CORPORATE SOCIAL RESPONSIBILITY AND FIRM’S

PERFORMANCE

BY

ORIAIFO OSEMEILU DERRICK

MGS0703517

DEPARTMENT OF ACCOUNTING
FACULTY OF MANAGEMENT SCIENCES
UNIVERSITY OF BENIN
BENIN CITY

NOVEMBER, 2011

1
 CORPORATE SOCIAL RESPONSIBILITY AND FIRM’S
PERFORMANCE

BY

ORIAIFO OSEMEILU DERRICK

MGS0703517

A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT

OF ACCOUNTING, UNIVERSITY OF BENIN, BENIN CITY

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

THE AWARD OF BACHELOR OF SCIENCE (B.Sc) DEGREE IN
ACCOUNTING

NOVEMBER, 2011

2
 DECLARATION

I declare that;

1. This project report is based on a study undertaken by me in the

Department of Accounting, University of Benin, under the

supervision of Mr. Odia, J.O.

2. The work has not previously been submitted for the award of a

degree elsewhere.

3. All ideas and views are product of my personal research and

where the views of others has been expressed, they have been

duly acknowledged.

______________________
Oriaifo Osemeilu Derrick

___________________
Date

3
 APPROVAL

We certify that this project was completed by Oriaifo Derrick in

partial fulfillment of the requirements of the award of Bachelor of

Science (B.Sc) degree of Accounting.

______________________ __________________
Mr. Odia, J.O. Mr. Ilaboya, O.J
Project Supervisor Project Coordinator

__________________ ________________
Date date

________________________
Prof. (Prince) Izedonmi, F.O.I
Head of Department

_________________
Date

4
 DEDICATION

To God be the glory without whom we are naught. This piece of

work is dedicated to my parents and siblings who cherish hard work.

5
 ACKNOWLEDGEMENTS

I wish to acknowledge the advice, directive and encouragement

received from my project supervisor, Mr. J.O. Odia who paid attention

to every detail, ensuring that this work came out excellent.

My gratitude also goes to all the lecturers I came across during

my stay in the University for their high academic and ethical prowess,

especially the Dean of the Faculty, Prof. B.A. Agbonifoh, the Assistant

Dean Dr. E.K. Emeni, the Head of the Department of Accounting, Prof.

F.O.I. Izedonmi and my project co-ordinator.

Also worthy of note is the wisdom and understanding of my

parents, brothers, cousins and my lovely beautiful only sister,

Maranatha.

Special regards and appreciation to all class reps and assistants of

the various constituencies in the Faculty of Management Sciences,

especially Nosa, Andrew, Frank, Miracle and Adora; the entire

6
executive council of the MASSA (2010/2011), comprising of Okonta,

David, Suara, Emmanuel, Michael Shedrack, amongst others; the

members of parliament especially Mr. Speaker (Umoru Moses), & SP

(Joseph), Alex, Chuks, Ema, Jude, Biola, Flames, Ehis, to mention but a

few. Special thanks also go to Ifeoma, David, Justin, Momodu, Ephraim,

Dayo, Sally, Tola, Flora Khalimat, Obehi, Mary and the entire

graduating class of 2011 with who I built an unbreakable bond.

To my most esteemed friend, companion, confidant, Isoken

Guobadia, who after God was my major source of strength throughout

my exams and the duration of this project, I love and cherish you so

much and I plead that you accept my many thanks of sincere

appreciation.

Finally, to God Almighty who was, is and will continually be, my

head is bowed and to all those I failed to mention, please accept my love

for we share a common bond, and shall meet again.

7
 TABLE OF CONTENTS

Title Page - - - - - - - - - ii

Declaration - - - - - - - - - iii

Certification - - - - - - - - iv

Dedication - - - - - - - - - v

Acknowledgements - - - - - - - vi

Table of Contents - - - - - - - viii

Abstract - - - - - - - - - xii

CHAPTER ONE: Introduction

1.1 Background of the study - - - - - - 1

1.2 Statement of research problem - - - - - 3

1.3 Research objectives - - - - - - 4

1.4 Research questions - - - - - - 5

1.5 Research hypothesis - - - - - - 6

1.6 Methodology - - - - - - - 7

8
1.7 Population Sample - - - - - - 8

1.8 Sources of data - - - - - - - 9

1.9 Scope of the study - - - - - - 9

1.10 Method of data analysis and statistical tools - - 10

1.11 Definition of terms - - - - - - 10

References - - - - - - - - 13

CHAPTER TWO: Literature Review

2.0 Introduction - - - - - - - 14

2.1 Theoretical evolution of corporate social 5responsibility - 22

2.2 The corporate social performance theory - - - 27

2.3 The shareholder value theory - - - - - 28

2.4 Stakeholder theory - - - - - - 29

2.5 Corporate citizenship theory - - - - - 30

2.6 Corporate Social Responsibility (CSR), its components and

boundaries - - - - - - - - 33

2.7 Stakeholder management and CSR disclosure - - 41

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2.8 Firm performance and CSR disclosure among Nigerian

companies - - - - - - - - 46

References - - - - - - - - 62

CHAPTER THREE: Theoretical Framework, Methodology and Model

Specification

3.1 Theoretical Framework - - - - - - 73

3.2 Methodology of the research - - - - - 74

3.3 Sample size and procedure - - - - - 75

3.4 Method of data collection - - - - - 75

3.4 Model specification - - - - - - 75

References - - - - - - - - 78

CHAPTER FOUR: Data Presentation and Analysis

4.1 Introduction - - - - - - - 79

4.2 Descriptive Statistics - - - - - - 81

4.3 Pearson’s Correlation Coefficient Analysis - - - 84

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4.4 Presentation of Results - - - - - - 92

4.5 Analysis of Regression Result - - - - - 94

CHAPTER FIVE: Summary, Conclusion and Recommendation

5.1 Summary of Findings - - - - - - 102

5.2 Conclusion - - - - - - - - 105

5.3 Recommendations - - - - - - 106

Bibliography - - - - - - - 108

Appendices

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 ABSTRACT

This study is to investigate the impact of voluntary disclosure

responsibility (CSR) on the overall performance of firms with emphasis

on the top highly market capitalized firms listed on the Nigerian Stock

Exchange. It examines CSR disclosure practices in the annual reports of

companies across different industry groups to determine how CSR

affects the overall performance of the companies.

Our analysis entails regression model test for the year 2009,

showing the relation between CSR report and from performance. Our

findings from the results show that the companies size, leverage,

Earnings Per Share (EPS) and capital intensity have a significant impact

on the Corporate Social Responsibility of the top 20 companies by

market capitalization on the Nigerian Stock Exchange.

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 CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The nature and scope of responsibility has changed over time. The

concept of Corporate Social Responsibility is a relatively new one. The

phrase has only been used since the 1960s. But, while the economic,

legal, ethical and discretionary expectations placed on organizations

may differ, it is probably accurate to say that all societies at all points in

time have had some degree of expectations that organizations would act

responsibly by some definitions. (Achua, 2008).

In the eighteenth century, the great economist and philosopher,

Adam Smith expressed the traditional or classical economic model of

business. In essence, this model suggested that the needs and desires of

the society could best be met by the unfettered interaction of individuals

and organizations in the market place. By acting in a self interested

manner< individuals would produce and deliver goods and services

13
that would earn them a profit, but also meet the needs of others. The

view point expressed by Adam Smith over 200years ago, still forms the

basis for free market economies in the twenty first century. However,

even Smith recognized that the free market did not always perform

perfectly and he stated that the free market place participants must be

just and honest towards each other if the ideals of the free market are to

be achieved. (Savage, 1994)

In the 1960s and 1970s, the civil rights movement, consumerism

and environmentalism affected society’s expectation of business. Based

on the general idea that those with greater power have great

responsibilities, many called to the business world to be more

productive in (1) ceasing to cause societal problems and (2) starting to

participate in societal problems. Many mandates were placed on

business related to equal employment opportunity, product safety,

workers’ safety and the environment. Furthermore, society began to

expect business to further participate in solving societal problems wither

14
they had caused the problems or not. This was based on the view that

corporations should go beyond their economic and legal responsibilities

and accept responsibilities related to the betterment of the society. This

view of Corporate Social Responsibility is the prevailing view in much

of the world today.

1.2 STATEMENT OF RESEARCH PROBLEM

Recent research shows that when investors finance a firm, they

face the risks and near certainty that the returns on their investment will

never materialize because the controlling shareholders or managers

expropriate them by stealing profits, selling the firms’ output and assets,

installing possible unqualified family members in managerial positions

or overpaying executives as well as shouldering the responsibilities of

the community. This tends to reduce the performance of the firms.

This study tends to find solutions to the following problems:

- If extensive community responsibilities undermine the

functioning of a and reducing its value how can it be limited?

15
 - To what extent can a firm improve its market value by upgrading

Corporate Social Responsibility practices?

- Through what channels do shareholders influence the

management and consequently the firm’s performance?

- Whether the pattern of ownership structure of other companies

affect the Social Responsibility of that company.

1.3 RESEARCH OBJECTIVES

The aim of the study is to investigate the influence of Corporate

Social Responsibility on organization’s overall performance in order to

analyze whether it can contribute to increasing the firm’s profitability,

value, etc. In order to obtain the information in the study, the following

objectives should be considered:

 Examining the existing definitions of CSR and their use within the

organizational framework.

16
  Identifying the purpose of CSR in every organization and external

functions of organizations.

 Considering the various tools through which CSR is being

integrated and developed, including standards and guidelines,

market incentives and investment indices.

 Offering a synopsis of corporate objectives and goals in

developing CSR within organizations.

 Measuring the long term impact of CSR in every organization.

1.4 RESEARCH QUESTIONS

Having studied the aim and objectives of this research, the main

questions on which this work is built are the following:

 Does the corporate framework recognize a higher return on

investments or a risk mitigation and higher potential leverage

measured by the relative performances to socially responsible

firms?

 How does CSR really affect the firm’s performance?

