THE EFFECT OF CORPORATE SOCIAL RESPONSIBILITY ON BUSINESS

PERFORMANCE

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

A company's primary approach for voluntarily incorporating social and environmental concerns

into how it does business to engage with a variety of stakeholders is known as corporate social

responsibility (CSR) (Wang et al., 2018, p. 68). Due to the expanding, recent idea that

sustainability is essential for a firm's long-term growth and survival, corporate social

responsibility has received scholarly interest and gradually increased (Bahta et al., 2021).

Corporate social responsibility is a top priority for many academics and business leaders who

want to develop a long-lasting competitive edge (Lee and Lee, 2019; Kim and Kim, 2020;

Matten and Moon, 2020). Social responsibility, whether it originates from a business, the

government, or a non-governmental organization, can appear in one of two ways: either as a

result of the social impact of the institutions or as a result of problems with society as a whole.

(Homes, 1977). Both are very important to the administration. The first is concerned with what

an institution does to society, while the second is focused on what an institution can do for

society. For instance, a textile industry established in a region was not built to pollute the

environment but rather to supply people with clothing.

However, during the production process, the byproduct may pollute the environment. Research

has shown that companies that engage in corporate social responsibility activities can enhance
their reputation, improve customer loyalty, increase employee engagement, and reduce risks

related to environmental and social issues (Carroll, 2008). However, the relationship between

corporate social responsibility and financial performance is still subject to debate, with some

studies suggesting a positive link and others finding no significant impact. (Becchetti &

Trovato, 2011). Several research has examined the connection between corporate social

responsibility (CSR) and business performance (BP) (AL-Shammari et al., 2021; Otto et al.,

2020; Zhou and Ki, 2018). There is a lot of ambiguity regarding the nature of the CSR-BP link

despite substantial research on it (Aupperle et al., 1985). Effective CSR can give businesses a

competitive edge, according to some studies (Bernal-Conesa et al., 2017; Farooq et al., 2017).

However, others contend that the agency costs associated with CSR could hurt performance

(Ting and Yin, 2018; Barauskaite and Streimikiene, 2021). This makes one wonder about

additional elements that might affect the relationship. Several academics think that corporate

social responsibility (CSR) and business performance (BP), have a direct relationship whereas

others emphasize an indirect relationship (Hsu, 2012; Lai et al., 2010). Prior empirical studies on

CSR attempted to link it to profitability (Quere et al., 2018; Aupperle et al., 1985), but they did

not address potential effects of CSR, such as corporate image (Hoeffler and Keller, 2002),

customer perceptions (Pradhan, 2018), corporate reputation (CR) (Hsu, 2012a, b), customer

satisfaction (Hsu, 2012a, b), etc. that may indirectly affect a firm's performance.

1.2 STATEMENT OF THE PROBLEM

The primary goal of a firm is to maximize profit, not to be socially responsible. Through

initiatives like environmental conservation, raising the standard of living for its employees and
society at large, and practicing transparency in its business practices, it furthers the possibilities

of its mandate by engaging in social and environmental activities in the communities where it

conducts its operations. As a result of these activities, more investors are attracted to socially

responsible businesses (Werbel & Castellano, 2010). Organizations must be able to integrate

certain corporate social responsibility principles and efforts into their strategic goals if they hope

to advance their competitive advantage in the face of competition in their various industries and

long-term business ambitions. Knowing about the relationship between corporate social

responsibility and business performance is becoming more important as organizations come

under increasing pressure to adopt socially responsible activities.

Some studies claim that corporate social responsibility improves reputation and has a good

impact on financial performance, while others contend that the expenses of putting corporate

social responsibility methods into practice may outweigh their advantages and that there isn't

always a direct correlation between the two. (Margolis, J. D., Elfenbein, H. A., & Walsh, J. P.

2009). Now, research has linked the impact of corporate social responsibility on sustainable

company operations and performance, as well as how businesses can work successfully with

stakeholders to advance their corporate social responsibility activities and succeed commercially.

So, the purpose of the study is to determine the impact corporate social responsibility has on

business performance and operations. (Aguilera et al., 2007).

