore, 2014). The collapse of large corporations like Enron and WorldCom among others due to managerial opportunism and large scale accounting frauds has showcased the need for accountability by these corporations (Dinsmore, 2014).
Furthermore, from the 18th century, studies have shown a lack of social responsibilities in the activities of businesses. Corporate perception by the society has been that corporation show no lack of concern in the footprint of their activities on the earth, with contribution of heavy emission and depletion of the earth’s ozone layer (Stanley, 2011). These challenges have created a need for oversights to the activities of corporations and their social conducts (Idemudia, 2011).
Consequently, businesses have embarked on social responsibility strategies that would improve their reputation and public image along with restoring stakeholder confidence (Servaes and Tamayo, 2013). Some of these social activities have been criticized to be nothing but marketing strategies by businesses. Finally, the activities of corporations fuelled with the supervision of stakeholders albeit not in full effect calls for the need to the understanding of the motives underpinning corporate social activities.
1.1 Background of the study
The importance of corporate social responsibility in the business world cannot be weighted. Economic, political and social factors have influenced and moulded CSR activities in the world today (Baughn et al., 2007). CSR being a controversial topic and what it entails has skyrocketed to the top of corporate priorities in management lately (Franklin, 2008).
Consistently, corporate performance is affected by operations and strategies in market spaces and otherwise. These eventually add to the existing debate on the extent of businesses in considering factors such as environmental, social and ultimately profitability when making decisions.
Furthermore, a statement by former CEO of IBM T.V Larson compounds to the controversial argument on how far social activities should be, “businesses usually profit best when it serves the public interest within its capabilities, but one can’t negate from the ironclad law of profit… if a business loosens itself to the basic duty of profitability, even if it claims to have a conscience and heart as big as the earth, there is nothing at all that it can do to benefit the society” (Prout and Jerry, 2006).
Arguably, different notions of what corporate social responsibility is and how it should be defined have risen with different studies showing a lack of a clear harmonic definition propounding to the divergence of its application in practice. intellectuals and groups have tried bringing about a generally accepted definition of corporate social responsibility. Within a certain degree of consensus, most definitions have tried incorporating what is known as the triple bottom line(TBL) (Mirfazli, 2009). The triple bottom line definition of CSR states that corporations should not only have profitability as it only objective but rather, it should also try adding unbiased environmental and social value to the society (Mirfazli, 2009).
Similarly, CSR activities might have different ways they are being conducted according to the different societal context corporation find themselves in (Halme et al., 2009). Business investment on societal activities vary according to the society they find themselves in as sometimes societal activities are done for perceptibility (Luo and Bhattacharya, 2006).
In line with the pressure steaming from the stakeholders of corporations, disclosure of social activities has become paramount for businesses with backing from government laws. One of the benefits of the CSR disclosure is that investors make use of it to check for competence and several other factors when dealing with corporations. There have been several cases of corporations reaping positive rewards or negative backlashes in regards to their social disclosures in their annual reports (Dhaliwal et al., 2012).
Ultimately, a socially responsible organization should make efforts on making profit, obeying the law, being ethical in its corporate decision and finally being a good corporate citizen (Carroll, 1999). In summary, this study goes with the perception that an investigation on this subject matter will have an impact on the policies regarding corporate social responsibilities.
1.2 Research question
In an attempt to empirically test the relationship between corporate social responsibility and the financial performance of listed companies in Nigeria, the following research question is generated:
What is the relationship between corporate social responsibility and the financial performance of companies listed in the Nigerian stock exchange?
In order for the main question to be answered, appropriate research aim and supporting objectives were formulated and presented in sub-section 1.3.
1.3 Research aim and objectives
This study attempts to empirically study the relationship between corporate social activities and the financial performance of 30 companies listed in the Nigerian stock exchange over a period of 5 years 2011 to 2015. In this connection, the objectives below will help in the successful implementation of this research:
To critically analyse financial performance of the selected Nigerian listed companies through the accounting and market based measure;
To examine the corporate social responsibility activities of selected Nigerian listed companies through CSR disclosure index:
To examine the relationship between corporate social responsibility and financial performance of selected Nigerian listed.
1.4 Scope and limitation of the study
This study analyses 30 companies listed in the Nigerian stock exchange from various industries excluding the financial sector over a period of 5 years from 2011 to 2015. Some of the limitations that this study encountered include:
Limitation to the quality of annual reports: disclosures made by companies on their annual reports are coerced by different stakeholders because the expectation of stakeholders is expected to be met by companies (Guidry and Patten, 2010). This phenomenon leads companies to low quality reporting in terms of actual information and with inadequate policies by the Nigerian governments, this becomes a limitation of unbiased result for this study.
CSR measurement: the method of measuring the CSR of companies used for this study is the disclosure index. As the index made is based on the understanding of the study, several other methods could be used as a measurement tool that would give overall different results.
The final result ascertained for the relationship between CSR and Financial performance cannot be generalized for the entire population of the Nigerian stock exchange. The result can only be interpreted in relation to the 30 companies chosen and over the 5-year period selected.
1.5 Motivation and originality of contribution
The link between CSR and financial performance has extensively been examined with different results and interpretation presented worldwide. In reference to developing economies, little or non-substantial research has been carried out to find an understanding on the relationship between CSR and financial performance.
Consequently, by focusing more on Nigeria, this study evaluate that the little study carried out have been lacking in numerous empirical methods and gaps which this study plans on filling. Such empirical gaps can be examined from the study conducted by Uadiale and Fagbemi (2012) whom using a sample size of 40 listed companies made use of secondary data to examine the relationship between CSR and financial performance articulating the use of the accounting based measure of financial performance alone leaving room for enormous gaps that need to be filled.
Furthermore, most of the empirical research done in Nigeria are related to multinational companies who have established themselves in developed countries. The lack of empirical study in a developing economy like Nigeria with so much economic potential makes it imperative for this study to be conducted. This study makes use of different theoretical frameworks with the intention of underpinning them in supporting the different arguments this study makes. The remaining part of this study comprises of chapter 2 discussing the literature review along with the different theoretical frameworks used, the chapter 3 covers the methodology, the philosophical paradigm used and the analysis of the dependent, independent and control variables used. Data analysis and result interpretation is covered in the chapter 4 with finally the chapter 5 concluding the study.
Chapter 2: Literature review
This chapter critically discusses some important concepts and related previous research on the impact of (Corporate Social Responsibility) CSR on financial performance. Additionally, the chapter presents the theoretical framework that underpins the entire study. Although there is large literature on the association between the two main concepts, there is generally lack of agreement/general consensus on the extent to which CSR has an effect on company financial position. This may depend on so many reasons that are specific to country or company in question. This chapter reviews different routes empirical studies use in clarifying the linkages between corporate social responsibility and financial performance and the flaws that come along with the different studies made. The essence of the chapter is primarily to establish any existing gap in the literature in relation to how CSR has an effect on the financial performance of a company by specifically focusing on methods, theoretical framework, data or new perspectives/traditions of CSR.
2.2 A review of different CSR dimensions
The overall classification of CSR in its present structure originated from Howard R. Bowen (1953) particularly with his write up on “The Social Responsibilities of a Businessman”. Subsequently, the concept of CSR has come to dominate the society-business interaction with numerous theories and viewpoints being proposed.
Indeed, the whole concept of CSR and what it entails has changed over the years and as a result of this, a common agreed definition has not been decided. The whole concept of CSR has varied according to people and the context to which it is put in (Saeidi, et al., 2014). Despite all the disputes and lack of clear definitions, all the definitions put forward have agreed on one thing regarding CSR which is trying to meet up the expectations set by the society when planning environmental management strategies (Gossling and Vocht, 2007).
Consequently, this project would utilize the Triple Bottom Line (TBL) definition of CSR which entails 3Ps namely profit, people and planet. The people part of the definition refers to how entities go about their businesses with regards to the labour force they interact with when conducting their businesses. The profit part of the definition deals with how the economic policies and profit generation of the company affects the society while the planet part refers to how a company takes responsibility in regards to its environmental variables (Shnayder et al., 2015).
2.2.1 Economic dimension of CSR
The main duty of a business when operating is to produce goods and services that are in demand by the society for consumption and to sell them for profit making (Carroll, 1979). With the profit-making ability of a company in no doubt, it fulfils its responsibility as an economic unit of the society (Carroll, A. B. and Shabana, K. M., 2010). There have been a lot of questions raised in relation to how far businesses should maximise their profits and at whose detriment. Milton Friedman (1962) gave his economical view by stating that a business has one and only task which is to maximise its profits as long as it stays within the confines of the generally accepted laws and regulation is to follow.
In contrast with Friedman (1962), Barnett (2007) states that maximising shareholder wealth is actually not in the full interest of the shareholders. Another similar perception would be company’s exploiting all possible ways be it legal or not to make the most profit (Carroll, A. B. and Shabana, K. M., 2010). However, the two opposite views are of the view of long term benefits of the business.
2.2.2 Environmental dimension of CSR
Human activities on the earth has resulted in a continuous decay of the earth’s core resulting in changing climate and other resulting changes. There has been a lot of talks by world leaders on the need for change on how countries govern their businesses on operations taking place to make sure that the earth does not disappear under our very own eyes. Consumption of natural resources and other human activities has increased from the normal rate over the last 40 years (Hart, 1995). As a result of this, the environmental activities of companies have been on the news lately with increased scrutiny (Hart, 1995). Due to the increased alertness shown by the public in terms of what happens with the environment, companies have to take extra caution when executing business decisions regarding the environment (Chatterji et al, 2009).
Indeed, the whole concept of CSR has mainly been around social responsibilities like community programs, employee rights etc but in recent times, the need to hold businesses responsible for what happens to the environment has become also an essential component of CSR (Flammer, 2013). As a good image is imperative for any business trying to succeed, CSR helps in achieving that purpose as Flammer (2013) indicates that shareholders show a positive reaction to environment friendly projects while also showing negativity towards projects that harm the environment. Environmental friendly businesses are often also rewarded by customers as opposed to those with bad environmental perception (Flammer, 2013).