17
  How can the specific characteristics of firms (corporate

governance systems, relations with trade unions, regulations, etc)

affect the relation between CSR and firm’s performance?

1.5 RESEARCH HYPOTHESIS

The hypotheses to be tested in this study are as follows:

1.) HA: The corporate framework recognizes a higher return on

investments (or a risk mitigation and higher potential leverage),

measured by the relative performances to socially responsible

firms.

HO: The corporate framework does not recognize a higher return

on investments (or a risk mitigation, and higher potential

leverage), measured by the relative performances to socially

responsible firms.

2.) HA: CSR really affects the firm’s performance.

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 HO: CSR does not really affect the firm’s performance.

3.) HA: The specific characteristics of firms (corporate governance

system, relation with trade union, regulations, etc) affect the

relation between CSR and the firm’s performance.

HO: The specific characteristics of firms (corporate governance

system, relation with trade union, regulations, etc) do not affect the

relation between CSR and the firm’s performance.

1.6 METHODOLOGY

The method to be applied in this research is the use of

comparative case studies that span across governmental and non-

governmental ones. The ideas regarding the corporate social

responsibility are obviously already implemented among organizations

across the world. In order to determine the approach of the

organizations regarding Corporate Social Responsibility in relation to

performance, it will be better to focus the study on the strategy of the

19
firm in the implementation of CSR and then establish a relationship

between the corporate disclosure and firm performance. This is because

organizations have the responsibility of ensuring their internal and

external effectiveness.

1.7 POPULATION SAMPLE

Agbonifoh and Yomere (1999:81) defined population as the group

about whom we want to be able to draw conclusion. It is the totality of

the objects or elements being studied and which the conclusions or

generalization of our results will apply. Tha population of this study

comprises of all firms quoted in the Nigerian Stock Exchange.

Great care was exercised to get a representation of the population.

The researcher used a sample size of top 20 companies by market

capitalization in the Nigerian Stock Exchange for the year 2009.

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1.8 SOURCES OF DATA

Data used for this research work were drawn from mainly

secondary sources. The secondary data used includes NSE Fact Books,

text books, journals and the internet.

The researcher adopted content validity which ensured that every

item being measured were calculated appropriately, ensuring a good

degree of relationship between the measuring instruments and practical

results

1.9 SCOPE OF THE STUDY

The scope of the study includes the time horizon, sample size and

geographical location.

i. Time Horizon

The research focuses on the impact of Corporate Social

Responsibility on the performances of the top 20 companies by market

capitalization quoted on the Nigerian Stock Exchange for the year 2009.

21
ii. Sample Size

The sample will include top 20 companies quoted in the Nigerian

Stock Exchange by market capitalization.

1.10 METHOD OF DATA ANALYSIS AND STATISTICAL TOOLS

Data analysis is the breaking down and ordering of data into

groups and the searching for pattern of relationship among the variables

sets of data. Thus, the statistical tools adopted in this research work is

the regression technique.

1.11 DEFINITION OF TERMS

Corporate Social Responsibility: CSR is concerned with treating the

key stakeholders of a firm or institution ethnically or in a responsible

manner. ‘Ethnically responsible’ means treating stakeholders in a

manner deemed acceptable in civilized societies.

Accountability: Is a process standard to assist an organization in the

definition of goals and targets, the measurement of progress made

22
against these targets, the auditing and reporting of performance, and

feedback mechanisms.

Corporate Citizenship (CC): Is about business taking greater account of

its social and environmental – as well as its financial footprints. Source:

Simon Zadek The Civil Corporation.

Corporate Governance (CG): Corporate Governance is concerned with

holding the balance between economic and social goals and between

individual and communal goals.

Corporate Social Investment (CSI): Is the investment in development

projects in emerging markets by companies that may, or may not be,

directly relevant to the company’s bottom line.

Corporate Sustainability: It aligns an organizaton’s products and

services with stakeholder expectations, thereby adding economic,

environmental and social value. (Price Waterhouse Coopers).

23
Public Private Partnerships (PPP): Partnerships between private

companies and public bodies in a joint venture to perform projects and

programmes for the public good.

Social Accountability: An international students for human rights in

the industrial setting set up by CEPAA in the USA. MHCi provided

comments and suggestions in the early days of SA8000.

Social Reporting: Non-financial data covering staff issues, community

economic developments, stakeholders involvement and can include

voluntarism and environmental performance.

Social Responsibility Investment (SRI): Investment is socially

responsible activities normally by an investment fund.

24
 REFERENCES

Achua J.K, (2008). “Corporate social responsibility in Nigerian banking

system” Soc. Bus. Rev. 3(1); 57-71

Agbonifoh B.A. and Yomere, G.O.(1999). Research methodology in

social sciences and education, Uniben press.

Nachmias, D. and Nachmias, C.(1981). Research methods in the social

science, New York: St. martins Press.

Savage A.A. (1994). “Corporate social disclosure practices in South

Africa”. Social and Environmental Accounting U.K; Centre

for Social and Environmental Accounting Research,

University of Dundee.

25
 CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION

The social impact of corporations is becoming a very important

issue in business administration (Fiori, Donato and Izzo, 2007). The

performance of business organizations is affected by their strategies and

operations in market and non-market environments. Hence, there is a

debate on the extent to which company directors and managers should

consider social and environmental factors in making decisions. In

essence, Corporate Social Responsibility (CSR) may be described as an

approach to design making which encompasses both (social and

environmental) factors. It can therefore be inferred that CSR is a

deliberate inclusion of public interest into corporate decision, and the

honoring of a triple bottom line which are People, Planet and Profit.

(Harpreet, 2009).. CSR has been defined in various ways. Majority of

26
these definitions integrate the three dimensions: economic,

environmental and social aspect into the definition, what is usually

called the triple bottom line. The triple bottom line is considering that

companies do not only have on objective, profitability, but that they also

have objectives of adding environmental and social value to society

(Mirfazli, 2008).

CSR has been defined as a “concept whereby companies integrate

social and environmental concerns in their business operations and in

their interaction with their stakeholders on voluntary basis” (Green

Paper Promoting a European Framework for Corporate Social

Responsibility 2001). Heig (2007) also defines CSR as the set of standards

to which a company subscribes in order to make its impact on society.

A wide variety of definitions of firm performance have also been

proposed in the literature. Both accounting and market definitions have

been used to study the relationship between corporate social

responsibility and firm performance (Orlitzky, Schmidt, & Rynes, 2003).

27
However, since most social responsibility scholar seek to understand the

ways that socially responsible corporate activities can create or destroy

shareholders’ wealth, market definitions of firm performance seem

likely to be more appropriate than accounting definitions of firm

performance in this context (Margolis & Walsh, 2001).

The history of formalized CSR in Nigeria can be traced back to the

CSR practices in the oil and gas multinationals. The CSR activities in this

sector are mainly focused on remedying the effects of their extraction

activities on the local communities. The companies provide pipe-borne

waters, hospitals and schools. Many times, these initiatives are ad hoc

and not always sustained (Amaeshi, Adi, Ogbechie and Amao, 2006).

The development of CSR in Nigeria has a somewhat different

development phase. While CSR as a concept in the West was developed

as early as in the 1950’s the concept of CSR is a relatively new

phenomena in Nigeria. Contrary to the West, the main influencing

factors driving the CSR agenda in Nigeria have been foreign,

28
multinational companies operating in Nigeria together with foreign

governments and international NGOs have been the primary drivers

(Helg, 2007).

The Nigerian government ahs through its National Economic

Empowerment and Development Strategy (NEEDS) set the context by

defining the private sector role by stating that “the private sector will be

expected to become more proactive in creating productive jobs,

enhancing productivity, and improving the quality of life. It is also

expected to be socially responsible, by investing in the corporate and

social development of Nigeria…” (Nigerian National Planning

Commission, 2004).

The concept of Corporate Social Responsibility (CSR) in its

present form originated in 1950s when Bown wrote on “The Social

Responsibilities of Businessman” (Carroll, 1999). Since then, the notion

of CSR has come to dominate the society-business interface and many

theories and approaches have been proposed. With respect to CSR and

29
firms financial performance, the literature consists of three principal

stands: (i) the existence of a positive correlation between CSR and

financial results (ii) the lack of correlation between CSR and financial

results; and (iii) the existence of a negative correlation between CSR and

financial results.

Some proponents of the first strand (Soloman and Hansen, 1985;

Pava and Krausz, 1996; Preston and O’Bannon, 1997; griffin and Manon,

1997) find that investment in Corporate Social Responsibility have a big

return in terms of image and overall, financial result; the related

benefits, in fact are bigger than the related costs. Literature reveals the

existence of many positive externalities that are linked to CSR in its bid

to respond to stakeholders’ requirements. Clarkson, (1995) and

Waddock and Graves, (1997) believe that satisfying the interest of

stakeholders (shareholders, employees, suppliers, community,

environment and so on) and being accountable to them may actually

have a positive impact on all firm dimensions, particularly financial

30
performance. Positive reputations have often been linked to positive

financial returns. Roberts and Dowling, (2002); Fombrun, Gardberg and

Barnett (2000); Porter and Van Der Linde (1995) and Spicer (1978), posit

that CSR initiatives can lead to reputation advantage as improvements

in invested trust, new market opportunities and positive reactions of

capital market would enhance organization’s financial performance.

The idea that negative relationship exists between CSR and

financial performance is focused on empirical studies and contributions

that refer to managerial opportunism hypothesis. Preston et al., (1997)

point out that manager can reduce investments in corporate social

responsibility in order to increase short term profitability (and, in this

way, their personal compensation). This point seems to be really

interesting, due to the fact that other authors (Barnea and Rubin, 2006)

suggest the existence of an opposite trend linked to the same

phenomena (Managerial opportunism). Warddock et al., (1997)

assumed that companies with responsible behaviour may have a

31
competitive disadvantage, since they have unnecessary costs. These

cost, fall directly on the bottom line and would necessarily reduce

shareholders profits and wealth. Both short term analysis based on

measuring abnormal returns (Wright and Ferris, 1997), market measures

and long term studies (Vance, 1975) have negative relationship between

performance and corporate social responsibility.