1.3 OBJECTIVES OF THE STUDY

The main objective of this study is to examine empirically the effects of corporate social

responsibility on business performance. The following specific objectives are listed to fulfil

this purpose;

1. To identify the factors that influence corporate social responsibility

2. To identify the effect of corporate social responsibility on financial performance

3. To investigate the impact of corporate social responsibility on customer satisfaction.

1.4 RESEARCH QUESTIONS

To evaluate the impact of corporate social responsibility on organizational performance, the

following questions shall be tested;

1. What are the factors that influence corporate social responsibility?

2. To what extent does corporate social responsibility affect financial performance?

3. How does corporate social responsibility impact customer satisfaction?

4. Does corporate social responsibility have any relevance to business profitability?

1.5 SIGNIFICANCE OF THE STUDY

Corporate social responsibility is much important to organizations in particular and society at

large. The organization gets to explore by knowing the environment where they may be socially

responsible, which measures their impact on society, by improving their corporate standards and

in the long run making some profits. The research work also intends to assist vigorously other

corporate organizations and the general public at large to understand the importance of corporate

social responsibility and its related roles as a stakeholder in the wheel of progress, more so the

public will become aware and informed about various kinds of social interventions which

corporate bodies can extend them. It also helps corporate entities to benefit from various forms

of social responsibilities and areas they can assist the public and other stakeholders. This will be

of tremendous significance to them.

1.6 BRIEF METHODOLOGY

Research design. To evaluate the connection between corporate social responsibility and

corporate performance, the research approach for this study will be correlational in nature. As

data will be gathered at a particular point in time, a cross-sectional study strategy will be used.

Sample Selection. The selection of 50 firms that operate in the Ashanti region, Kumasi, will

serve as the sample population for this study. Using a 95% confidence level and a 5% margin of

error, the sample size will be estimated using a power analysis.

Data collection. A self-administered questionnaire will be used to gather the data. The

questionnaire aims to obtain data on business performance and corporate social responsibility

efforts. Before being sent to the sample population, the questionnaire will undergo pretesting.

Data analysis. A statistical software program will be used to examine the acquired data. To

describe the sample population, descriptive statistics like mean, standard deviation, and

frequency distribution will be employed. To investigate the connection between CSR and

business performance, a correlation analysis will be performed. Ethical Consideration. Before

any data is collected, participants' informed consent will be sought. The confidentiality of the

participant’s answers will also be ensured.

1.7 SCOPE OF THE STUDY

This study's focus is on how corporate social responsibility (CSR) impacts the performance of

businesses. Examining the link between a company's CSR efforts and various performance

metrics is often part of this process. Financial performance, such as market share, customer

satisfaction, and customer loyalty, will be included. The study will also take into account various

CSR initiatives, including charitable endeavors, morally upright company conduct,

environmental sustainability measures, and social impact initiatives. This study will also span

several months, and the businesses included will be those that are situated in the Ashanti region

of Ghana where a sample of 50 companies will be used.

1.8 LIMITATIONS

When examining the impact of corporate social responsibility (CSR) on business performance, th

ere are several potential restrictions to take into account: Establishing causality can be difficult, e

ven when there may be a correlation between a company's CSR efforts and its financial performa

nce. The performance of a corporation may also be influenced by other elements like the state of 

the market, rivalry, and general business Time frame: Because of the study's brief time duration,

fewer businesses and limited information can be used. As a result, only businesses situated

within the Ashanti region will be included in this study. Subjectivity: Because we'll only be

looking at businesses in the Ashanti Region for this study, we wouldn’t be able to generalize

from our results the effect CSR has on businesses in the entire country.

1.9 ORGANIZATION OF THE STUDY

The study is organized into five chapters. Where chapter one comprises the background, problem

statement, objectives, significance of the study, scope of the study, limitations of the study, and

the organization of the study. Chapter two is the literature review. This section outlines the

definition of concepts related to the study, the theoretical review, the empirical review, and an

overview of the literature. Chapter three comprises the methodology. This section contains a

theoretical framework, empirical model specification, estimation techniques, data sources,

variable measurement, and definition.  Chapter four consists of the research findings and

discussions. This chapter contains the presentation of research findings, discussions, and
diagnostic tests of the results. Chapter Five consists of a summary of the findings, conclusions,

and policy implications of the findings.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

Corporate Social Responsibility (CSR) has for years captured the interest of academics as well as

business professionals. CSR describes an organization's charitable efforts to address social and

environmental issues while concentrating on attaining its financial objectives. The link between

CSR and corporate success has come under increased scrutiny, with some studies showing a

favorable correlation and others finding no discernible effect. This literature study examines

several aspects of CSR, such as environmental sustainability, social responsibility, ethical

behavior, and corporate governance in an effort to shed light on the link between CSR and

company success. The goal of the study is to identify the variables that affect CSR, its effects on

consumer satisfaction and business performance, and the best CSR strategies for enhancing

corporate performance. A self-administered questionnaire will be used to gather data for the

correlational study design. The results of the study will be important to stakeholders, firms

looking to embrace CSR practices, and the general public.