2.2.3 Social dimension of CSR
Lately, there has been an increase on the pressure that businesses have gotten from the general public and even their stakeholders on the need for them to be accountable and try their best in meeting the expectations of the stakeholders (Malsch, 2012; Gonzalez-Rodriguez et al., 2015). With stakeholders having more interest on the CSR activities of companies, firms have started using their CSR activities as a marketing tool (Bhattacharya and Sen, 2004). Examples of such marketing CSR activities could be a pharmaceutical company subsidizing the price of their products to the general public for a certain period in third world countries.
Furthermore, Mohr et al., (2001) explain how connections exist between social responsibilities of a company and their consumer’s behaviour when making purchases of the company’s product. Mohr et al., (2001) explains that pressure has been building up for companies to participate in social activities like the example of subsidizing their products in regions where people might not necessarily be able to afford the product. Societal marketing can be defined as a way of operating one’s business in a way that refines and sustains both the society and consumer’s prosperity by reducing the harmful effects of its products and boosting the company’s long-term impact on the society (Kotler, 1991; Mohr et al., 2001). Mohr et al.’s (2001) analysis shows a number of people that were questioned said they were willing to patronize more companies that were active in charitable works.
2.3 CSR implementation in developing economies
CSR implementation in developing economies can be viewed as a philanthropic activity in most cases (Frynas, 2005: Jamali, 2007). Making CSR a mainstream activity for corporations could prove difficult as its perception in developing economy is weak due to poor and weak governance (Ite, 2004). Corruption and other negative impact have hampered the need for proper implementation of CSR activities in developing economies (Ite, 2004).
Furthermore, there have been several debates on the actuality of CSR in developing countries and whether CSR activities should be enforced by law or not (Mordi et all., 2012). Other conversations that have ensued are pertaining to whether globalisation and economic activities would have more impacts on the environment and social scenes in developing economies (world bank, 2006).
Consequently, while the research on CSR activities in developing economies has been relatively little, there has been some progress both theoretically and empirically lately (Baughn et al., 2007). Different studies have shown that the type of CSR activities carried out in places like Nigeria and India are of philanthropic bases tied to religious beliefs in most cases (Amaeshi et al., 2006; Chahoud et all., 2007).
Finally, researches need to be carried out to understand the perceptions and attitudes of social and ethical activities and for the different governments to understand and implement crucial policies to ensure adequate implementation of CSR duties if and when necessary (Abdul et al., 2014).
2.4 Limitations to the effective implementation of CSR in Nigeria
Ultimately, with Nigeria being a developing economy, there would exist a number of limitations that would hamper the implementation of CSR effectively. Some of these limitations include:
lack of community participation: often enough, the communities for which the CSR activity will benefit most times show little or no interest in terms of the activities that are focused on them. Sometimes, there is no adequate communication between the company and the community involved on its objectives in the community (Raju, S.S Ray and Subhasis, 2014).
Companies do not take CSR activities as serious as they should in countries like Nigeria. They engage in philanthropic activities instead of CSR activities thereby leading them to becoming corporate social irresponsible companies (George et all. 2012).
There is no constitutional law that mandates companies to implement CSR activities in their operational plans and so companies do not see CSR activities as a responsibility they must obligate to (Ugwunwanyi and Ekene, 2016).
Corruption and lack of transparency by the government of the day in developing countries makes it easier for companies to be able to take advantage of the loopholes that exist in company operational laws to mischievously operate their companies leaving sometimes irrevocable havoc (Raju, S.S Ray and Subhasis, 2014).
2.5 Review of empirical studies on the link between CSR and financial performance
The empirical analysis on the link between corporate social responsibility and the financial performance of companies centres around two important issues being how they interact and the nature of the direction of these two constructs when interacting. with the relationship between corporate social responsibility and financial having started a long time ago, the empirical conversations they have sparked remain unsettled (Grougiou et al. 2014; Jo and Harjoto, 2011). This study will attempt to analyse and understand the current studies on the relation between CSR and financial performance with the aim of identifying a common trend and understanding the significant gaps in the literature in order to further knowledge on the topic.
Furthermore, Lin et al., (2015) examine how corporate social responsibility affects corporate financial performance, its implications and significance. For their research, an integrated model was proposed which had intellectutal capital as a mediator while the moderator was the industry type on the relationship between corporate social responsibility and financial performance of the different companies. The disclosures made by companies in regards to CSR activities differ in relation to the industry type because the effect of reporting the activities varies (Lin et al., 2015).
Furthermore, the population of the study consisted of 500 of the largest companies chosen from the American stock market of S & P 500. The sources of the data come from the KLD social ratings and social index while the second source is the Compustat databases. Variables used in the study including financial performance, intellectual capital, CSR, industry type and the control variables such as firm size and R & D expenses were gotten from the two databases mentioned above giving a total of 1144 observations after deleting records with incomplete variables from the years 1998 to 2008. For the calculation of the financial variable, the accounting based measure was used in favour of the market based measure particularly the return of assets (ROA). In relation to previous literature, this empirical review tried filling the empirical gap by using intellectual capital and industry type in different roles to give the required result.
At the end, the results of the empirical analysis showed that CSR can improve intellectual capital which can in turn increase financial performance meaning that there is indeed a relationship between CSR and the financial performance of a company in an environmentally sensitive industry.
Moreover, Lin et al., (2015) attempted to establish the relationship between CSR and the financial performance but there have been some obvious but acceptable flaws that exist with the empirical study. While using intellectual capital and industry type as the mediating and moderate role respectively, there exist many other possible variables that can also be used to further improve the knowledge of CSR and financial performance and how far of an effect CSR has on the financial performance of a company. Also, the use of those different variables could give different interpretations of the relationship between CSR and the financial performance of a company.
Similarly, Cavaco and Crifo, (2014) analysed the interaction between the numerous dimensions of corporate social responsibility that come in between the relationship between corporate social responsibility and the financial performance of companies. the lack of a consensus or the frequent debate by previous literature on the CSR-financial performance relationship could be as a result of the different synergies and trade-offs between the existing CSR components.
Consequently, by making use of an unbalanced panel sample data from 15 countries over a period from 2002-2007 giving a rough 1094 number of observations from the data of 300 biggest European publicly traded companies. In this regard, two important variables are used in this empirical study namely for the CSR variables, research and development and advertising ratio as omitting these variables would likely give different results with the use of research and development being consistent with Lin et al., (2015).
Appropriately, the second set of variables used categorising the financial performance variable are based on two types of measurements namely the accounting based measure the return on assets and return on equity while the market based measurements include the Tobin’s Q. This empirical study made use of the accounting based measure of return on assets and made use of the Tobin’s Q from the market based measure. The reason for the application of the two methods was to help give a better picture of the relationship between corporate social responsibility and financial performance. This process on this study was in the same vein as Lin et al., (2015).
Additionally, with the application of three dimensions namely environmental, social and business behaviours, the results show that CSR activities towards the human resource dimension (employees) and business behaviour dimension (customers and suppliers) show synergy inputs of financial performance showing less squabble and more mutual benefits between those mentioned stakeholders. More conflicts or rather over investments towards these same stakeholders is seen when environmental dimensions appear as inputs of financial performance of companies observed. Lin et al., (2015) having directly made use of CSR index, Cavaco and Crifo, (2014) analyzed their CSR score by scoring each of the three dimensions of environment, social and business behaviours separately and explaining their significance separately to the financial performance of the selected companies.
Thereafter, a limitation of the empirical study can be the unbalanced data that was used in the research. Also, reliance on past company information (lags of independent and dependent variables) may result in bias weak instruments as also explained by (Staiger and Stock, 1997). Similar to the empirical study done by Lin et al., (2015), a positive relationship prevailed, But Cavaco and Crifo, (2014) instead of trying to focus on the direct effect of CSR on the financial performance of companies, it only goes further to explain the core aspect of CSR activities that have significant effects on financial performance components and make business owners have an in-depth conversation on how money for CSR should be spent. A critical issue surrounding the stakeholder theory is the argument on whether or not companies the competitive demands of the different stakeholders they have. Finally, quite frankly none of the two empirical studies have been able to give adequate reasoning on how companies can achieve maximum output from its CSR activities. The two studies of Lin et al., (2015) and Cavaco and Crifo, (2014) made use of the panel data.
Rodgers et all., (2013) in the same vein empirically researched for the link on the impact of corporate social activities on the corporate financial performance of companies and whether investors should value the firm’s commitment to social activities. The empirical literature tried contributing to the literature by using a two-stage investor decision model to explore the relationship between a firm’s research and development effort, it’s corporate social activities and the financial performance of the company.
Consequently, Rodgers et all., (2013) examine the impact of CSR and the financial performance of a company by testing for the financial performance using both accounting based measures and the market based measure to give a full picture of the impact and how close related they are. The accounting based measure used was through the checking of the financial health of companies while the market based measure used was the Tobin’s Q. For the CSR measure, customer and employee satisfaction, community relation indices and the overall CSR score gotten from the official website of the journal of business ethics and based on the data from the KLD research and analytics. In the same vein with Lin et al., (2015) and Cavaco and Crifo, (2014), an analyses are made that all the three studies made use of the KLD index in scoring their CSR disclosure. A problem for the use of the KLD index is that it does not compute for the CSR scores of all companies but rather only the ones in the United States and United Kingdom.
Thereafter, the sample period used was from 2000-2006 consisting of a total of 497 observations for the sample period. The results from the empirical literature reveal that after controlling for a firm’s research and development, there is a positive link between a firm’s CSR activity and its financial performance. an observation is made that all the three studies reviewed so far of Lin et al., (2015), Cavaco and Crifo, (2014) with Rodgers et all., (2013) have made use of the research and development as a control variable to mediate between the relationship of CSR and financial performance.
Furthermore, Rodgers et all., (2013) have to some extents tried in filling in vital gaps that have been missing in previous literatures by reviewing the long term and short term effects of the relationship between the CSR activities of a company and the financial relationship of the companies. Along with the good the empirical literature has provided include its limitations in the study. With the limited size of the sample, control for industry differentiation would have some flaws (Hull and Rothenberg, 2008). Also, with the use of the partial least squares (PLS), compared to the maximum likelihood estimation the parameters are not effectively estimated.
In addition, Enahoro et all., (2013) empirically examined the relationship between the corporate social responsibility activity of a company and its effect on the financial performance with evidence from the Nigerian manufacturing sector. The empirical study made use of descriptive research design and then selected a sample size of 20 companies from 2002-2011. After a simple random sampling method was used in selecting the companies from the manufacturing sector of the Nigerian stock exchange, data was collected from the different audited financial statements of the selected companies.