Empirical studies of the relationship between CSR and financial

performance comprise essentially two types. The first uses the event

study methodology to assess the short-run financial impact (abnormal

returns) when firms engage in either socially responsible or

irresponsible acts (Wright et al., 1997; Posnikoff, 1997; McWilliams et al.,

(1997). The second type of study examines the relationship between

some measure of corporate social performance (CSP) and measures of

long term financial performance, by using accounting or financial

measures of profitability (Cachran and Wood, 1984; Aupperie et al.,

1985; Waddock et al., 1997).

32
 The relationship between corporate social responsibility and

corporate firm performance has been studied intensively with mixed

results. In a survey of 95 empirical studies conducted between 1972-

2001, Margolis et al., (2001), report that: “When treated as an

independent variable, corporate social performance is found to have a

positive relationship to financial performance in 42 studies (53%), no

relationship in 19 studies (24%), a negative relationship in 4 studies

(5%), and a mixed relationship in 15 studies (19%). “In general, when

the empirical literature assesses the link between social responsibility

and financial performance, the conclusion is that the evidence is mixed.

Measuring CSR has always been a difficult task as there is little

consensus about which measurement instrument to apply. In many

cases, subjective indicators are used. Similarly, measuring financial

performance is equally difficult as there is little consensus about which

measurement instrument to apply. Many researchers use market

measures (Alexander and Buchholz, 1978; Vance, 1975), others put forth

33
accounting measures (Waddock et al., 1997; Cochran et al., 1984) and

some adopt both of these (McGuire, Sundgren and Schneeweis, 1988).

These two measures, which represent different perspectives of how to

evaluate a firm’s financial performance, have different theoretical

implications. (Hillman and Keim, 2001) and each is subject to particular

biases (McGuire et al. 1988). The use of different measures, needless to

say, complicates the comparison of the results of different studies

(Tsoutsoura, 2004).

2.1 THEORETICAL EVOLUTION OF CORPORATE SOCIAL

5RESPONSIBILITY

The concept of social responsibility has evolved over time in three

movements. The first movement is known as the social responsibility

movement which saw the responsibility of firms as one focusing on the

business obligation of the firm as well as on motivation. The second is

the social responsiveness movement which emphasizes action and

34
activity by the firm towards meeting some social obligations to society

(being responsive). It underscores activities that have projected and

defined outcomes that match or contribute to development objectives of

policies defined by a firm. And the third which summarizes into the

CSR practiced today, is Corporate Social Performance (CSP) and relates

to how well an institution has translated its social goals into practice

(outcomes and results). It is also seen by Marc Orlitzky as “a business

organization’s configuration of principles of social responsibility,

processes of social responsiveness, and policies, programs and

observable outcomes as they relate to the firm’s societal relationships.

“Put in everyday language, CSP is a construct that emphasizes a

company’s responsibilities to multiple stakeholders, such as employees

and the community at large; in addition to its traditional responsibilities

to economic shareholders. These movements have resulted in an

unwieldy field of theories which Elisabet Garriga and Domenec Mele

latter articulated into four categories.

35
 These categories show what the academic community considers

CSR to cover as the central themes researched. These central theoretical

themes, as Frans Paul van der Putten notes, relate to ethical values,

profits, social demands and community performance. But in mapping

out the following four theoretical approaches to the study of CSR,

Elizabeth Garriga and Domenec Mele note in their work titled

“Corporate Social Responsibility Theories: Mapping the Theory”, that

the CSR field “presents not only a landscape of theories but also a

proliferation of approaches which are controversial, complex and

unclear.

2.1.1 Ethical Theories

This comprises a group of theories each of which ultimately

focuses on the ethical responsibilities of corporations to society. In other

words, they are theories that revolve around the need for organizations

to conduct themselves ethically in their relationship with society as they

do their business.

36
 Within this packet of theories of CSR are the: Normative

Stakeholder Theory, Universal Rights Theory, Sustainable Development

Theory and the Common Good Approach.

2.1.2 Instrumental Theories

These are theories that are concerned with how CSR is used as a

tool for maximizing shareholder value, wealth creation and creating

competitive advantage. The resounding theme of the packet of theories

here is profitability of the firm through the pursuit of activities that also

add value to the society by marrying the need of the organization to

make profit to the needs of the wider society to survive and thrive.

2.1.3 Integrative Theories

These are CSR theories with a focus on how firms satisfy social

demands by ‘concentrating on issues management, public

responsibility, stakeholder management and corporate social

performance.’ Under these theories, the firm is genuinely concerned

37
with ensuring that the interests of stakeholders to the business are

integrated in the firm’s decisions and activities to the extent of

incorporating their concerns.

2.1.4 Political Theories

These theories are concerned with the powers firms have and how

these powers can be used to impact on society in a responsible and

positive manner. Frans Paul van der Putten in his work titled “A

Research Agenda for International Corporate Social Responsibility” add

that in particular, the political theories of CSR focus on corporate

constitutionalism, integrative social contracts and corporate citizenship.

These theories do not operate in a continuum. In fact, Garriga and

Mele advise that each of them presents four dimensions related to

profits, political performance, social demands, and ethical values.

In a later study in 2008 by Domenec Mele titled “CSR: Four

Theories for a Necessary Practice”, Corporate social responsibility is

38
portrayed as a subject that evolves, changes or shifts with time such that

corporate attitudes and behaviors that were hitherto considered

responsible may no longer be seen to be so today. This is because as

society evolves, firms are also expected to improve the ways they relate

with society and its needs. In this realization, Mele distinguishes four

definite theories of CSR. These are:

2.2 THE CORPORATE SOCIAL PERFORMANCE THEORY

Based on the need to be both socially responsible and responsive,

this theory canvasses that firms and society are symbiotically related,

with each party performing its obligations in the relationship. Firms

operate in the society and society allows them to do so. In return, firms

must serve society by creating wealth, contributing to the social needs of

society as well as meting the social obligations which the firms are

expected must in responsible and responsive manners. When firms

abide by this bond of symbiosis, they earn some good reputation which

39
is an invaluable asset. The major weakness which Mele associated with

the social performance theory is that under it, business firms attempt to

give capitalism a human face with less emphasis on the ethics of their

business conduct.

2.3 THE SHAREHOLDER VALUE THEORY

The theory sees the primary responsibility of firms as that of

generating profits for shareholders and working hard to raise their stock

values. The perception on the performance of social activities by firms

for society is that such activities are not necessary except the laws

specify otherwise since business firms are created primarily to enhance

shareholders value. Without argument, this theory focuses on wealth

creation and shareholder value with less commensurate consideration

for the wellbeing of society. But in discussing the demerits of the theory,

Mele notes that although wealth creation is part of firms’ social

responsibility, firms should not take it as the only social responsibility

40
they should shoulder. He argues that it is not also good enough that

firm cite compliance with relevant laws as part of meeting their social

responsibility because they can comply with the laws and still exploit

their workers, to balance their needs with those of society and achieve

sustainable development, firms are advised by Mele to considerably

integrate those of other stakeholders in society, which to oil companies

and a host of other companies include the interest of the environment as

stakeholders.

2.4 STAKEHOLDER THEORY

Chester Bernard noted that “the purpose of the corporation was to

serve the society, and that the function of the executive was to instill this

sense of moral purpose in the corporation’s employees.”

This is the basis of the stakeholder theory which recognizes that it

is the satisfaction of all the legitimate interest of a firm’s interdependent

constituencies (like the employees, customers, suppliers, the local

41
community, shareholders, etc.) that can be said to truly lead to the long-

term success of that firm. The major argument against the stakeholder

theory, Mele notes, is that it can lead to opportunism given that selfish

executives can justify their selfish decisions and actions by merely

arguing that they are in the stakeholders’ interest. Another pitfall is that

although interests of specific stakeholders may differ, this theory treats

all stakeholder interests as though they are equal, and this does not

bring fairness. But, Mele asserts that any attempt by the firm to bring

fairness into stakeholder representation will present some difficulty in

corporate decision making, apart from portraying the firm as merely

existing to service the interest of stakeholders.

2.5 CORPORATE CITIZENSHIP THEORY

This theory conceptualizes firms as corporate citizens who should

“actively contribute to the good of society or the world as a whole.”

Here, organizations are seen as citizens who should go beyond just

42
meeting their ordinary legal duties to also participate in the wellbeing of

society, and indeed the world as a whole, even as global citizens.

The meaning comprises “the full range of both internal and

external corporate activities that contribute to the well-being of society;

those which embrace the related concepts of sustainability and

corporate social responsibility (CSR).”

The Corporate Citizenship Research Unit of Deakin University

explains the subject as “recognition that a business, corporation or

business-like organization, has social, cultural and environmental

responsibilities to the community in which it seeks a license to operate,

as well as economic and financial ones to its shareholders or immediate

stakeholders. Corporate citizenship involves an organization coming to

terms with the need for, often, radical internal and external changes, in

order to better meet its responsibilities all of its stakeholders (direct or

indirect), in order to establish, and maintain, sustainable success for the

organization, and, as a result of the success, to achieve long term

43
sustainable success for the community at large,” On their own part, the

Centrefor Corporate Citizenship at Boston College takes the subject as

“the business strategy that shapes the values underpinning a company’s

mission and the choices made each day by its executives, managers and

employees as they engage with society.”

The theory considers firms as citizens who stand shoulder to

shoulder with any other citizen that comprise the society. Thus, it

clearly notes that firms should come out to take their place in the

community as other citizens do and also to play the impactful roles that

justify their citizenship. Matthew Haigh and Marc Jones further captures

the idea of corporate citizenship in their 2007 work titled “The

Transnational Corporation and New Corporate Citizenship”.

The major problem with this theory is that it is said to lack

consciousness. More than this, it is also difficult to develop a global

standard for corporate citizenship as it is an issue that should reflect the

peculiar circumstances firms find themselves operating in.