2.1. REVIEW OF THE LITERATURE

2.1.1. The case for CSR

According to Moir (2001), CSR has been a continual responsibility for businesses to act

honorably, promote economic growth, and enhance working conditions for employees, their

families, and society at large. Businesses must take part in the performance of the environmental,

social, and economic effects. According to the perspective of corporate social responsibility,

businesses must also have moral, ethical, and philanthropic obligations in addition to their legal

and ethical obligations to provide investors with a fair return. Corporate leaders have struggled

with the issue of the company's social duty, nevertheless. Friedman (1970) argued that under the

belief that a company owes a responsibility to a wide range of societal groups, corporate

responsibility stands to give a focused financial return to shareholders.

2.2 Theories Explaining Corporate Social Responsibility

2.2.1. Shareholders Theory

According to the concept, an organization must prioritize maximizing income because it has a

duty to the firm's investors, who are given priority over all other obligations. Some of the

scholars in this group have roots in the organization's conventional neoclassical worldview

(Moir, 2001). Friedman (1970), who disagreed that in an open economy, it would be only on

the social duty of business, helped to further popularize the firm's model. As long as it complied

with business regulations, it would probably use its resources and take intentional steps to

increase its revenues. It would participate in an open competition without deception or fraud.

Milton Friedman asserts that the economic system becomes less capable when firms are diverted
from the pursuit of profit. To succeed in business, one must follow the regulations set forth by

the sector. Private companies shouldn't be expected to carry out public duties that belong to the

government, according to Friedman (1970). The "fundamental morality rules against dishonesty,

force, and fraud which are intended to encourage open and unrestricted competition" (Friedman,

1970) are the rulebooks of the business to which Friedman alludes. Friedman holds that allowing

the market to operate with only the smallest number of restrictions is necessary to prevent fraud

that would directly take advantage of the country's general economic status. Profits are what

distinguish a healthy open economy. According to Bruno and Nichols (1990), the shareholders

model was another name for the CSR theory. The model is acknowledged based on the owners'

contractual agreement, management accountability, and its associations with moral and social

responsibility. It would only be a profit-oriented corporate approach, nevertheless, which has

been sharply condemned by several other studies and improved in the eyes of stakeholders.

Some critics of the shareholder contend that firms have obligations beyond generating profits.

2.2.2 Stakeholders Theory

The justification draws on Freeman's (1984) well-established stakeholder theory. Using

Freeman's definition from 1984, "the firm can be defined as a series of links of stakeholders that

the firm's managers attempt to manage." According to Bruno and Nichols (1990), a stakeholder

is "any identifiable group or individual who would have an impact on or be impacted by the

organizational performance in terms of its products, policies, and work processes." According to

Davis (1973), contemporary business and modern society are inextricably entwined. Corporate
endeavors have significant social repercussions, and it is hard to escape their effects on daily life.

As a result of their remarkable social and economic impact, companies ought to exert some

influence on obligations that go beyond generating profits.

A model for identifying and assessing stakeholder importance was developed, according to

Mitchell et al. (1997), and it refers to stakeholders who have more than one attribute of urgency,

legitimacy, and power. It is a given that businesses will give the greatest amount of compensation

to those genuine stakeholder groups who are persistent and influential. The consumer markets

have viewed these issues as having the potential to influence the reputation in some

circumstances where some businesses would struggle to keep their workers would pay attention

to employee troubles. The stakeholder theory also posed the question of whether businesses

would act in a socially responsible manner in order to perform well and please investors and

shareholders by permitting a reasonable amount of earnings on investments.

2.2.3. Social Contract Theory

According to Donaldson and Dunfee (1999), it was determined that the combined social

contracts theory provided a way for management to make moral judgments since it distinguished

between the micro and macro types of social contracts. Therefore, the micro-social contract

would be the specific type of involvement, and the macro-social contract would be the

assumption that a business provides some assistance to its local community in the context of

society. Companies that adopt a social contract perspective would therefore identify their
engagement as a "societal expectation"; nevertheless, although this might explain the initial

excitement, it could not explain the full extent of their participation.

2.3. Corporate Social Responsibility Commitments

Carroll (1991) proposed that there would be four categories of social responsibilities that could

create a total range of corporate social responsibility in the business activities in the book titled

Business Horizons (1991). Carroll (1991) derived this idea from the pyramid of corporate social

responsibilities. The categories of legal, economic, philanthropic, and ethical responsibilities are

represented by a pyramid. The researcher went on to say that for corporate social responsibility

to be acknowledged by a trustworthy businessperson, the obligations should be presented in a

way that includes all of the obligations of the business.