Thereafter, by using profit before tax and the annual income as the appropriate proxies for the financial performance variable of the different companies, a regression analysis was done with the results showing that there was a significant effect of CSR in both the profit before tax and turnover of the companies analysed. The empirical study recommended that firms increase their investments in CSR activities as it would have a positive long term effect on their financial performance. the empirical study is one of the few that have actually tried filing in the gap in the literature in Nigeria but nonetheless, there are some obvious flaws with the empirical study itself and the results gotten.
Finally, with the lack of agreement on the key research variables for CSR and financial performance to be used, arguments can be raised as to the authenticity of the research. the measure used in the form of the accounting based measure has arguments of being backward looking and without further credible study, it makes it hard for business decision makers to make critical decision based on this form of result alone for the future.
Likewise, Uadiale and Fagbemi., (2012) tried investigating the relationship between corporate social responsibility and financial performance in developing economies with reference to the Nigerian economy. The empirical study selected a sample data of forty randomly selected companies from the Nigerian stock exchange with each company being able to provide its annual report. The study examined the effect of corporate social responsibility on the financial performance of companies by using the accounting based measure and selecting two variables namely the return on equity (ROE) and return on assets (ROA) to measure whether they exist a positive or negative effect between the two variables of CSR and financial performance. the result showed that they exist a positive and strong relationship between CSR and financial performance of the sampled companies reinforcing the growing body of works supporting a positive relationship between CSR and financial performance.
Consequently, Uadiale & Fagbemi (2012) and Enahoro et al. (2013) investigated the relationship between CSR and the financial performance of companies in Nigeria but like other empirical studies in Nigeria had big gaps that need to be filled. There has been a several arguments for the use of different control variables as each has its own effect on the financial position of a company. The similarities between all four empirical studies analysed is the use of the regression analysis so the regression analysis is relevant in finding the relationship between CSR and financial performance. All the studies discussed have used the panel data to run their regression model with the studies using either the random effects or the fixed for their panel data. The studies reviewed for Nigeria show there is a lack of adequate measures detailing the relationship between CSR and financial performance when compared to the other literatures on a global perspective.
2.6 Identification of the gaps in the literature examined
There has been a number of gaps that are evident in the current revised literature. Firstly, there exist an array of inconsistencies in the research findings which signifies inadequacies in the study between the relationship of CSR and financial performance. there needs to be more studies carried out that would help give a better picture of the relationship between CSR and financial performance and on the methodological side of prior studies. Secondly, as CSR is multidimensional the measurement of the variable ultimately becomes flawed.
In view of this, the studies with which individual variables of CSR are tested upon tend to give a better picture than those in which composite variables are used (Goss and Roberts, 2011; Wu and Shen, 2013). In regards to empirical research done in Nigeria, there hasn’t been enough research done that would even stipulate an understanding of the relationship between CSR and financial performance when compared to other countries. In regards to the empirical literature of CSR and financial performance in Nigeria, adequate use of the measures of the financial performance variable such as the Tobin’s Q is not done which leaves huge gaps in the literature in Nigeria
2.7 CSR theoretical framework
According to the 1979 definition of CSR by Carroll, he tried differentiating what he said were the four types of corporate social responsibilities namely: legal, ethical, economic and discretionary (Jamali, D. & Mirshak, R., 2007). Carroll also stated that for any company to have an effective CSR, a basic definition need to made by the company along with understanding the reason behind the existence of CSR and also how the company would like to respond to these issues (Jamali, D. & Mirshak, R., 2007).
Furthermore, Carroll (1991) revisited this theory by establishing a comprehensive three dimensional CSR framework which covers the natural, social and philosophical responsibilities of entities. Carroll made a pyramid diagram that shows economic responsibility being the basic foundation with discretionary being at the top. The new theory implies that the responsibilities are inter connected meaning that for one to be accomplished, it has to relate to another responsibility on the diagram.
2.7.1 Legitimacy theory
As mentioned by Deegan et al. (2006) Legitimacy theory encompasses that companies continually managing their operations and activities within the bounds and the norms of the society. These organizations show their activities in such a way that external parties believe it is all legitimate.
Additionally, the earlier mentioned bounds and norms are not static, but change over time and the company must response quickly to adapt these changes (Deegan & Unerman 2006, p. 271). The Legitimacy theory discusses a social contract among the company and the community (Dai, 2010). In case in which the company fails to accomplish their social contract it will damage their own legitimacy.
Furthermore, the result of this failure could be sanctions from the society (Deegan et al, 2008). To prevent these, companies will provide voluntary CSR disclosures. According to this they will perceived if those actions are expected from the society (Cormier et al, 2001). Cho et al, (2007) mentioned that companies can use the disclosure of the information as a tool to maintain their legitimacy and so to escape sanctions from the society. According to Campbell et al, (2003) is the Legitimacy theory the most widely used theory in the literature that discusses the CSR disclosures of organizations.
2.7.2 Stakeholder theory
With the legitimacy theory discussing the expectations of society in general on firms. Stakeholder theory concentrates and focuses on particular stakeholder’s groups. It explains how an organization interacts with these particular groups. Stakeholders are defined as an individual or group that can affect the achievements of the organization’s objectives or are affected by these objectives (Freeman, 1984). Thompson et al., (1995) explained that stakeholders are groups in relationship with an organization.
Furthermore, according to Clarkson (1995), stakeholders are persons or groups that have, or claim ownership, rights, or interest in a company and its activities. Stakeholder groups are: employees, local community, suppliers, customers, society, finance providers, governments, and NGO’s.
Consequently, Clarkson (1995) classified two groups of stakeholders. The first group is the primary stakeholders and the second group is the secondary stakeholders. The primary stakeholders are defined as “one without whose continuing participation the corporation cannot survive as a going concern” (Clarkson 1995, p. 106). According to this definition we can say primary stakeholder group are the public stakeholder group, which is needful for the company to survive. Examples are shareholders, investors, suppliers, and customers. Finally, secondary stakeholders are defined as “those who influence or affect, or are influenced or affected by, the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival” (Clarkson 1995, p. 107). Some examples are the media and special interest groups.
2.8 Summary and conclusion of the chapter
The literature review in this chapter that was conducted revolves around the legitimacy and stakeholder theory, a separate vein from the orthodox classical economic theory previously applied. The legitimacy and stakeholder theories are of the view that business transactions and operations should be within the confines of the public accepted norms. By conforming to these theories, firms are bound to enjoy the support of the public and their stakeholders in order to maximise profit. The stakeholder theory applied for this study was underpinned by the Carroll’s (1991) comprehensive framework. Consequently, within the view of the past literatures reviewed, several gaps were identified that need to be explored.
Finally, this study is designed with the view of bridging some of the gaps identified especially in the Nigerian frame. in chapter 3, this study will focus on the research methodology, strategy and design.
Chapter 3: Research methodology
The aim of this empirical study is to test for the relationship between the corporate social responsibility activities of a company and the financial performance of the companies involved. The financial performance of the company is viewed from two angles namely the accounting based measure through the use of a variable known as the return on assets (ROA) and also the market based measure with the use of the Tobin’s Q. Consequently, with the quantitative study being in connection with positivist epistemology and ontology, the use of the multiple regression analysis was used for testing the hypothesis. This chapter will present information on how the study was conducted and the line of reasoning and the motivation that underpin the methods used and the approaches made. The selections made on this study are made based on guidelines ascertained from previous empirical reviews while still in line with the purpose set for the research.
3.2 The philosophical assumption of the study
Ideally, studies are guided by the philosophical perception that circles around two types namely ontology and epistemology. Ontology can be defined as either the objectivity of the social reality (Collis and Hussey, 2009). Ontology then can be spilt into two views namely objectivism which states that the reality as we know it is constant and cannot be affected by research (Creswell, 2009) while constructionism is of the view that the reality as we know it is constructed and not constant (Creswell, 2009). Epistemology has to do with how valid knowledge is gotten (Collis and Hussey, 2009). There exist two schools of epistemological thought known as the positivists who are of the view that valid knowledge is perceptible and measurable while the second view interpretivist state that valid knowledge is expressed by those researching it. With the above stated explanation, the research to be carried out falls under the positivist epistemology and objective ontology (Creswell, 2009).
3.3 Description of the research design
In relation to the chosen research paradigm this empirical research was constructed as a correlational research where a multiple regression analysis was implemented in exploring the relationship between CSR and financial performance. with recognisance of the research questions for the study, in order to reflect the bi-dimensional nature of the business financial performance measures two regression models are constructed to account for the market and accounting-based measures. In accordance with Field (2009, p.210), a multiple regression is suitable where the study has to do with determining the linear predictors that correlate with used dependent variable. This empirical study was postulated to ascertain the combination of the CSR variables that maximally correlate with the financial performance variables.
3.4 Data sources
There are two types of data according to Saunders et all. (2009) called the primary and secondary type of data. This study will make use of only secondary data which is gathered from the sampled companies’ annual reports. The CSR index will be made in relation to the annual reports of company gathered. A beneficial aspect of using secondary data is that it affords the research the opportunity to perform a longitudinal empirical research (Bryman and Bell, 2011). With this study, the use of the secondary data provides the possibility to asses a company’s CSR and financial performance variables over a five-year period without wasting significant time on data collection. Large data collections are often performed by government or big institutions but it doesn’t necessarily mean that the quality of the data provided is high, therefore it falls on the researchers to evaluate the collected data before using them to make sure they are up to standard (Saunders et al., 2009).
The secondary data used for this empirical research can be grouped as a multiple-source data as it is a collection of data from different sources to make up another set of information (Saunders et al., 2009).
3.5 Research strategy
This empirical research makes use of a longitudinal research strategy with the aim of investigating the relationship CSR and financial performance in Nigerian companies from the official Nigerian stock exchange over the period of five years from 2011 to 2015. The research strategy chosen was selected by reason of being in line with the aim of the study which is to study the relationship between the variables of CSR and financial performance from the five years of data collected. By analysing data over a period of time, it provides the researches the ability to witness trends and in certain periods allow casual inferences to occur (Bryman and Bell, 2011).