44
notwithstanding these difficulties, many transnational firms are

increasingly adopting corporate citizenship as a strategy in their

relationship with their communities and the world at large.

As it is true with management practice, the situation

organizations face may call for what will best suffice in the circumstance

they face, including the blend thereof.

2.6 CORPORATE SOCIAL RESPONSIBILITY (CSR), ITS

COMPONENTS AND BOUNDARIES

Another major problem that has aided the proliferation of

definitions on CSR is the ambiguous nature of the boundaries of social

responsibility or what truly may constitue social responsibility.

Notwithstanding these constraints, research into CSR remains

incrementally active especially from the 1950s when the first definition

of the subject credited to H.R. Brown was offered in his work titled The

Social Responsibilities of the Businessman. In this work, Brown is

45
quoted by Frans van der Putten to have defined CSR as the obligation of

businessmen to pursue those policies, to make those decisions, or follow

those lines of actions which are desirable in terms of the objective and

values of our society.

Thus for a firm to be socially responsible, it must be seen to

properly take on economic, legal, ethical and discretionary or

philanthropic responsibilities.

2.6.1 Economic Responsibilities

By their nature, firms are brought into existence as economic units

that provide goods and services for the society and its members with a

primary incentive to make profit in the efficient discharge of this

function. Archie B. Carroll, in his work titled “The Pyramid of

Corporate Social Responsibility: Toward the management of

Organizational Stakeholders” asserts that the major twists in the firm’s

existence came at the point when this notion for profit making

46
metamorphosed into a notion for maximum profit making and has ever

remained that way. The fact however is that Responsibility: Toward the

Management of Organizational Stakeholders” asserts that the major

twist in the firm’s existence came at the point when this notion for profit

making metamorphosed into a notion for maximum profit making and

has ever remained that way. The fact however is that without the

profitable performance of the economic responsibility of firms, the other

remaining three social responsibilities of the firm will at best be still-

born. So, the economic component of firm social responsibility operates

on the notion that a firm should perform in a manner consistent with

maximizing earnings per share; be committed to being as profitable as

possible; maintaina storng competitive position; maintain a high level

of operating efficiency and must be seen to be successful by being

consistently profitable. So, by their existence, society sanctions that

business firms must operate according to the profit motive.

47
2.6.2 Legal Responsibilities

To be socially responsible also, business firms must be seen to

comply with all relevant laws of the land at the federal, state, local

government and municipal levels. Therefore, these firms should be able

to pursue their legitimate business interests within the prescriptions of

the law.

Observance of the laws of the land must thus coexist with the

economic and other responsibilities of the firm as it conducts its

business. So, it is necessary for business firms to operate in ways that are

consistent with governmental and legal expectations; comply with

various federal, state, local government and municipal laws and

regulations; be a law-abiding corporate citizen; be seen as fulfilling its

legal obligations; and be seen to provide goods and services that meet

legal prescriptions for such goods and services.

48
2.6.3 Ethical Responsibilities

Firms must also be seen to be truly fair and just in their dealings

and relationship with the society at large. This is part of their social

responsibility defined within the realm of ethical responsibilities. Firms

are expected to respect the views of members of the communities in

which they operate as they pertain to what are seen as acceptable and

unacceptable practices that guided the evolution and sustenance of such

communities or societies. In other words, ethical responsibilities of the

firm would include embracing those norms, standards and expectations

that clearly reflect the concerns of fairness, justness, morality and moral

rights by their different stakeholders like the consumers, employees,

shareholders and their host communities at micro and macro levels. The

content of firms’ ethical responsibilities here would thus embrace the

necessity for firms to perform in manners that are consistent with the

ethical norms and mores of society; to recognize and respect new or

49
evolving ethical moral norms adopted by society; prevent ethical norms

from being compromised in order to achieve corporate goals; define

good corporate citizenship to include the doing of all those things that

society expects of them morally and ethically; and a recognition that

corporate integrity and ethical behaviour go beyond mere compliance

with laws and regulations. In fact, given that ethics both predates and

feeds new laws, it has, through time, aided the broadening of existing

laws and, in many cases, helped to inform the creation of entirely new

body of laws. Thus, firms should handle their ethical responsibilities

very seriously given that failure to do so can give rise to new set of laws

that may cage firms so badly as to affect their financial performance. It is

sometimes as a result of firms not doing what they are supposed to be

doing that new laws are created to address those lapses pointedly.

2.6.4 Discretionary or Philanthropic Responsibilities

Philanthropy can be seen as the voluntary promotion of human

welfare or benevolent altruism awith the intention of increasing the

50
well-being of mankind, especially by charitable giving. It can also be

more pointedly defined as the act of donating money, goods, services,

time, and/or effort to support a socially beneficial cause, with a defined

objective and with no financial or material reword to the donor. Another

web definition sees philanthropy as the giving of money, assets,

encouragement and expertise to create social or environmental impact.

It is different from charity, though both are important. By charity, we

refer to something that is purely altruistic, compassionate, and person-

to-person, such as providing disaster relief or emergency aid. But by

philanthropy, we mean something more strategic and engaging, less

intuitive, more thought out, involving an individual giving to an

organization that is trying to address the root causes of a problem.

But Archie B. Carroll in his treatise defines philanthropy to

encompass ‘those corporate actions that are in response to society’s

expectation that businesses be good corporate citizens, including active

engagement in acts or programs to promote human welfare or

51
goodwill.’ Carroll also distinguishes philanthropic responsibilities from

ethical responsibilities in that philanthropy is not always expected in a

moral or ethical sense. An organization can engage in great acts of

philanthropy but still receives serious societal bashing if it makes ethical

missteps. Carroll thus argues that although philanthropy is highly

desired and priced, it is actually and arguably less important in weight

than the other three categories of social responsibility.

This is possibly why Deb Abbey quoted in the introductory part

of this research said that CSR is not about what firms give or can give, it

is about how they operate. Thus, to be socially responsible

philanthropically, it is desirable that firms perform in a manner

consistent with the philanthropic and charitable expectations of society;

assist the fine and performing arts as well as other vocations in society;

managers and employees participate in voluntary and charitable

activities within their local communities; provide assistance to private

52
and public educational institutions; and voluntarily, assist those projects

that enhance the community’s quality of life.

Ultimately, the socially responsible firm is a firm that makes

profit, obeys the law, is ethical and good corporate citizen or

philanthropist.. all these four social responsibility roles must be

simultaneously fulfilled by the firm. Each of them is a distinct

component of CSR which when taken together comprises the totality of

what is meant by Corporate Social Responsibility.

2.7 STAKEHOLDER MANAGEMENT AND CSR DISCLOSURE

Traditionally, a firm is accountable only to its stockholders, and

its objective is to maximize the value of the firm. Its activities, however,

affect a wide range of other stakeholders, including employees,

suppliers, customers, governments, local communities, and th

environment (Simmons, 2004; Brickson, 2007). Stakeholder theory posits

that a firm’s long term existence depend upon addressing stakeholders’

53
concerns, and CSR has expanded firm responsibilities to stakeholders

and the public.(Foreeman, 1984, Donaldson and Freston, 1995).

Porter and Kramer (2006) propose that CSR can be much more

than a cost, constraint, or charitable deed, that it can in fact be a potent

source of innovation and competitive advantage. Being socially

responsible brings firms various potential benefits, such as improved

labour relations and employee productivity, less risk of litigation related

to its products/services, fewer complaints from the community because

of environmental issues, lower regulatory costs, and better brand

recognition, among others. These potential benefits suggest the socially

responsible firms will perform better. Cochran and Wood (1984),

McGuire et al (1988), and Beurden and Gossling (2008) document a

positive association between CSR and financial performance.

Managing the diverse rang eof interests of multiple stakeholders

however, is the biggest challenge for firms. A firm’s action have

different impacts on its stakeholders, while stakeholders have various

54
expectations of the demands on the firm and therefore place different

emphases on the firm’s responsibilities, which causes conflicts of interest

among stakeholder groups (Barney, 1991; Greenley et al., 2004; Ogden

and Watson, 1999; Galbreath, 2006).

Rather than trying to satisfy every stakeholder, firms prioritize

their stakeholders after assessing the resource needs of each stakeholder

group (Pfeffer, 1981), and the legitimacy and urgency of attending to the

needs of stakeholder groups (Mitchell et al., 1997). Several studies

provide evidence in support of this process of prioritization, including

those of Clarkson (1995), Uhlaner et al, (2004), Papa Solomou-Doukakis

et al. (2005), Galbreath (2006), and jamali (2008). By disclosing CSR

information, a firm addresses the information needs of stakeholders and

provides a basis for dialogue between the firm and its stakeholders

(Dierkes and Antal, 1985; Gray et al., 1995). As a critical avenue of

stakeholder management, CSR disclosure shapes external perception of

the firm, helps relevant stakeholders assess whether the firm is a good

55
corporate citizen, and ultimately justifies the firm’s continue existence to

its stakeholders. Gelb and Strawser (2001) argue that a greater level of

disclosure is itself a form of socially responsible behaviour.

Managers must weigh the benefits and costs of disclosing CSR

information. The literature on disclosure indicates that increased levels

of disclosure lead to a reduction in information asymmetry between

managers and investors (Kim and Verrecchai, 1994; Botosan, 1997), and

thus help to increase stock liquidity, attract institutional investors, and

eventually lower the firm’s cost of capital (Gibbins et al., 1990; Clarkson

et al., 1994; Frankel et al., 1995; Botosan, 1997; Healy et al., 1999; Healey

and Palepu, 2001). Blacconiere and Patten (1994) find that firms that

gave more environmental information in their financial report prior to a

chemical leak experienced a less negative market reaction than firms

that provided less such information. Their results suggest that investors

interpreted such disclosure as a positive sign of the firm managing its

exposure to future regulatory costs.