In regards to this research, panel study is considered to be the most suitable over cohort study because even though panel and cohort share many similarities (Bryman and Bell, 2011), the divide occurs because for this research, the same sample is used through the entire five years which is in line with the panel study. During the panel research, it is important for researches not to mistake results gotten between variables to be the final result for a causative as there are numerous influences that could result in the association of the selected variables (Ployhart and Vanderberg, 2010).
3.6 Sample and data collection method
For this empirical research, the method of using secondary data is implemented due to the availability of chosen company’s annual reports on the Nigerian stock exchange. Due to the unavailability of a proper CSR index in Nigeria, an index is created for the purpose of this study to be able to ascertain a correlation between corporate social responsibility activities and the financial performance of a company. Saunders et al. (2009) further stresses the importance of researchers conducting thorough investigations in regards to the availability of existing information and to make sure that the information ascertained can be implemented in regards to the study. In order to reduce the inaccuracy that results from the use of unbalanced data, this study limits itself to companies that have a balanced data with thirty (30) companies being selected at random from ten (10) sectors from the Nigerian stock exchange.
A decision to exclude the financial sector was made because the high leverage that would be normal for firms in the financial sector probably does not have the same meaning for non-financial firms (Fama and French, 1992). High leverage is usually normal for financial firms while for non-financial firms, it could probably mean distress (Fama and French, 1992). By using the online library provided by Coventry university, this study also makes use of peer reviewed journals to retrieve information for use for this empirical study. There have also been several articles that have discussed extensively on the relationship between corporate social responsibility and financial performance for which this research will make use of (Waddock and Graves, 1997; Rodgers et al., 2013).
Collecting data for the Nigerian companies in regards to the variables of corporate social responsibility and financial performance might be difficult due to the consistent unavailability of company annual reports. The sample period selected for the empirical research of 2011 – 2015 allows us to be able to make use of a large number of balanced observatory data. The time range used is relatively recent in order for the provision of more reliable and useful data.
3.6.1 Financial data
for this empirical research, the financial data utilized is ascertained from the chosen company’s annual reports. The purpose of the annual report is to enable the calculations of the financial performance variables which include the return on assets (ROA) and the Tobin’s Q. the secondary data to be used as explained will be in line with past literatures that have provided reasonable arguments for the use of this particular type of information. Also, in line with the sample period between 2011 – 2015, the annual reports for each of the years to be used will be needed.
3.7.1 Measuring of CSR
Along the years, a large number of researchers have applied different methods in an attempt to measure the overall CSR performance of companies. The KLD index among a few has been a popular method that has been used by several researchers. The KLD index evaluates companies based on a number of attributes eight in particular (Waddock and Graves, 1997). The KLD index method along with its likes have several advantages of their use but there have been a lot of criticism with one of them being that they are not comprehensive enough while another criticism is that they are only limited to measure companies that are trading in the US stock exchange (Peng and Yang, 2014).
In developing economies, the measurement of CSR activities is lacking as there have been discussions explaining the non-implementation of CSR activities not to even mention the thought of creating a CSR index. For this empirical research, a CSR index will be constructed making use of approaches made and explained with reference to previous literatures.
3.7.2 CSR index construction
Firstly, a dichotomous approach is used in this empirical study for the construction of a CSR index with several previous literatures having made use of this approach. In line with past literatures, the study will adopt sub variables from the disclosure dimensions of corporate social performance (Brammer et al, 2006). The sub variables will be divided according to the dimension they fall under.
Subsequently, with reference to past literatures, the disclosure variables comprise of five corporate social performance disclosure dimensions: community performance, human rights, environment responsibility, employment and supply chain management. Three disclosure dimensions were found in most of the companies this study is using which happen to be employee information, community involvement and environmental information with information for human rights and supply chain management rarely being reported effectively in a developing economy like Nigeria. The disclosure scores for companies are unweighted and the reason for this will be the elimination of any bias found in weighted scores as assigning importance or value will be based on individual perception and understanding (Chau and Gray, 2002). Thereafter, the corporate social performance will be assessed based on a number of questions. For the environmental information, the questions to be asked would include pollution prevention, environmental conservation, reporting of environmental accomplishments, emission reduction and company policies on the environment. The questions for the employee information would include employment equity, Employment involvement, employee training, employee relations and employee health and safety. the assessment of the community responsibility attribute would include Charity donations, code of ethics existence, public interest projects, scholarship programs and community involvement.
In line with previous literatures, scoring of items found in the annual reports of companies are dichotomous in nature with a score of one (1) attributed to a variable if it is declared while giving a score of zero (0) when a variable has not been disclosed. The total score for a company will be equals to fifteen (15). The explanation can be formularized as:
where di is 1 is a variable is disclosed and o if otherwise with n being the maximum number of items.
An example of the CSR disclosure would be that of Cadbury Nigeria who in 2011 disclosed 13 items out of the maximum 15 thus the index for Cadbury for 2011 was calculated as 13/15
or 0.8667. the five year CSR disclosure analysis for Cadbury is shown in the table below.
Table 1: Calculation of the CSR disclosure index for Cadbury Nigeria
3. Environment responsibility
Source: Author, 2017
3.7.3 Measuring of financial performance
There have been a lot of parameters that have been used in the measurement of the financial performance of companies (Cochran and Wood, 1984). There are three categorizes that spilt how the measurement of the financial performance variable. The first is making use of the accounting and profitability based approach which include the use of return of assets (ROA) and return on sales (ROS) (Tang et al., 2012) or the combinations of different accounting variables (Waddock and Graves, 1984). The second measure used is the use of the market based approach such as the Tobin’s Q (Brammer et al., 2006).
Furthermore, the third measure is making use of both approaches meaning the use of the accounting based model and the market based model (McGuire et al., 1988). The third approach has been explained to give a clearer picture on the relationship between CSR activities and financial performance because as explained in previous literatures, the accounting based model is backward looking in the sense that we are privy to information about occurrences that have happened while the market based model shows us a picture of what may occur in the future so the use of the two model would be better (McGuire et al., 1988).
For this empirical research, the accounting based and market based approach will be made use of together. The accounting based variable to be used would be the return on assets (ROA) and for the market based approach, the Tobin’s Q will be made use of.
3.7.4 Financial measurement
The Tobin’s Q was first introduced as a market based measure of financial performance by James Tobin in 1968 (Wang et al., 2014). Ideally, the Tobin’s Q has the main purpose of evaluating how a firm utilizes its assets. In regards to previous empirical studies, there exist different results on the relationship between CSR and Tobin’s Q which may be as a result of the different measurement criteria’s that have been implemented.
Accordingly, in line with Guenster et al., (2011), a modified version of the Tobin’s Q constructed by Chung and Pruitt (1994) is used which involves collecting information form the balance sheets of annual of the firms selected. The formula used is as follows:
Tobin’s Q = (MVE +PS + DEBT)/TA
MVE: the market value of the common equity of a firm;
PS: the liquidating value of the firm’s preferred stock;
DEBT: total current liabilities minus total current assets, plus book value of long-term debt;
TA: the book value of the total assets of the firm.
Return on assets (ROA)
return on assets (ROA) can be defined as a measure popularly made use of when estimating a firm’s financial performance and profitability (Belu and Manescu, 2013). The return on assets is a variable that represents the financial performance within a firm (Guenster et al, 2011). There have been numerous literatures in the past that have made use of ROA when the relationship between CSR and financial performance has been examined (Tang et al., 2012). The return on assets is a well-known measure of financial performance and with that being in mind, this study will make use of ROA as an accounting based measure of financial performance. in line with Guenster et al., (2011) this study will make use of the formula calculating the return on assets as the net profit of a firm divided by its total assets:
ROA = Net profit/Total Assets
Prior research has shown that there exist several factors that affect the independent and dependent variables for the study (Waddock et al., 1997; McWilliams and Siegel 2000). With reference to previous research, this study makes use of two control variables which are Firm size and leverage. These control variables might have an effect on the relationship between CSR and financial performance.
One of the most popular control variable used in past research is firm size (Waddock and Graves, 1997). Waddock and Graves (1997) explained firm size as a significant factor in social responsible disclosure by firms arguing that larger firms tend to disclose more of their corporate social activities than smaller firms. An explanation of this thought could be due to the large financial resources large firms possess and extra attention they gain from their different stakeholders.
Consequently, Different firm size measurements have been implemented along the years by different studies. Such measurements include total assets, total sales, number of employees and number of shareholders. In line with Waddock and Graves (1997) and Aras et al., (2010) who argue that total assets helps better in the measurement of firm size, this study controls for the impact of firm size on CSR and financial performance of companies listed in the Nigerian stock exchange by using the natural log of total assets.
The second variable used in this study is the leverage of firms listed in the Nigerian stock exchange. A leverage ratio is one of the measurements used in assessing the financial health and going concern of corporations. Jensen and Meckling (1976) state that corporations with higher debts to equity might encounter bankruptcy risks and these firms would try to expand their CSR disclosures in order to reduce related agency costs.
Along the years, there has numerous methods that have been implemented in the measurement of leverage depending on how it relates to the study. Leverage can be measured by different methods such as total debt/total assets, average total assets/ average total equity and long term debt/total equity. In line with the study carried out by Waddock and Graves (1994), this empirical study makes use of the ratio of total long term debt to total equity as this study looks to measure the relationship between CSR and financial performance within a time frame of five years.
3.8 Hypotheses development
Chapter 3 of this study signifies that the relationship between CSR and financial performance are inconclusive as indicated by previous researches. The expectation of this study is that there would be a positive relationship between CSR and the financial performance of companies. In accordance with the limitation of prior studies in developed economies with Nigeria as emphasis, the following hypothesis are developed.
Accordingly, the market based measure selected for this study is the Tobin’s Q which is the proxy for the market value of a firm’s asset. Several attempts have been over the years to ascertain the relationship between CSR and financial performance with several recent studies making use of the Tobin’s Q as a market based measure. The results of studies carried has been inconclusive with different studies giving reasons for the different results realised. In line with studies made by Cheung et al., 2010 and Saleh et al., 2011, this studies expects a positive relationship between CSR and financial performance.
Ha2: There exist a positive linear relationship between CSR and financial performance of companies from the Nigerian stock exchange using Tobin’s Q as a market based measure.