56
 In a recent study, Dhaliwal et al, (2009) find that firms with a high

cost of equity capital tends to release CSR reports, and that reporting

firms with relatively superior social responsibility performance enjoy a

reduction in the cost of equity capital. CSR information, however, may

be used by stakeholders against the firm, and hence hurt firm value. For

instance, the community may use disclosed information on the

environmental impact of corporate operations to file a lawsuit against

the firm, while the disclosure of the effect of company products on

consumer health and safety may also result in consumer actions that

have negative monetary implications for the company. In addition, the

release of CSR information such as labour practices and relations and

supplier and customer interactions may result in a loss of competitive

edge (Healy and Palepu, 2001).

Most importantly, prioritization affects the disclosure decision of

managers. As they receive multiple information requests from diverse

groups of stakeholders, managers direct their disclosure efforts towards

57
key stakeholders that are judged as such based on factors including

power, legitimacy, and urgency (Mitchell et al., 1997). Key stakeholders

receive more attention from the management of a firm, and the issues of

concern to them are more likely to be addressed in the CSR disclosure.

2.8 FIRM PERFORMANCE AND CSR DISCLOSURE AMONG

NIGERIAN COMPANIES

The primary stakeholders of a firm are its shareholders, who are

concerned with firm profitability. From a legitimacy perspective, firms

with good performance need to demonstrate their contribution to social

and community interests, and provide greater disclosure of their CSR

activities to avoid regulation (e.g. Ng and Koh, 1994; Cho and Patten,

2007). This argument suggests a positive relation between firm

performance and the likelihood of CSR disclosure and disclosure

quality. The existing evidence, however, is mixed. Some studies confirm

a positive relationship. Roberts (1992), Alnajjar a(2000), and Haniffa and

58
Cooker (2005), for example, find that CSR disclosure is positively related

to profitability. In contrast, Neu et al., (1998) find that unprofitable firms

disclose more environmental information in annual reports. Gray et al.,

(2001) find that the relationship between profitability and CSR

disclosure is not stable from year to year, and Belkaoui and Karpik

(1989), Freedman and Jaggi (1988), Patten (1991), Cormier et al. (2005),

Branco and Rodrigues (2008), and Reverte (2009) do not find any

significant relationship between firm performance and CSR disclosure.

Gray et al., (2001) suggest that differences in cultural and

institutional factors among countries may explain the mixed results of

the relation between profitability and CSR disclosure. Examining the

data of Norwegian, Danish, and U.S. companies, Smith et al., (2005) find

evidence that cultural and institutional factors affect CSR disclosure.

Nigeria has unique cultural and institutional features that affect

managerial incentives regarding CSR and the process of stakeholder

prioritization, and hence the decision by managers to disclosure CSR

59
information. From the stakeholder management prospective, however,

shareholders primacy (the view that firms exist only to make money for

their shareholders) is still dominant in Nigerian companies, and

stakeholders have little influence. Lin (2010) argues that even though

Nigeria has introduced several initiatives to promote CSR, the pressure

on Nigerian companies from stakeholders to demonstrate CSR is quite

weak, and stakeholder expectations are low. There are a number of

possible explanations for this. First, although the government launched

some CSR initiatives, regulatory costs for irresponsible behaviour are

not clearly addressed, which may lead Nigerian companies to remain

uncommitted to, and place little priority on CSR. Second, unlike their

counterparts in Western countries, NIGERIANS consumers are lagging

in pressuring companies to develop and produce goods and services in

a responsible fashion. Lack of consumer awareness is one reason, but

the most important one is the deficiency in consumer rights protection

in Nigeria. Third, critical players in CSR, nongovernmental

60
organizations, are handicapped by the Nigerian government and the

political environment in Nigeria, in not only their formation, but also

their CSR agenda.

Jamali (2008) contents that firms in developing countries prioritize

their stakeholders based primarily on instrumental considerations,

namely bottom line firm performance. Consistent with Jamali’s (2008)

argument, a questionnaire survey of Nigerian firms by Zu and Song

(2009) finds that Nigerian managers perceive that CSR activities serve

the economic aims of firms. Because of the lack of regulatory costs and

stakeholders influence in Nigeria, managers of Nigerian companies

mainly consider profitability when deciding on the level and quality of

CSR disclosure. Therefore, in Nigeria, only when a firm perform well

does it have the motivation and incentive to disclose its CSR activities to

stakeholders.

Corporate social responsibility (CSR) has permeated management

practice and theory up to a point where CSR can be referred to as the

61
latest management fad (Guthey, Langer, & Morsing, 2006). However, so

far CSR integration into business processes has been very uneven,

Hockerts (2008), for example, finds that most firms conceptualize CSR

primarily as a tool to reduce risks and operational cost. Only a minority

of firms is actually using CSR as a means to drive innovation. In their

study of 150 German and British pharmaceutical companies, Blum-

Kusterer and Hussain (2001) similarly find that regulation and

technological progress are the two main drivers for sustainability

innovations. They observed that the lure of emerging market niches was

no important motivator for the firms studied. This is unfortunate since

bringing stakeholders into the innovation process offers important

opportunities to increase both the social and financial performance of

firms.

It is worth state of here that CSR on the other hand is a concept

that has attracted worldwide attention and acquired a new resonance in

the global economy (Jamali, 2006). Heightened interest in CSR in recent

62
years has stemmed from the advent of globalization and international

trade, which have reflected in increased business complexity and new

demands for enhanced transparency and corporate citizenship.

Moreover, while governments have traditionally assumed sole

responsibility for the improvement of the living conditions of the

populations, society’s needs have exceeded the capabilities of

governments to fulfill them (Jamali, 2006). In this context, the spotlight

is turning to focus on the role of business in society, and companies are

seeking to differentiate themselves through engagement in what is

referred to as CSR. The World Business Council for Sustainable

Development (WBCSD) defines CSR as the commitment of business to

contribute to sustainable economic development, working with

employees, their families and the local communities (WBCSD, 2001).

More generally, CSR is a set of policies, practices, and programs that are

integrated throughout business operations and decision-making

processes, and intended to ensure the company maximizes the positive

63
impacts of its operation on society (Business for Social Responsibility,

2003).

The most common conceptualizations of CSR are those of Carroll

(1979) and Lantos (2001). Carroll (1979; 1991) differentiated between

four types of CSR, namely, economic (jobs, wages, services, legal (legal

compliance and playing by the rules of the game), ethical (being moral

and doing what is just, right, and fair0 and discretionary (optional

philanthropic contributions), while Lantos (2001) collapsed these

categories into three; ethical, altruistic, and strategic. According to

Lantos (2001), ethical CSR is morally mandatory and goes beyond

fulfilling a firm’s economic and legal obligations, to its responsibility to

avoid herm or social injuries, even in cases where the business does not

directly benefit. Altruistic CSR, according to Lantos (2001), is

humanitarian / philanthropic CSR, which involves genuine optional

caring, irrespective of whether the firm will reap financial benefits or

not. Examples include efforts to alleviate public problems (e.g. poverty,

64
illiteracy, etc.) in an attempt to enhance society’s welfare and improve

the quality of life. Strategic CSR on the other hand is strategic

philanthropy aimed at achieving strategic business goals while also

promoting societal welfare (Jamali, 2007). The company strives to

identify activities and deeds that are believed to be good for business as

well as for society (Quester and Thompson, 2001).

Principles for Good Governance of Corporate Responsibility:

“Business in the Community” is a journal for the advancement of

corporate governance especially in the area of corporate social

responsibility. Its Chief Executive, Stephen Howard, presents eight

principles of good governance of corporate social responsibility which

should guide corporate boards and management to properly position

and integrate CSR, for value, into the everyday strategic focus of the

firm. These principles require that the board and management should:

65
 1. Provide leadership and commitment to set responsible business

values and standards.

2. Think strategically about corporate social responsibility.

3. Request regular information on implementation against targets.

4. Engage in improving regulation in your business sector.

5. Align performance management to reward responsible success

over the long term.

6. Create a culture of integrity.

7. Use internal audits and risk management to secure responsibility;

and

8. Regularly review your governance arrangements.

Howard notes that previous research with the Doughty Center

demonstrates that corporate oversight of environmental and social

impacts makes a difference. He further notes that findings from the

Corporate Responsibility Index Analysis (CRIA) demonstrates that

companies with corporate social responsibility committees reporting to

66
the board increased from 13% in 2002 to 60% in 2007. The research also

shows that those companies with focused board sub-committee on CSR

are more likely to better manage their social and environmental impacts,

thus performing higher across the overall CSR index.

Does CSR Yield Value to Organizations?

Three methods of evaluating CSR performance are the accounting

or financial measures, market/stock market value measures and the

mixed measures which include the reputational assets accumulated

through engagement in CSR programs. Although quite a lot of research

have been focused on CSR and its effects on firm value, much of usch

research are not empirical. Results of empirical research in this regard

however follow the pattern of studies elsewhere where findings either

establish positive, negative, no or mixed relationships. This segment

thus reviews the literature on whether undertaking CSR efforts

enhances firms or diminishes them.

67
 This review is split into three to report findings that establish a

positive relationship between CSR and firm performance, those that

establish negative or no relationship and those findings that are mixed.

Some Studies that establish positive relationship between CSR and

firm Performance or Value

There is quite a large amount of literature, empirical and

otherwise, that positively associate CSR to enhanced firm performance.

The evidence appears so overwhelming that even firms with

conservative bent to spending are increasingly indulging in CSR efforts.

This is true even of Nigeria when a lot of firms are foraying into the

practice. A survey of Americans commissioned by the National

Consumers League and Fleishman Hillard International

Communications, released on May 31, 2006, clearly shows that two-

third of Americans would patronize or buy the products of companies

they adjudged socially responsible, especially those Economic and

68
Financial Framework”, summarizes the benefits that are linked to CSR

programs to include:

 Reduced risk to the firm

 Reduced waste

 Improved relations with regulators

 Generating brand equity

 Improved human relations and employee productivity

 Lower cost of capital.

Laura Poddi and Sergio Vergalli in their 2009 study titled “Does

Corporate Social Responsibility Affect the Performance of Firms?” also

find that CSR firms are more virtuous, and have better long run

performance. They add that although such firms may bear some initial

costs arising from their involvement in CSR, they nonetheless obtain

higher sales and profits due to the reputation effect of their corporate

social responsibility involvements or programs, as well as a reduction of

long run costs and increased socially responsible demands.