Furthermore, recent studies have established different results on the relationship between CSR and financial performance due to different measurement criteria’s. studies examining the different variables of CSR and financial performance have established various arguments on different measurement processes. Waddock and graves (1997) along with McGuire et al (1988) postulated studies based on accounting based measures like the return on assets to state that there is a significant positive relationship between CSR and financial performance. consequently, with reference to past empirical literatures, the first hypothesis is:
Ha1: There is a positive linear relationship between CSR and financial performance of companies from the using the accounting based measure of ROA.
3.9 Regression models
in order the main question of this study to be answered, two regression analysis will be conducted one for the accounting based measure of return on assets (ROA) while the second one is for the market based measure of the Tobin’s Q. the independent variable will be the CSR index while the dependent variables will be the return on assets and the Tobin’s Q.
the first and second regression models will be presented respectively as below:
ROA=b0+b1(CSR index)+b2(Firm size)+b3(Leverage)+bS
Tobin’s Q=b0+b1(CSR index)+b2(Firm size)+b3(Leverage)+bS
ROA= return on assets, (net profit/total assets)
Tobin’s Q= Q ratio, (MVE +PS + DEBT)/TA
CSR index= index score on company disclosure
Firm size= natural log of total assets
Leverage= total long term debt/total equity
S is the error term
b(1-3) are the coefficients
This chapter illustrates the research paradigm used to underpin the research structure. By making use of the positivist epistemology and objective ontology, a research design is proposed that becomes the foundation for the study carried out. The research design made was the introduction of the multiple regression analysis into the study with reasons why that model is the best fit for the type of study that was carried out. The research strategy which involves the use of the panel study over the cohort was discussed as well giving reasons why it is the better fit for this study.
Furthermore, the sample data and the collection method were discussed with highlights on making use of the annual reports of the selected 30 companies from the Nigerian stock exchange. After that, the different variables that were used involving the CSR independent variable with the two dependent variables of return on assets and the Tobin’s Q along with the control variables of firm size and leverage ratio.
Consequently, the CSR disclosure index is explained with the use of balanced data coupled with a set formula in line with previous literature along with an example using Cadbury Nigeria on how the final CSR index was made. Lastly, the hypothesis was discussed in relation to the questions that are answered for the study thereby leading to the creation of two regression models. The next chapter discusses the interpretation of the results with theoretical and practical implications of the tests conducted.
Chapter 4: Data analysis, results and presentation
In this chapter, through the use of the Stata program the results of the regression analysis will be shown and interpreted. This study starts by providing the information for the summary statistics in relation to the variables that underpin this study with the view of interpreting the data. The study then goes further to discuss the regression model with the view of further understanding the relationship between CSR and financial performance in line with the control variables firm size and leverage. The correlation matrix along with the robustness test on the two regression models will also highlighted. Ultimately, the two hypothesis that were stated in the previous chapter will be discussed in relation to the results obtained in the regression models. Conclusively, a summary of all discussions is made.
4.1 Summary statistics
TABLE 2: Summary statistics
Variable Observations Mean Standard Deviation Minimum Maximum
CSRINDEX 150 0.6897 0.1752 0.2666 1
Return on Assets 150 0.0879 0.0743 0.0100 0.4319
Tobin’s Q 150 0.4348 0.2035 -0.1633 0.9325
Leverage 150 0.6189 1.3383 0 10. 2129
Firm Size 150 -0.0133 1.0262 -6.0262 4.1190
Source: Author, 2017
In the table 2 presented above, the overview of the summary statistics of the sample used is presented along with the variables that were implemented on which include the CSR index being the independent variable, return on assets (ROA) and Tobin’s Q being the dependent variables and the two control variables firm size and leverage. The sample size used for this study produced 150 observations from 30 companies over a period of five years 2011 to 2015.
The divergence between the maximum and minimum values for almost all of the variables are quite high. For example, the variables of firm size spreads out from -6.0262 to 4.1190 while the Tobin’s Q minimum is at -0.1633 to a maximum value of 0.9325. the mean for Return on assets is 0.0879 while the mean for Tobin’s Q is at 0.4348. the mean value of return on assets places the perception that majority of the sampled companies have a return on assets of 0.088% while the value for Tobin’s explains that most of the sampled companies have a Tobin’s ratio of 0.4348.
As the Tobin’s ratio is between 0 and 1, it costs more financially to replace the assets of a firm than what the firm itself is valued at. The mean for the leverage is at 0.6189 which shows that the leverage for the selected corporations is at 61% which may pose certain threats to their going concern depending on the sector of the firm as different firms react differently to leverage. The CSR index mean is at 0.6897 which shows that 69% approximately of firm’s disclosure their required CSR information.
4.2 Pooled ordinary least squares (OLS)
In running of the pooled ordinary least squares model, one of the most important component of the linear regression model is the assumption that there is a constant variance of the error terms (Homoscedastic). Several situations lead to the error term not having a constant variance leading to heteroskedastic implications.
OLS estimators may not be truly efficient in the presence of heteroscedasticity leading to biased estimated standard errors of the coefficients making the results unreliable for the t-statistics or hypothesis testing. This study carries out testing on the Stata program that tests for heteroscedastic errors. A limitation of the pooled OLS model is that it does not exploit the autocorrelation in the composite error term making it inefficient. After carrying out the testing, the Pooled OLS presented is explained below with the assumption of it being homoscedastic.
Table 3: Financial performance measurement of Tobin’s Q using Pooled OLS
Tobin’s Q-dep variable COEFFICIENTS P-Value /t/
CSR Index 0.2258** 0.018
Leverage -0.0453 0.025
FirmsizeTA 0.0240 0.199
Constant 0.3074 0.653
Prob F-statistics 0.0239
Adjusted R-Square 0.0932
** Indicate statistical significance at level of 5% source: Author, 2017
The pooled OLS regression is tested on the Stata program, in order to minimize the risk of obtaining inaccurate results the homoscedasticity test is performed on the first regression model which contains one independent variable of CSR and the two control variables firm size and leverage which will be used in explaining the dependent variable of the Tobin’s Q. The value of R square shows that 11.15% of the Tobin’s Q is explained by the independent value of CSR. The remaining percent due to standard error
The p-value of the CSR index which is at 0.018 along with the coefficient of 0.2258 shows that the CSR index and the Tobin’s Q have a significant positive relationship (p<0.05). the coefficient goes to show that each CSR index disclosure is associated with a 0.2258 change increase of the Tobin’s Q. The leverage variable with a p-value of 0.025 shows that there is a significant negative relationship between high and low leverage of corporations which then have an effect on the financial performance of the firms. With the f test statistics of 0.0239 less than the critical value 0.05 as the significance level, this means that all coefficients are jointly significant than 0. Table 4: Financial performance measurement of Return on assets(ROA) using Pooled OLS Return on assets-dep variable COEFFICIENTS P-Value /t/ CSR Index 0.1204** 0.000 Leverage -0.0084 0.116 FirmsizeTA 0.0037 0.454 Constant 0.0101 0.653 Observations 150 Prob F-statistics 0.0023 R-square 0.0866 Adjusted R-Square 0.0866 ** Indicate statistical significance at level of 5% Source: Author, 2017 For the variable of return on assets after testing for homoscedasticity, a regression is performed to test for the relationship between the dependent variable of return on assets with an independent variable of CSR alongside two control variables firm size and leverage. The R-square value shows that 8.66% of the return on assets is explained by the independent value of CSR. The p-value for the CSR index of 0.000 coupled with the coefficient of 0.1204 show that there is a positive significant relationship (p<0.05). the coefficient of the CSR variable goes further to show that each CSR disclosure is related with a 0.1204 increase on the return on assets. The leverage variable with a p-value of 0.116 and a coefficient of -0.0084 shows that statistically, there is a negative association and CSR and financial performance variable of return on assets. Also, the control variables firm size and leverage are not statistically significant in their association with CSR and return on assets. The f-test statistics of 0.0023 less than the significance value of 0.05 means that all coefficients are jointly significant than 0. After running of the Pooled OLS regression, this study goes further to run the panel data. The term panel data implies to examination of multi-dimensional data and measurements over a period of time for this study being from 2011 to 2015. There are two methods used in analysing panel data namely the fixed effects and then the random effects. To determine between the two techniques which one to use this study makes use of the Hausman test to determine which method is more preferable to use. The Hausman test will be conducted for both Return on Assets and for the Tobin’s Q. The hypothesis used in accepting one of the two methods is as follows: Ho: random effect is more appropriate H1: fixed effect is more appropriate with the significance level of 0.05%. The first test carried out will be for the Tobin’s Q Table 5: Hausman test for the appropriateness of fixed effect or random effects for the Tobin’s Q COEFFICIENTS DIFFERENCE FIXED EFFECT (Fe) RANDOM EFFECT (Re) (Fe-Re) CSR index -0.0314412 0.1160131 -0.1474543 Leverage -0.0079942 -0.018262 0.0102678 Firm size (TA) 0.0106118 0.0122222 -0.0016104 Observations 150 Prob>chi2 0.0758
Significance value of p-value>0.05. hypothesis: H0: random effect is appropriate. H1: fixed effect is appropriate. Source: Author, 2017
With the p-value of 0.0758 greater than the significance value of 0.05 and by making reference to the hypothesis stated above, the Hausman test for the Tobin’s Q shows that the random effect model is more appropriate for this study.
Also, the Hausman test for the return is stated below:
Hausman test for the appropriateness of fixed effect or random effects for the return on assets
FIXED EFFECT (Fe) RANDOM EFFECT (Re) (Fe-Re)
CSR index 0.2042795 0.1241923 0.0800871
Leverage -0.0012408 -0.0062179 0.0049771
Firm size (TA) 0.0022988 0.0027817 -0.0004829
Significance value of p-value>0.05. hypothesis: H0: random effect is appropriate. H1: fixed effect is appropriate. Source: Author, 2017
Consequently, with the p-value for the return on assets 0.7250 greater than the significance value of 0.05, the null hypothesis is accepted meaning the random effects model is more appropriate for this study. The random effects model for the Tobin’s Q and the return on assets are explained below.
Financial performance measurement of Tobin’s Q using panel data Random effect models
Tobin’s Q-Dep Coefficients P- Non-
Variable value Robust Std. Err.
CSR Index 0.1160131 0.429 0.1465485
Leverage -0.018262 0.157 0.0129136
FirmsizeTA 0.0122222 0.238 0.0103563
Constant 0.3662729** 0.000 0.0103563
Prob Chi-sq. 0.2826
** = Significance level of 0.05% Source: Author, 2017
With the regression tested using the Stata program, the results show that there isn’t any significant relationship between the variables tested. With a p-value of 0.429 greater than the critical value of 0.05 along with the coefficient of 0.116031, the CSR index goes to explain there is a positive but non-significant relationship to the Tobin’s Q variable. The coefficient of the CSR index signifies that a CSR disclosure leads to a 0.116031 change increase of the Tobin’s Q variable.
Consequently, the control variable leverage coefficient of -0.018262 and a p-value of 0.157 goes to explain a negative relationship with a statistical non significance in the regression. The R-square of 0.1088 translates to 10.88% of the Tobin’s Q being explained by the independent value of the CSR index variable. Indeed, only a rare dataset meets all assumptions underlying a multiple regression and failure to meet these assumptions can lead to biased results of the coefficients and the standard errors. Testing for the robustness of the regression aims to reduce the significance of the failures associated with the assumptions of running regressions like lack of normality and heterogeneity.
To make sure that the assumptions made on running the regression are accurate to certain degrees, the robustness test is carried out for each of the random effect models for the return on assets and Tobin’s Q in relation to the CSR independent variable and the control variables of firm size and leverage. The regression with robust standard error for the Tobin’s Q is stated below:
Measurement of Tobin’s Q using panel data Robust Random effect models
Tobin’s Q-Dep Coefficients P-
Variable value Robust Std. Err.
CSR Index 0.1160131 0.390 0.1348737
Leverage -0.018262 0.317 0.0182515
FirmsizeTA 0.0122222 0.548 0.0203496
Constant 0.3662729 0.000 0.0905222
Prob Chi-sq. 0.4564
**=Significance level of 0.05% Source: Author, 2017
By comparison with the regression containing the non-robust standard error, it can be concluded that the estimates of the coefficients still remain the same as the non-robust regression model. The standard errors for the robust random model take into account issues such as the lack of normality, observations that exhibit large residuals and heteroscedasticity among such problems.
The change between the robust model and the non-robust can be examined from the p-values and the standard errors of the tests. Conclusively, the use of the robust test did not change any of the assumptions made on the non-robust regression model analysis.
Furthermore, the next regression that is analysed is that of the return on assets examining the first model without the test for robustness of the standard error. The model is stated below for evaluation.
Table 9: Measurement of Return on assets (ROA) using panel data Random effect models
Return on Assets-Dep Coefficients P- Non-
Variable value Robust Std. Err.
CSR Index 0.1241923** 0.011 0.0486474
Leverage -0.0062179 0.255 0.00546
FirmsizeTA 0.0027817 0.598 0.0052693
Constant 0.0061838 0.856 0.0341395
Prob Chi-sq. 0.0580
**=Significance level of 0.05% Source: Author, 2017
By examining the non-robust random model, it can be realised that there is a significant positive relationship between CSR index and return on assets with a p-value of 0.011 and a coefficient of 0.1241923. the coefficient of the CSR index explains that a CSR disclosure leads to a 0.1241923 change of the return on assets dependent variable. The two control variables all have statistical insignificant relationships with the leverage variable have a negative coefficient of -0.0062179 to symbolise a negative relationship. The R-square of 0.0847represents 8.47% of the return on assets explained by the independent variable of the CSR index.
Consequently, the robustness test carried out gives this study the results below:
Measurement of Return on assets(ROA) using panel data Robust Random effect models
Return on Assets-Dep Coefficients P-
Variable value Robust Std. Err.
CSR Index 0.1241923** 0.003 0.0486474
Leverage -0.0062179 0.377 0.00546
FirmsizeTA 0.0027817 0.531 0.0052693
Constant 0.0061838 0.814 0.0341395
Prob Chi-sq. 0.0260
**=Significance level of 0.05%. Source: Author, 2017
In comparison to the regression done containing the non-robust standard error for the return on assets, it can be concluded that the estimates of the coefficients still remain the same as the non-robust regression model. The standard errors for the robust random model take into account issues such as the lack of normality, observations that exhibit large residuals and heteroscedasticity among such problems.
The change between the robust model and the non-robust can be examined from the p-values and the standard errors of the tests. The p-value of CSR index gives a more significant relationship with a change from 0.011 to 0.003 with the coefficient still a positive 0.1241923. the R-square value between the two models still remains at 0.0847.
Conclusively, the use of the robust test did not change any of the assumptions made on the non-robust regression model analysis for the return on assets dependent variable. This goes to show that the excluded variables do not affect the regression model results.
This next paragraph of the study will examine the correlation matrix of the independent variable CSR index with the two dependent variables of Tobin’s Q and return on assets and the two control variables firm size and leverage.
4.3 Pearson correlation matrix
CSR index Return on assets Tobin’s Q Leverage Firm size
CSR Index 1.0000
Return on assets 0.2514 1.0000
Tobin’s Q 0.1343 0.2471 1.0000
Leverage 0.2745 -0.0700 -0.2339 1.0000
Firm size 0.1795 0.0882 0.1284 0.0930 1.0000
Table 11 presents the Pearson correlations between the independent variable CSR and the two dependent variables return on assets and Tobin’s Q along with the two control variables firm size and leverage. The values of the correlation model are significant at 5%. According to the table above, the Pearson correlation between CSR and return on assets is 0.2514 indicating a positive relationship between the two variables. The positive correlation indicates that the implementation of CSR activities increases the return on assets of the companies. the correlation between the Tobin’s Q and the CSR variables is 0.1343.
The correlation between the CSR and the Tobin’s Q shows that an increase in CSR activities results in an increase in the market value of the company. The leverage variable has the highest correlation value of 0.2745 to the CSR variable while having a negative relationship with return on assets and the Tobin’s Q with values of -0.0700 and -0.2339 respectively. The firm size variable also has a positive relationship with the independent variable and the dependent variables. Overall, there isn’t a clear cut signal of a strong significance between the independent variable and the dependent variables with the highest correlation being at 0.2514 between the return on assets and the CSR variable.
4.4 Hypothesis discussion
There exists a positive linear relationship between CSR and financial performance of companies using Tobin’s Q as a market based measure.
In the regression outcome of the pooled OLS model that was examined for the Tobin’s Q, the relationship examined was significant positive relationship between CSR and the Tobin’s Q variable of the companies examined. With a p-value of 0.018, the relationship between CSR and Tobin’s Q is fairly significant. The R squared value for the model is at 11.15% which indicates that the relationship may be fairly significant as the value indicates the movement of the relationship is only explained by 11.15%. by using the second model for this study, the random effect panel data showed different results in relation to the pooled OLS results. After controlling for the leverage and firm size and with a p-value of 0.390, the relationship between the Tobin’s Q and the CSR variable shows a non-significant positive relationship. The R-square of 0.1088 for the random model translates to 10.88% of the Tobin’s Q being explained by the independent value of the CSR index variable.
Furthermore, a correlation matrix was conducted so as to understand further the relationship between CSR and the market based measure of Tobin’s Q. with a positive value of 0.1343, this study comes to the conclusion that there is a positive relationship between CSR and the market based measure Tobin’s Q. a wide spread conclusion cannot be made due to other factors having effects on the relationship between the CSR and the Tobin’s Q variables.
An instance of these variables could be the financial crisis of 2007 which had an effect on the profitability of companies in Nigeria. CSR disclosures in recent years have increased due to pressure from stakeholders in Nigeria looking for transparencies by companies operating in Nigeria. A change in government along with the recent recession the country is in, policies and framework have lately been employed to control for the activities of companies and how they affect the society around them (Anyanwu, 2016).
Consequently, the results examined show a positive relationship albeit not significant which signifies that CSR is not a significant factor when it comes to the movement of the value of the Tobin’s Q. this result differentiates from the study conducted by other researchers (Rodgers et al., 2015; Guenster et al., 2011) who found a significant positive relationship between CSR and the Tobin’s Q variable. Furthermore, due to different methodologies and variable approaches within this field, mixed results are bound to occur.
Ultimately, because of the lack of overall significance in the models this study incorporates with the research, hypothesis 1 is rejected.
There is a positive linear relationship between CSR and financial performance of companies from the using the accounting based measure of return on assets (ROA).