69
 In another study titled “Corporate Social Responsibility – An

Economic and Financial Framework” Geoffrey Heal asserts that poor

shouldering of CSR cost organizations dearly through the loss of

reputation and goodwill. This means that organizations that properly

integrate CSR as part of their business strategy, develop good programs

to implement this strategy and go ahead to implement the CSR strategy

effectively will enjoy high reputation and accumulate high reputational

assets. Heal also states that CSR may reduce a firm’s cost of capital

through the impact of its “financial cousin” called Social Responsibility

Investing (SRI). SRI “suggests that there may be a connection between a

firm’s policies towards corporate social responsibility and its position in

the capital markets. At the same time, one of the tenets of CSR

proponents is that it raises profits in the long run through” reduced risk,

reduced waste, improved relations with regulators, generating brand

equity, improved human relations and employee productivity, and

through lower cost of capital.

70
 A study by Nicholas Mangos and Peter O’Brien investigates

whether social responsibility practices of Global Australian firms

enhance economic performance of these firms over a three year period

between 1993 and 1995. The study titled “investigating social

responsibility practice of Global Australian Firms and how those

practices enhance economic success” find that CSR has positive and

strong effect on the firm in terms of “community related stakeholder

concerns”. The results of the study also in another study by W. Gray

Simpson and Theodor Kohers titled “The Link between Corporate Social

and Financial Performance: Evidence from the Banking Industry”, a

solid support was given to the hypothesis that the link between CSR

and financial performance of the firm is quite positive. Lee E. Preston

and Douglas P. O’Brien also see no significant negative relationship

between CSR and firm financial performance. These authors studied 67

large U.S corporations for a period of 10 years, between 1982 and 1992,

71
under the title “The Corporate Social-Financial Performance

Relationship” to arrive at the above finding.

Leonardo Bacchetti, Stefania Di Giacmo and Damiano Pinnacchio

in their study titled “Corporate Social Responsibility and Corporate

Performance: Evidence from a Panel of U.S. Listed Companies” observe

that total sales per employee are significantly higher in CSR firms

notwithstanding the fact that smaller portion of the financial benefits so

derived go to shareholders (suggesting that returns on equity may be

lower in CSR firms). But this seeming penalty of relative lower return on

equity is compensated for by reduced conditional volatility social

responsibility. The authors go further to document that negative

consequence are the portion of firms that abandon CSR. In his work on

“Competitiveness and Corporate Social Responsibility”, Laszlo Zsolnai

states that “caring organizations are rewarded for the higher costs of

their socially responsible behaviour by their ability to form

commitments among owners, managers, and employees and to establish

72
trust relationships with customers and sub-contractors.” He went ahead

to quote Robert Frank, the author of the book “What Price the Moral

High Ground?” who clearly pointed that people who are intrinsically

motivated to adhere to ethical norms often prosper in competitive

environments; and that socially responsible firms can survive in

competitive environments because social responsibility can bring

substantial benefits to firms.

73
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84
 CHAPTER THREE

THEORETICAL FRAMEWORK, METHODOLOGY AND MODEL

SPECIFICATION

3.1 THEORETICAL FRAMEWORK

The concept of social responsibility has evolved over time in three

movements. The first movement is known as the social responsibility

movement which saw the responsibility of firms as one focusing on the

business obligation of the firm as well as on motivation.

The second is the social responsiveness movement which

emphasizes action and activity by the firm towards meeting some social

obligations to society (being responsive). It underscores activities that

have projected and defined outcomes that match or contribute to

development objectives or policies defined by a firm. And the third,

which summarizes into the CSR practiced today, is Corporate Social

Performance (CSP) and relates to how well an institution has translated

85
its social goals into practice (outcomes and results) It is also seen by

Marc Orlitzky as “a business organization’s configuration of principles

of social responsibility, processes of social responsiveness, and policies,

programs, and observable outcomes as they relate to the firm’s societal

relationship.” Put in an everyday language, CSP is a construct that

emphasizes a company’s responsibilities to multiple stakeholders, such

as employees and the community at large; in addition to its traditional

responsibilities to economic shareholders. These movements have

resulted in an unwieldly field of theories which Elisabet Garriga and

Domenec Mele later articulated into four categories. These categories

show what the academic community considers CSR to cover as the

central themes researched.

3.2 METHODOLOGY OF THE RESEARCH

This study employs the ordinary least square (OLS) estimation

techniques to estimate the parameters of the model so specified.

86
3.3 SAMPLE SIZE AND PROCEDURE

The sample was made up of 13 companies out of the top 20

companies by market capitalization in the Nigerian Stock Exchange for

2009.

3.4 METHOD OF DATA COLLECTION

Secondary data was used for this study. They include relevant

textbooks, seminars and term papers, internet review, private research

publications (daily newspapers), various journals, Nigerian Stock

Exchange (NSE) Fact Books, CBN Statistical Bulletin, Companies and

Annual Reports of companies

3.4 MODEL SPECIFICATION

Based on the above theoretical framework and highlights relating

to the corporate social responsibility of firma performance in Nigeria, a

87
single econometric model was specified to test the hypothesis as stated

in chapter one of this study.

This research contains information on the following parameters:

the performance of firm, the size of the firm, the corporate social

responsibility and risk factor. The econometric model used to access the

impact of CSR on firm performance is given by equation.

The functional form of the model is

P = δ + β1CSR + β2IND+ β3SIZE + β4LEV +Ut

Performance = f(CSR, IND, SIZE, LEV)- - - - - (1)

CSR = f(performance, IND, SIZE, LEV)- - - - - (2)

Where:

CSR = Corporate Social Responsibility

IND = Industry type (1 if companies is financial or 0 otherwise)

SIZE = Company size proxy by logarithm of total assets

Performance = proxy by return on equity (ROE) and earnings

per share (EPS)

88
LEV = Leverage, U = error term

89
 Apriori Expectation

β1, β2, β3, β4 > 0. The implication is that a positive relationship is

expected between the explanatory variables and the explained variable.

90
 REFERENCES

Garriga, E., & Mele, D. (2004), “Corporate Social Responsibility

Theories: Mapping the Territory” (Electric version). Journal of

Business Ethics 53: 51-71, 2004. Retrieved July 18.

Marc Orlitzky. (June 2000), Corporate Social Performance: Developing

Effective Strategies.

91
 CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1 INTRODUCTION

Research generally, is meant to generate data for analysis and this

results in a large volume of statistical information which is mostly in its

raw state. In order to use data for the objective of a research, they have

to be reduced to manageable dimensions. This among other things, is

what this chapter seeks to achieve.

In this chapter, an attempt will be made to classify the

information obtained from the annual reports and accounts of selected

companies in the year under review. The information were in respect of

the independent variables which include IND, LEV, BIG 4, EPS, CAPIN

and SIZE. Information was also obtained on the dependent variable

which is CSR.

92
 Descriptive Analysis

Mean Std. Skeweness Kurtosis Minimum Maximum

Deviation
Statistics Statistics Statistics Statistic Statistics Statistics

CSR 12.3 2.496 -0.148 -0.936 8 16

SIZE 11.565346 0.5859074 -0.224 -1.585 10.6459 12.3032

LEV 3.344182 1.9494600 0.401 0.352 0.8420 7.2872

ROA 0.104355 0.1090317 0.375 -2.014 0.0015 0.2609

ROE 0.267010 0.3030286 1.379 1.236 0.0127 0.9279

EPS 3.5456 5.09646 1.772 2.379 0.10 14.81

IND 0.69 0.480 -0.946 -1.339 0 1

CAPIN 0.164600 0.1984236 1.688 1.947 0.0197 0.6450

CSR 1.00 0.000 -- -- 1 1

COM
SUB 8.55 4.886 -0.084 -1.039 1 13

BIG4 1.00 0.000 -- -- 1 1

Valid N
Listwise

93
4.2 DESCRIPTIVE STATISTICS

The minimum and maximum statistics for the corporate social

responsibility (CSR) of the forms are 8 and 16 respectively. Comparison

between the mean and standard deviation of 12.31 and 2.496

respectively shows the great disparity, indicating that the companies are

not similar in terms of CSR. The minimum and maximum statistics of

the SIZE of the firms are 10.6459 and 12.3032 respectively. Comparison

between the mean and standard deviation of 11.565346 and 0.5859074

respectively shows great disparity indicating that the companies are

different in SIZE. The minimum and maximum statistics of LEV are

given as 0.8420 and 7.2872 respectively. Comparisons between the mean

and standard deviation of 3.344182 and 1.9494604 shows less disparity

which is insignificant, indicating similarity between the companies in

LEV. The minimum and maximum statistics for the ROA are 0.0015 and

0.2609 respectively. Comparison between the mean and standard

94
deviation of 0.104355 and 0.1090317 respectively shows less disparity

which is insignificant, indicating similarity between the companies in

ROA. The maximum and minimum statistics for the ROE are 0.0122 and

0.9279 respectively. Comparison between the mean and standard

deviation of 0.26790 and 0.3030286 respectively shows less disparity

which is insignificant indicating similarity between the companies in

ROE.

The maximum and minimum statistics for the EPS are 0.10 and

14.81 respectively. Comparison between the mean and standard

deviation of 3.5456 and 5.09646 respectively shows less disparity which

is insignificant, indicating similarity between the companies in EPS. The

minimum and maximum statistics for IND are 0 and 1 respectively.

Comparison between the mean and standard deviation of 0.69 and 0.480

respectively shows less disparity which is insignificant, indicating

similarity between the companies in IND. The minimum and maximum

statistics for CAPIN are 0.0197 and 0.6450 respectively. Comparison

95
between the mean and standard deviation of 0.164600 and 0.1984236

respectively shows less disparity which is insignificant, indicating

similarity between the companies in CAPIN. The maximum and

minimum statistics for the CSRCOM are given as 1 and 1 respectively.