Accordingly, for the pooled OLS model that was tested for the return on assets, a significant positive relationship is observed with a p-value of 0.000 showing the relationship is very significant (p<0.05). this is in line with other studies who found statistical significance in the relationship between the CSR and return on assets variable (Waddock and Grave, 1997; Kamatra et al., 2015). The R-squared value of 8.66% indicates that the movement of the relationship of CSR and the return on assets variable is explained by 8.66% which is fairly significant but not enough to draw a final conclusion. Additionally, a panel random effects model was conducted to give this study a better understanding of the relationship between CSR and the return on assets. With a p-value of 0.003 and a coefficient of 0.1241923, the results also show a significant positive relationship between the CSR and the return on assets variable. This could indicate presumably that Nigerian companies have started adhering to the calls by stakeholders for the increase of CSR activities. These findings are in relation to the arguments laid by Friedman (1970) suggesting that companies would gain financial benefits by engaging in CSR activities in relation to their return on assets. Consequently, a correlation matrix was conducted highlighting the relation of the different variables both dependent and independent. The return on assets had more correlation to the CSR variable when compared with the Tobin’s Q variable. Based on the result from the correlation matrix. The results gotten are in line with previous studies (Uadiale & Fagbemi, 2012; Lin et al., 2015) presenting a significant positive relationship between CSR and the return on assets variable for companies. Eventually, in line with the hypothesis stated for the return on assets, the alternate hypothesis is accepted presenting a significant positive relationship between CSR and return on assets of companies in Nigeria based on the pooled OLS model and the panel random model constructed. Accordingly, the implications of study results consist of outlines that cover the relationship of CSR and the financial performance of companies over a period of 5 years from 2011 to 2015 in the context of Nigerian listed companies. This study results can help companies and experts understand the relationship between CSR and financial performance in Nigeria through the use of the accounting and market based measures. Furthermore, as the results indicate, there is a high statistical significance regarding companies CSR activities and their return on assets. Inversely, the results indicate a low statistical significance between companies CSR activities and their Tobin’s Q value. This results in turn can influence the way companies recognize CSR activities and which ones they distinguish to be important in performing. CSR implementation by companies in Nigeria are relatively low compared to the global economic environment 4.5 Theoretical and practical implications This study adds to the existing literature of CSR and financial performance relationship in different ways with reference to the Nigerian literature on the relationship between the two variables. Firstly, this study shows that there was no overall significant relationship between CSR and the Tobin’s Q as a financial performance variable in Nigeria. In regards to the relationship between CSR and return on assets, this study found a significant positive relationship between the two variables in Nigeria. In this way, this study adds to the limited empirical studies that exist in Nigeria. Due to the limited research in Nigerian and the different methods in ascertaining the relationship between CSR and financial performance of companies, this study helps further understanding of the relationship between CSR and the financial performance of publically traded companies in Nigeria. Secondly, financial performance is a broad construct that contains various variables and dimensions. Majority of studies especially in Nigeria rely on measurements that point towards historical performances like the return on assets and return on sales. In contrast, this study makes use of two pathways the accounting based measure and the market based measure in other to get a better understanding of the relationship that exists between CSR and financial performance in Nigeria. Finally, the use of firm size and leverage as control variable in the regression model for return on assets and CSR indicates that they moderate the relationship while for the regression model of Tobin’s Q and CSR, a conclusive result was not realized. This could be due to a number of reasons other than the variables and the methods of measurement used as external influences are present in such a broad debatable topic. For the accounting based measure of return on assets, the significant positive relationship could represent an increase in the CSR activities of the companies in Nigeria. The return on assets measurement could have an influence on the CSR activities companies may decide to invest in. in relation to the results gotten, there have been arguments on the most preferable method of measurement. McGuire et al., (1988) argues that the accounting based measure return on assets is a better predictor of the relationship between CSR and financial performance and this study leans to that argument with the results gotten and interpreted. 4.6 Summary This chapter of the study presents the interpretation of the summary statistics carried out in relation to the independent, dependent and control variables. By using a balanced data of a 150 observations the mean, minimum and maximum values are interpreted in relation to the tests that was conducted. The second test that was performed was the pooled OLS model with the aim of examining the relationship between CSR and financial performance by using firm size and leverage as control variables. The test interpretation is then discussed within the significant value of 0.05. Accordingly, after performing the Hausman test which is used to specify between the fixed effect and the random model which should be used, the random model interpretation for both Tobin’s Q and the return on assets was then prepared. After performing the interpretation for the random models, the robustness test was conducted to check for the correctness of the models that were prepared and interpreted. Thereafter, the correlation matrix was conducted to further explain the relationship between CSR and financial performance. the hypothesis constructed was then analyzed and the hypothesis for the Tobin’s Q was rejected due to overall insignificance while the return on assets hypothesis was accepted due to significant relationship examined in the tests conducted. Theoretical and practical implication are then discussed in relation to the Nigerian companies that were selected. Finally, the next chapter discusses the conclusion summary of the study along with suggestion on how future research should be conducted. Chapter 5: Conclusion and recommendations 5.1 Summary This study examines the relationship between CSR and financial performance of companies listed on the Nigerian stock exchange. To help with the analysis of the main question, sub questions were made and their analysis is presented below. Accordingly, attempts to examine the background of corporate social responsibility and what it entails. The introduction to CSR is prepared with discussions on the reason for the importance of CSR, debates that have been sparked in bringing forth a consensual definition for CSR. Thereafter voluntary disclosures are discussed along with their importance. Subsequently, the second question is based on discussion that underpin the concept of CSR. Discussions were then made on the different theories that explains companies disclosing their business information to the public. Critical analysis is also done on the different theories that are presented that would help in the argument presented on the relationship between CSR and financial performance. Consequently, empirical studies are reviewed and are then presented, reviewed and critically analyzed along with comparison examined with the intention of providing support in the selection of variables, measurement and interpretation of results. Thereafter, this study also deals with the analysis of the past methodologies and critical review to bring forth the hypothesis that is then analyzed in relation to the main question. Finally, after selection of the perceived important variables, tests were conducted with regression models presented and analyzed. Test results are then discussed with interpretation provided and then discussion is made on how the results affect CSR in Nigeria. A final conclusion is made explaining in detail what the next should be for the government in Nigeria on how to encourage CSR activities in Nigeria despite the recent economic ordeals companies are facing with the country in recession tackled along with terrorist activities in some parts of the country. 5.2 Contributions of the study Given that this study builds on the existing literature to investigate the relationship between CSR and financial performance, the following contributions are made based on the gap identified. First, the study contributes by providing additional empirical evidence on the nature of association between CSR and financial performance. Hence, the study can be used as important source to be used in the discussion of CSR and firms’ performance. More importantly, the choice for the empirical evidence was mainly based on critical evaluation of both accounting and market based – approaches. Additionally, the study employs panel data analysis/methodology consistent with the framework (both positivist school and theoretical basis) used in this study. This methodology is robust enough to examine the postulated relationships among the variables considered in this study. Finally, the study provides some important research findings that may have practical implications to businesses. The process adopted in this study and the findings can be informative to firms in understanding the association between CSR and other performance related indices. 5.3 Suggestion for future research Primarily, this sub-section designates the suggestions that future studies may carry out to further bridge the gap that exists in the study of the relationship between CSR and financial performance. Firstly, future research need to review how the disclosure index is constructed as there exists a lot of criticism on how disclosure indices are made based on the study perception of what components are more important in the assessment. Accordingly, the themes for the disclosure need to also be assessed as future disclosure variables should cover all components of a company’s business activity so that a better relationship can be examined. Finally, variables that are used as criteria’s need to also be examined so that as different results are ascertained on the same analyses due to different perception of which variable has more significance on the relationship research. Chapter 6: Appendices Appendix 1: COMPANIES INDUSTRY A.G. Leventis Nigeria Industrials Airline Services And Logistics Industrials Berger Paints Basic Materials C & I Leasing Industrials Cadbury Nigeria Consumer Goods Caverton Offshore Support Group Oil & Gas Chams Technology Dangote Cement Industrials E-Tranzact International Technology Eterna Oil & Gas Forte Oil Oil & Gas GlaxoSmithKline Nigeria Health Care Guinness Nigeria Consumer Goods Honeywell Flour Mill Consumer Goods Julius Berger Nigeria Industrials Lafarge Africa Industrials Livestock Feeds Consumer Goods Mobil Oil Nigeria Oil & Gas Mrs Oil Nigeria Oil & Gas Nestle Nigeria Consumer Goods Nigerian Breweries Consumer Goods Oando Oil & Gas Okomu Oil Palm Consumer Goods Pharma-Deko Health Care Presco Consumer Goods PZ Cussons Nigeria Consumer Goods Total Nigeria Oil & Gas U A C N Industrials Unilever Nigeria Consumer Goods University Press Consumer Services Appendix 2: Sample of listed Nigerian companies Appendix 3: Summary Statistics Variable Observations Mean Standard Deviation Minimum Maximum CSRINDEX 150 0.6897 0.1752 0.2666 1 Return on Assets 150 0.0879 0.0743 0.0100 0.4319 Tobin’s Q 150 0.4348 0.2035 -0.1633 0.9325 Leverage 150 0.6189 1.3383 0 10. 