Comparison between the mean and standard deviation of 1 and 0

respectively shows no disparity, indicating similarity between the

companies in CSRCOM. The maximum and minimum statistics for the

SUB are given as 1 and 16 respectively. Comparison between the mean

and standard deviation of 8.55 and 4.886 respectively shows great

disparity, indicating that the companies are not similar in SUB. The

maximum and minimum statistics for the BIG4 are given as 1 and 1

respectively. Comparison between the mean and standard deviation of

1.00 and 0.00 respectively shows no disparity, indicating similarity

between the companies in BIG4

96
 Correlation
CRS SIZE LEV ROA ROE EPS IND CAPIN SUB BIG4

CSR 1

SIZE 0.45 1

LEV 0.032 0.802** 1

ROA 0.084 -0.398 -0.744** 1

ROE -0.139 -0.831** -0.563 0.902** 1

EPS -0.083 -0.650 -0.355 0.686* 0.885** 1

IND 0.155 0.608* 0.757** -0.755** 0.885** -0.679* 1

CAPIN 0.105 -0.550 -0.721* 0.738* 0.758* 0.556 -0.872** 1

SUB 0.010 0.879** 0.855** -0.558 -0.823* -0.716 0.713* -0.713* 1

BIG4 12 11 10 9 9 8 12 12 10 12

** Corelation is significant at the 0.01 level (2 tailed)

* Correlation is insignificant at the 0.05 level (2 tailed)

4.3 PEARSON’S CORRELATION COEFFICIENT ANALYSIS

Correlation is the degree of association between variables and it is

represented by R which lies between 0-1. It could be positive or

97
negative, very low, or high, very high. Considering the results of the

correlation of the variables, the following analysis are thus made:

CSR:

- There is a low positive correlation of 0.45 between the CSR and

SIZE of the companies. It is however, insignificant, indicating that

CSr is not affected by SIZE.

- There is a very low positive correlation of 0.032, 0.084, 0.155, 0.105

and 0.010 between the CSR and LEV, ROA, IND, CAPIN, SUB

respectively of the companies. It is however insignificant,

indicating that CSR is not affected by them.

- There is very low negative correlation of -0.139 and -0.083

between the CSR and ROE, EPS respectively of the companies. It

is however insignificant indicating that CSR is not affected by

these.

98
- There is a very high positive correlation of 12 between CSR and

BIG4 of the companies. It is however insignificant, indicating that

CSR is not affected by BIG4.

99
SIZE:

- There is a high positive correlation SIZE and ROE, EPS CAPIN, of

0.831, -0.0650 and 0.550 respectively. However, only that of ROE is

significant, indicating that SIZE is affected by ROE and not EPS or

CAPIN.

- There is a low negative correlation between SIZE and ROA of

00.855 between LEV and ROA, IND, CAPIN, SUB. Those of LEV

and ROA, CAPIN are significant at the 5% level while those of

LEV and ND, SUB are significant at the 1% level. This indicates

that LEV is affected by all four variables.

- There is a high negative correlation of -0.563 between LEV and

ROE. It is however insignificant indicating that LEV is not

affected by ROE.

100
 - There is a high negative correlation of -0.563 between LEV and

EPS. It is also insignificant, indicating that LEV is not affected by

EPS.

- There is a very high positive correlation of 10 between LEV and

BIG4 which is however, not significant, an indication that LEV is

not affected by BIG4.

ROA:

- There is a very high positive correlation of 0.902, 0.686, 0.738

between ROA and ROE, EPS, CAPIN. They are significant at the

1%, 5% and 1 level respectively, indicating that ROA is affected by

them.

- There is a high negative correlation between ROA and IND, SUB

of -0.755 and -0.558 respectively. That of IND is significant, while

SUB is not, indicating that ROA is affected by IND and not

affected by SUB.

101
- There is a very high positive correlation between ROA and BIG4.

It is however insignificant, indicating that ROA is not affected by

BIG4.

102
ROE:

- There is a very high positive correlation of 0.885, 0.758, and 9

between ROE and EPS, CAPIN, BIG4 respectively. EPS and CAPIn

are significant at the 1% and 5% levels respectively, while BIG 4 is

not. This indicates that ROE is affected by EPS and CAPIN, but

not affected by BIG4.

- There is a very high negative correlation of -0.856 and -0.823

between ROE and IND, SUB respectively. They are significant at

the 1% and 5% levels respectively, indicating that ROE is affected

by both.

EPS:

- There is a high positive correlation of 0.556 between EPS and

CAPIN. It is however, insignificant, indicating that EPS is not

affected by CAPIN.

103
 - There is a high negative correlation between EPS and IND, SUB of

-0.679 and -0.716 respectively. That of IND is significant at the 5%

levels while that of SUB is not significant indicating that EPS is

affected by IND and not affected by SU.

- There is a very high correlation of 8 between EPS and BIG 4. It is

however not significant, an indication that EPS is not affected by

BIG4.

IND:

- There is a very high positive correlation between IND and SUB,

BIG4 of 0.713 and 12 respectively. That of IND is affected by SUB

and is not affected by BIG4.

- There is a very high negative correlation of -0.872 between IND

and CAPIN which is significant at the 10% level, indicating that

IND is affected by CAPIN.

CAPIN:

104
 - There is a very high positive correlation of 12 between CAPIN

and BIG4, but is however insignificant, indicating that CAPIN is

not affected by BIG4.

- There is a very high negative correlation of -0.739 between CAPIN

and SUB which is significant at the 5% level, indicating that

CAPIN is affected by SUB.

SUB:

- There is a very high positive correlation of 10 between SUB and

BIG4, but which is insignificant, indicating that SUB is not affected

by BIG4.

105
 OLS Regression for Top 20 Companies by Market Capitalization
Dependent Model 1 Model 2 Model 3 Model 4
variable CSR CSR ROE EPS
Constant -77.951** -69.821 -10.870 29.954**
(-3.713) (-1.480) (-1.370) (4.215)
CSR - - 0.021 -0.032
(0.645) (-0.532)
EPS 0.333* - 0.447* -
(2.084) (2.542)
ROE - 1.955 - 1.527*
(0.402) (2.842)
SIZE 7.945** 7.646 0.073 -0.364
(3.957) (0.744) (-0.184) (-0.516)
LEV -0.345* -0.385 0.112*** -0.176*
(-2.144) (-0.711) 7.128 (-2.528)
BIG4 -2.987 -1.688 0.705* -.1474**
(-1.506) (-0.594) (2.426) (-4.105)
CAPIN 10.917* 2.275 14.756 -32.761***
(2.272) (0.217) (2.584) (-25.683)
SUB - -0.149 0.077* 0.174**
(-0.477) (-2.032) (4.479)
IND -1.588 -4.462 10.387* -23.175***
(-0.614) (-0.766) (2.549) (-30.689)
R 0.912 0.772 0.988 1.000
R2 0.832 0.595 0.975 0.999
R-2 0.630 -0.112 0.910 0.996
F 0.293* 0.5096 0.358** 384.443***
D.W 1.854 1.733 2.415 2.687

t-values ARE IN Parenthesis

106
xxx, xx, x – significant at the 1%, 5% and 10% levels respectively.

107
4.4 PRESENTATION OF RESULTS

Model I

CSR: -77.95 + 0.33EPS+7.945SIZE + 0.345lEV-2.987BIG4 +10.919CAN + -

1.588IND Ut

S.E. (20.992) 6.160 (0.161) (1.983) (4.805) (4.805) + (3.092)

T-test 2(-3.713) (2.084) (3.957) (-2.144) (-1.506) (2.272) t 514

R – square = 0.912

R-bar square = 0.630

F stat = 4.12 (0.071)

D.W. Statistics = 1.854

Model II

CSR: -69.821 + 1.955ROE+7.646SIZE + 0.345LUE + 1.688BIG4 + 0.149SUB +

2.2955CAPIN + 4.462IND

S.E. (47.147) (4.866) (4.381) (0.542) (2.843) + (0.313) (10.472) (5.823)

T-test (-1.480) (0.402) (1.744) (-0.711) (-0.594) (-0.477) (0.217) (-0.766)

108
R – square = 0.595

R-bar square = 0.112

D.W. Statistics = 1.733

F stat = 0.841 (0.606)

Model III

ROE = (F(CSR, EPS, SIZE, LEV, BIG4, SUB, CAPIN and IND)

ROE = -10.870 + 0.021CSR + 0.447EPS + -0.0735SIZE + 0.112LEV +

0.705BIG4 + -0.077SUB + 14.756CAPIN + 10.387IND

S.E. (7.934) (0.032) (0.176) (0.395) (0.016) (0.290) (0.038) + (5.711) + (4.075).

T-test = (-1.370) (0.645) (2.542) (-0.18.4) (7.128) (2.426) (-2.032) (2.584)

(2.549)

R – square = 0.975

R-bar square = 0.910

D.W. Statistics = 2.415

F stat = 14.922 (0.024)

Model IV

EPS = F(CSR, ROE, SIZE, LEV, BIG4, SUB, CAPIN, IND)

EPS = 29.954 +-0.3CSR + 1.527ROE + -0.3645SIZE + -0.176LEV + -

1.474BIG4 + 0.174SUB + -32.761CAPIN + -23.175IND

109
S.E. = (7.107) (0.061) (0.704) (0.070) (0.359) (1.276) (0.755)

T-test = (4.215) – (-0.532) (2.542) (-0.528) (-4.105) (4.4479 (-25.6883) (-

30.689)

R – square = 0.999

R-bar square = 0.996

D.W. Statistics = 2.687

F stat = 374.443

4.5 ANALYSIS OF REGRESSION RESULT

Model 1

A close examination of the ordinary least square regression results

for 2009 indicates that the coefficient of determination (R-squared) stood

at 0.832, indicating that 83.2% of the systematic variation in CSR is

explained by the explanatory variables i.e. EPS, SIZE, LEV, BIG 4, CPIN

and IND. Also the adjusted R-squared stood at 0.63 after adjusting for

the degree of freedom.