2129 Firm Size 150 -0.0133 1.0262 -6.0262 4.1190 Source: Author, 2017 Appendix 4: Financial performance measurement of Tobin’s Q using Pooled OLS Tobin’s Q-dep variable COEFFICIENTS P-Value /t/ CSR Index 0.2258** 0.018 Leverage -0.0453 0.025 FirmsizeTA 0.0240 0.199 Constant 0.3074 0.653 Observations 150 Prob F-statistics 0.0239 R-square 0.1115 Adjusted R-Square 0.0932 ** Indicate statistical significance at level of 5% source: Author, 2017 Appendix 5: Financial performance measurement of Return on assets(ROA) using Pooled OLS Return on assets-dep variable COEFFICIENTS P-Value /t/ CSR Index 0.1204** 0.000 Leverage -0.0084 0.116 FirmsizeTA 0.0037 0.454 Constant 0.0101 0.653 Observations 150 Prob F-statistics 0.0023 R-square 0.0866 Adjusted R-Square 0.0866 ** Indicate statistical significance at level of 5% Source: Author, 2017 Appendix 6: Measurement of Tobin’s Q using panel data Robust Random effect models RANDOM EFFECTS Tobin’s Q-Dep Coefficients P- Variable value Robust Std. Err. CSR Index 0.1160131 0.390 0.1348737 Leverage -0.018262 0.317 0.0182515 FirmsizeTA 0.0122222 0.548 0.0203496 Constant 0.3662729 0.000 0.0905222 Observations 150 Prob Chi-sq. 0.4564 R-square 0.1088 **=Significance level of 0.05% Source: Author, 2017 Appendix 7: Measurement of Return on assets(ROA) using panel data Robust Random effect models RANDOM EFFECTS Return on Assets-Dep Coefficients P- Variable value Robust Std. Err. CSR Index 0.1241923** 0.003 0.0486474 Leverage -0.0062179 0.377 0.00546 FirmsizeTA 0.0027817 0.531 0.0052693 Constant 0.0061838 0.814 0.0341395 Observations 150 Prob Chi-sq. 0.0260 R-square 0.0847 **=Significance level of 0.05%. Source: Author, 2017 Chapter 7: References Ahmed Haji, A. (2013) ‘Corporate Social Responsibility Disclosures Over Time: Evidence from Malaysia’. Managerial Auditing Journal 28 (7), 647-676 Amaeshi, K. M., Adi, A., Ogbechie, C., and Amao, O. O. (2006) ‘Corporate Social Responsibility in Nigeria: Western Mimicry Or Indigenous Influences?’. Available at SSRN 896500 Azizul Islam, M. and Deegan, C. (2008) ‘Motivations for an Organisation within a Developing Country to Report Social Responsibility Information: Evidence from Bangladesh’. Accounting, Auditing & Accountability Journal 21 (6), 850-874 Barnett, M. L. (2007) ‘Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility’. Academy of Management Review 32 (3), 794-816 Baughn, C. C. and McIntosh, J. C. (2007) ‘Corporate Social and Environmental Responsibility in Asian Countries and Other Geographical Regions’. Corporate Social Responsibility and Environmental Management 14 (4), 189-205 Blowfield, M. and Frynas, J. G. (2005) ‘Editorial Setting New Agendas: Critical Perspectives on Corporate Social Responsibility in the Developing World’. International Affairs 81 (3), 499-513 Bowen, H. R. (1953) ‘Graduate Education in Economics’. The American Economic Review 43 (4), iv-223 Campbell, D. (2003) ‘Intra‐and Intersectoral Effects in Environmental Disclosures: Evidence for Legitimacy Theory?’. Business Strategy and the Environment 12 (6), 357-371 Carroll, A. B. and Shabana, K. M. (2010) ‘The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice’. International Journal of Management Reviews 12 (1), 85-105 Carroll, A. B. (1991) ‘The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders’. Business Horizons 34 (4), 39-48 Cavaco, S. and Crifo, P. (2014) ‘CSR and Financial Performance: Complementarity between Environmental, Social and Business Behaviours’. Applied Economics 46 (27), 3323-3338 Chahoud, T., Emmerling, J., Kolb, D., Kubina, I., Repinski, G., and Schläger, C. (2007) Corporate Social and Environmental Responsibility in India: Assessing the UN Global Compact’s Role.: Deutsches Institut für Entwicklungspolitik Bonn Chatterji, A. K., Levine, D. I., and Toffel, M. W. (2009) ‘How Well do Social Ratings Actually Measure Corporate Social Responsibility?’. Journal of Economics & Management Strategy 18 (1), 125-169 Cho, S. Y., Lee, C., and Pfeiffer, R. J. (2013) ‘Corporate Social Responsibility Performance and Information Asymmetry’. Journal of Accounting and Public Policy 32 (1), 71-83 Clarkson, M. E. (1995) ‘A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance’. Academy of Management Review 20 (1), 92-117 Dhaliwal, D. S., Radhakrishnan, S., Tsang, A., and Yang, Y. G. (2012) ‘Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure’. The Accounting Review 87 (3), 723-759 Dinsmore, M. A. (2014) . The Collective Relationship between Corporate Social Responsibility and Corporate Financial Performance Dobers, P. and Halme, M. (2009) ‘Corporate Social Responsibility and Developing Countries’. Corporate Social Responsibility and Environmental Management 16 (5), 237-249 E Ite, U. (2004) ‘Multinationals and Corporate Social Responsibility in Developing Countries: A Case Study of Nigeria’. Corporate Social Responsibility and Environmental Management 11 (1), 1-11 Flammer, C. (2013) ‘Corporate Social Responsibility and Shareholder Reaction: The Environmental Awareness of Investors’. Academy of Management Journal 56 (3), 758-781 Friedman, M. (1962) ‘The Interpolation of Time Series by Related Series’. Journal of the American Statistical Association 57 (300), 729-757 Goss, A. and Roberts, G. S. (2011) ‘The Impact of Corporate Social Responsibility on the Cost of Bank Loans’. Journal of Banking & Finance 35 (7), 1794-1810 Gössling, T. and Vocht, C. (2007) ‘Social Role Conceptions and CSR Policy Success’. Journal of Business Ethics 74 (4), 363-372 Gotsi, M. and Wilson, A. M. (2001) ‘Corporate Reputation: Seeking a Definition’. Corporate Communications: An International Journal 6 (1), 24-30 Grougiou, V., Leventis, S., Dedoulis, E., and Owusu-Ansah, S. (eds.) (2014) Accounting Forum. ‘Corporate Social Responsibility and Earnings Management in US Banks’: Elsevier Haiying, X. J. L. (2010) ‘On the Corporate Social Responsibility Disclosure Practice to Central Enterprises: Evidence from 100 CSR Reports between 2006 and 2010 [J]’. Journal of Zhongnan University of Economics and Law 6, 013 Harrison, J. S. and Freeman, R. E. (1999) ‘Stakeholders, Social Responsibility, and Performance: Empirical Evidence and Theoretical Perspectives’. Academy of Management Journal 42 (5), 479-485 Harrison, L. H., Pelton, S. I., Wilder-Smith, A., Holst, J., Safadi, M. A., Vazquez, J. A., Taha, M., LaForce, F. M., Von Gottberg, A., and Borrow, R. (2011) ‘The Global Meningococcal Initiative: Recommendations for Reducing the Global Burden of Meningococcal Disease’. Vaccine 29 (18), 3363-3371 Hart, S. L. (1995) ‘A Natural-Resource-Based View of the Firm’. Academy of Management Review 20 (4), 986-1014 Idemudia, U. (2011) ‘Corporate Social Responsibility and Developing Countries Moving the Critical CSR Research Agenda in Africa Forward’. Progress in Development Studies 11 (1), 1-18 Jamali, D. and Mirshak, R. (2007) ‘Corporate Social Responsibility (CSR): Theory and Practice in a Developing Country Context’. Journal of Business Ethics 72 (3), 243-262 Jamali, D. and Mirshak, R. (2007) ‘Corporate Social Responsibility (CSR): Theory and Practice in a Developing Country Context’. Journal of Business Ethics 72 (3), 243-262 Jo, H. and Harjoto, M. A. (2011) ‘Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility’. Journal of Business Ethics 103 (3), 351-383 Lima Crisóstomo, V., de Souza Freire, F., and Cortes de Vasconcellos, F. (2011) ‘Corporate Social Responsibility, Firm Value and Financial Performance in Brazil’. Social Responsibility Journal 7 (2), 295-309 Lin, C., Chang, R., and Dang, V. T. (2015) ‘An Integrated Model to Explain how Corporate Social Responsibility Affects Corporate Financial Performance’. Sustainability 7 (7), 8292-8311 Luo, X. and Bhattacharya, C. B. (2006) ‘Corporate Social Responsibility, Customer Satisfaction, and Market Value’. Journal of Marketing 70 (4), 1-18 Mohr, L. A., Webb, D. J., and Harris, K. E. (2001) ‘Do Consumers Expect Companies to be Socially Responsible? the Impact of Corporate Social Responsibility on Buying Behavior’. Journal of Consumer Affairs 35 (1), 45-72 Mordi, C., Opeyemi, I. S., Tonbara, M., and Ojo, I. S. (2012) ‘Corporate Social Responsibility and the Legal Regulation in Nigeria’. Economic Insights–Trends and Challenges 64 (1), 1-8 Prieto‐Carrón, M., Lund‐Thomsen, P., Chan, A., Muro, A., and Bhushan, C. (2006) ‘Critical Perspectives on CSR and Development: What we Know, what we Don’t Know, and what we Need to Know’. International Affairs 82 (5), 977-987 Prout, J. (2006) ‘Corporate Responsibility in the Global Economy: A Business Case’. Society and Business Review 1 (2), 184-191 Rashid, Nik Ramli Nik Abdul, Rahman, N. I. A., and Khalid, S. A. (2014) ‘Environmental Corporate Social Responsibility (ECSR) as a Strategic Marketing Initiatives’. Procedia-Social and Behavioral Sciences 130, 499-508 Reverte, C. (2009) ‘Determinants of Corporate Social Responsibility Disclosure Ratings by Spanish Listed Firms’. Journal of Business Ethics 88 (2), 351-366 Reverte, C. (2009) ‘Determinants of Corporate Social Responsibility Disclosure Ratings by Spanish Listed Firms’. Journal of Business Ethics 88 (2), 351-366 Rodgers, W., Choy, H. L., and Guiral, A. (2013) ‘Do Investors Value a firm’s Commitment to Social Activities?’. Journal of Business Ethics 114 (4), 607-623 Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., and Saaeidi, S. A. (2015) ‘How does Corporate Social Responsibility Contribute to Firm Financial Performance? the Mediating Role of Competitive Advantage, Reputation, and Customer Satisfaction’. Journal of Business Research 68 (2), 341-350 Santín, C., Doerr, S. H., Preston, C. M., and González‐Rodríguez, G. (2015) ‘Pyrogenic Organic Matter Production from Wildfires: A Missing Sink in the Global Carbon Cycle’. Global Change Biology 21 (4), 1621-1633 Servaes, H. and Tamayo, A. (2013) ‘The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness’. Management Science 59 (5), 1045-1061 Servaes, H. and Tamayo, A. (2013) ‘The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness’. Management Science 59 (5), 1045-1061 Shah, G. and Ray, S. (2014) ‘Indian Firms and the New Era of Corporate Social Responsibility: Raising the Bar for People Above Profits’. in Humanistic Perspectives on International Business and Management. ed. by Anon: Springer, 198-209 Shnayder, L., Van Rijnsoever, F. J., and Hekkert, M. P. (2015) ‘Putting Your Money Where Your Mouth is: Why Sustainability Reporting Based on the Triple Bottom Line can be Misleading’. PloS One 10 (3), e0119036 Staiger, D., Stock, J. H., and Watson, M. W. (1997) ‘The NAIRU, Unemployment and Monetary Policy’. The Journal of Economic Perspectives 11 (1), 33-49 Togun, O. R. and Nasieku, T. (2015) ‘Effect of Corporate Social Responsibility on Performance of Manufacturing Companies in Nigeria’ Uadiale, O. M. and Fagbemi, T. O. (2012) ‘Corporate Social Responsibility and Financial Performance in Developing Economies: The Nigerian Experience’. Journal of Economics and Sustainable Development 3 (4), 44-54 Ugwunwanyi, A. and Ekene, C. (2016) ‘Corporate Social Responsibility and its Implementation in Nigeria: Problems and Prospects’. Global Journal of Human Resource Management 4 (2), 60-69 Wu, M. and Shen, C. (2013) ‘Corporate Social Responsibility in the Banking Industry: Motives and Financial Performance’. Journal of Banking & Finance 37 (9), 3529-3547
Our Service Charter
Excellent Quality / 100% Plagiarism-FreeWe employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers.
Free RevisionsWe keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed.
Confidentiality / 100% No DisclosureWe make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service.
Money Back GuaranteeIf the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit.
24/7 Customer SupportWe have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.