110
 The result reveals that the coefficient of EPS is positive. Thus, it is

plausible that the responses of CSR to EPS is positive. Specifically, the

result reveals that a unit change in EPS ratio leads to an increase in CSR

by 0.333 units. However, it is also important to state that the result is

statistically significant at the 10% level. The calculated t-value being

2.084, the result also reveals that the coefficient of SIZE is positive thus,

it is possible that the response of CSR to size is positive. Specifically, the

result reveals that a unit change in SIZE ratio leads to an increase in CSR

by 7.945 units. Also, the results is statistically significant at the 5% level,

the calculated t-value being 3.957. The result also reveals that the LEV is

negative. Thus, it is possible that an increase in LEV would result to a

decrease in CSR. Specifically, the result reveals that a unit change in

LEV would result to a decrease in CSR by 0.34 units. The results is

statistically significant at the 10% level, the calculated t-value being

2.144. The result also reveals that the coefficient of BIG 4 is negative.

111
Thus, it is possible that the response of CSR to BIG 4 is negative. The

result is statistically insignificant, the calculated t-value being -1.506.

The result also reveals that the coefficient of CAPIN is positive.

Thus, it is possible that the response of CSR to CAPIN is positive.

Specifically, the result reveals that a unit change in CAPIN results to an

increase in CSR by 10.917 unit. The result is statistically significant at the

10% level, the calculated t-value being 2.272. Finally, the result reveals

that the coefficient of IND is negative. Thus, it is possible that the

response of CSR to IND is negative. Specifically, the result reveals that

unit change in IND would result in a decrease in CSR by 1.588 units.

The result is statistically insignificant, the calculated t-value being -

0.614. The D.W. Statistics of 1.85 shows the presence of serial

autocorrelation between CSR and the independent variable.

Model 2

112
 A close examination of the ordinary least square regression results

for 2009 indicates that the coefficient of determination (R-squared) stood

at 0.595 indicating that 59.9% of the systematic variation in CSR is

explained by the explanatory variables i.e. ROE, SIZE, LEV, BIG 4,

CAPIN and IND. Also, the adjusted R-squared stood at -0.112 after

adjusting for the degree of freedom.

The result reveals that the coefficient of ROE is positive. Thus, it is

plausible that the responses of CSR to ROE is positive. Specifically, the

result reveals that a unit change in ROE ratio leads to an increase in CSR

by 1.955 units. However, it is also important to state that the result is

statistically insignificant. The calculated t-value being 0.402. The result

also reveals that the coefficient of SIZE is positive. Thus, it is possible

that the response of CSR to SIZE is positive. Specifically, the result

reveals that a unit change in SIZE ratio leads to an increase in CSR by

7.646 units. Also, the result is statistically significant at the 5% level, the

calculated t-value being 1.7444. The result also reveals that the LEV is

113
negative. This implies that the response of CSR LEV negative. However,

the result is statistically insignificant. The calculated t-value being -

0.711. The result also reveals that the coefficient of BIG 4 is negative. The

result is statistically insignificant the calculated t-value being -0.594.

The result also reveals that the coefficient of SUB is negative. This

implies that the response of CSR to SUB, negative. However, the result

is insignificant, the t-value being -0.477. The result also reveals that the

coefficient of CAPIN is positive. Thus, it is possible that the response of

CSR to CAPIN is positive. Thus, it is possible that the response of CSR

to CAPIN is positive. Specifically, the result reveals that unit change in

CAPIN would result in an increase in CSR by 2.275 units. The result is

statistically insignificant, the calculated t-value being 0.217. Finally, the

result reveals that the coefficient of IND is negative. This implies that

the response of CSR to IND is negative. However, the result is

insignificant as the calculated t-value is -0.766. The D.W Statistics of

114
1.733 shows the presence of serial autocorrelation between CSR and the

independent variables.

115
Model 3

A close examination of the ordinary least square regression results

for 2009 indicates that the coefficient of determination (R-squared) stood

at 0.975 indicating that 97.5% of the systematic variation in CSR is

explained by the explanatory variables i.e. CSR, SIZE, LEV, BIG 4, CPIN

and IND. Also, the adjusted R-squared stood at 0.910 after adjusting for

the degree of freedom.

The result reveals that the coefficient of CSR is positive. Thus, it is

possible that the responses of ROE to CSR is positive. Specifically, the

result reveals that a unit change in CSR ratio leads to an increase in ROE

by 0.021 units. However, the result is statistically insignificant. The

calculated t-value being 2.542, the result also reveals that the coefficient

of SIZE is positive thus, it is possible that the response of ROE to SIZE is

positive. Specifically, the result reveals that a unit change in SIZE ratio

leads to an increase in ROE by 0.073 units. The result is however

116
insignificant the calculated t-value being 0.184. The result also reveals

that the coefficient of LEV is positive. It is plausible that the response of

ROE to BIG4 is positive. The result is significant at the 10% level, the

calculated t-value being 2.426.

The result also reveals that the coefficient of CEPIA is positive. It

is plausible that the response of ROE to CAPIN is positive. Specifically,

a change in the ratio of CAPIN leads to a change in ROE by 14.756 units.

It is however insignificant, the calculated t-value being 2.584. The result

also reveals that the coefficient of SUB is positive. It is thus plausible

that the response of ROE to SUB is positive. It is thus plausible that the

response of ROE to SUB is positive. Specifically, a change in the ratio of

SUB leads to a change in ROE by 0.077 units. The result is significant at

the 10% level, the t-value being -2.032. Finally, the result reveals that the

coefficient of IND is positive. It is plausible that the response of ROE to

IND is positive. The result is significant, the calculated t-value being

117
2.549. The D.W Statistics of 2.415 shows the absence of serial

autocorrelation between ROE and the independent variable.

Model 4

A close examination of the Ordinary Least Square regression

results for 2009 indicates that the coefficient of determination (R-square)

stood at 0.999, indicating that 99.9% of the systematic variations in EPS

is explained by the explanatory variables i.e. CSR, ROE, SIZE, LEV,

BIG4, CAPIN, SUB and IND. Also, the adjusted R-square stood at 0.996

after adjusting for the degree of freedom.

The result reveals that the coefficient of CSR is negative. It means

that the response of EPS to CSR is negative. Specifically, a change in the

ratio of CSR leads to a decrease in EPS by 0.032 units. The result is

however not significant, the calculated t-value being -0.532. The result

also reveals that the coefficient of ROE is positive. It is plausible that the

response of EPS to ROE is positive. Specifically, a change in the ratio of

ROE leads to an increase in EPS by 1.52 units. The result is insignificant

118
at the 10% level, the calculated t-value being 2.842. the result also

reveals that the coefficient of SIZE is negative. This implies that the

response of EPS to size is negative. Specifically, a change in the ratio of

SIZE leads to a decrease in EPS by 0.364 units.

119
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 SUMMARY OF FINDINGS

Findings during the course of execution of this work, pointed out

the fact that companies pay more attention to and are in fact, more

interested in profit making, thus ignoring the essence of paying

paramount attention to their corporate social responsibilities and if this

persists, there could be an obvious negative boomerang effect where

crises will ensue in such communities where the companies carry out

their business. Aside the obvious indication of the existence of extreme

diversity in information provided, it was also discovered that most

companies carry out disclosure of information related to involvement in

their host communities and that such disclosure however contain little

quantifiable data. The result however evidence the possibility of the

companies attempting to improve their corporate social image and be

120
seen as responsible corporate citizens by embarking upon CSR

disclosure.

Findings are hereby summarized as follows:

1. There was a significant correlation between the CSR and all the

independent variables.

2. Companies size, leverage, Earnings Per Share (EPS) and capital

intensity were found to have significant impact on the Corporate

Social Responsibility of the top 20 companies by market

capitalization in the Nigeria Stock Exchange.

3. Leverage, audit firms, industry type and firm’s subsidiaries

positively and significantly affect firms performance (return on

earnings), while

4. Leverage, capital intensity and industry type negatively and

significantly affects firms performance (Earnings Per Share).

Returns on Earnings and firms subsidiaries have positive and

significant impact on Earnings Per Share (EPS)

121
5.2 CONCLUSION

Over the years, corporate social responsibility has grown to

become a very important issue in business administration as a lack of

basic fundamental policies in CSR could negatively affect the firm by

increasing its risk, thus causing a strained relationship between the firm

and stakeholders, affect its corporate reputation and obviously

negatively affect its overall performance. As a result, there has been an

increase in the firms development and communication of their CSR

strategies as well as implementation of policies so as to enhance

performance and reduce conflicts between society in a broad sense.

The positive relation between a good and healthy and the firm’s

performance seems to be consistent with the continuous yearning of

host communities for development so that there is a perceived good

relation between the company and community, which is a very sensitive

issue in terms of firm improvement and growth perspectives while the

negative relation between firm’s performance and good CSR disclosure

122
concerning the environment and country may be as a result of firms

ignoring that aspect of social policies and rather paying attention to

profit.

We can conclude as follows:

1. There is no significant correlation between CSR and firm

performance of the top 20 companies by market capitalization in

the Nigerian Stock Exchange.

2. While CSR has insignificant positive and negative impact on ROE,

and EPS respectively.

3. EPS has positive and significant impact on CSR.

4. ROE has positive and insignificant impact on CSR

5.3 RECOMMENDATIONS

On the basis of continuous prolonged agitation by regions across

Nigeria due to the neglect and in fact as a result of the absence of CSR

by companies operating therein, it is imperative that the government

123
forces a control body (if any), that will be saddled with the

responsibility of enforcing the CSR policies in the community, ensuring

that firms live up to the responsibility of promoting growth and

development in their communities.

Taking cognizance of the fact that mere adoption of rules and

regulations to improve CSR disclosure is grossly ineffective, regulatory

authorities must consider undertaking measures for improving

transparency and accountability by companies.

Finally, it is suggested that further study to investigate the

relationship between corporate social responsibility and firm’s

performance of all the companies in the Nigerian Stock Exchange be

carried out.

124
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