2.3.1. Economic Responsibilities

Economic entities created by business organizations have the goal of providing social members

with commodities and services. The desire to make money has been identified as the primary

driving force for entrepreneurship.

2.3.2. Legal Responsibilities

In addition to approving businesses' ability to operate in accordance with their financial

performance, society also expects them to abide by the norms set forth by the government for

how they should conduct themselves. The partial integration of business and society is

characterized by social ties, and organizations are likely to monitor commercial missions within

the confines of the law. As expressed by lawmakers, the fundamental idea of how things work,

the view of legal obligations reflects codified ethics. The open enterprise system's guiding

principles are properly understood as coexisting with legal and economic obligations.

2.3.3. Ethical Responsibilities

Although they are not explicitly specified in the law, ethical obligations are adopted by social

members and serve as a symbol of the economic and legal obligations on equality and justice.

Additionally, it stands for the accepted norms that express worries about what happens to

stakeholders' moral rights, including customers, shareholders, the community, and employees,

regardless of whether or not there is justice involved. Additionally, a change in ethics would

come before a law was created that would directly impose the motivation behind all laws and

regulations. In addition, although the values and norms would have been represented in business,

ethical obligations are seen as an implementation of evolving values and society norms.

Furthermore, ethical obligations are seen as a way for businesses to live up to evolving social

norms and values, even though these standards may differ from those set down in the law. It is

challenging for business to cope with ethical duties because they are typically defined and
contested according to their legality. Previous corporate ethics projects had clearly established an

ethical obligation as an actual CSR component.

2.3.4. Philanthropic responsibilities

Corporate actions demonstrate that firms are deserving corporate citizens in response to society's

expectations of charitable duties. The actions or venues actively advance the welfare of people.

In an ethical or moral sense, it is not envisaged that these two ethical and philanthropic tasks will

differ from one another. Communities expect businesses to support charitable activities with

resources like facilities and staff time, but failing to provide the desired level is not seen as

unethical business practice. Therefore, philanthropy is an optional component of businesses even

if it is continually a demand from society rather than something that businesses are able to fulfill.

One significant factor in the distinctions between ethical and philanthropic obligations is that

some businesses believe they are socially accountable by virtue of being respectable members of

the community. The crucial point that a corporate social responsibility includes philanthropic

contributions that are not limited to them is where the difference occurs. On the other hand, it can

be argued that while philanthropy is sought and admired, it is actually less important than the

other social responsibility aspect categories. As a result, philanthropy is essentially the cherry on

top.

2.3.5. Responsibility toward customers

An organization must be responsible to all customers or it risks eventually going out of business.

This could be achieved by offering products and services that are distinguished by honesty,
excellence, and care. Customers' rights to safer products being produced and their rights to all

relevant product information should be openly guided to success. Additionally, ethical

advertising merits consideration (Carly, 2003).

2.3.6. Responsibility toward employees

The practice of trained, well-managed, and responsible employment practices with well-trained,

well-managed, and motivated employees, whom should be properly rewarded in the

organization, and the organization safety should be prioritized for all employees in the physical

and social undertakings, give employees equal opportunities in the corporation to be socially

responsible towards reward and career advancement (Carly, 2003).

2.3.7. Responsibility toward investors

Managers have a duty to watch out that they don't treat shareholders irresponsibly by

underpaying them or lying about the financial strength of the company. Both competent financial

management and accurate reporting of finances are required. According to the International

Federation of Accountants (1998), compliance with IFRS and IAS is a unilateral demand.

Wanyama (2006) notes earlier research on the role accounting information plays in enabling

relevant stakeholders to track an organization's performance and hold management responsible

for resource management. When it comes to investing, holding management accountable, and
CSR issues, investors should be able to evaluate the performance of businesses fairly with the

use of sound accounting principles (Wanyama, 2006).

2.3.8. Responsibility toward suppliers

In order to obtain direct policy inspiration, socially conscious businesses should establish their

suppliers as partners before delivering their goods and services to them.

2.3.9. Responsibility toward community

Businesses must understand their obligation to collaborate with the communities in which they

operate and work to be good corporate citizens by making a positive contribution to

community wellbeing.

2.4. EMPIRICAL REVIEW

There are several related studies that have shown the relationship between Corporate Social

Responsibility. However, this section reviews related literature on the positive, negative, and

moderate relationship between CSR and business performance. To test the positive, negative, and

moderate relationship between CSR and business performance, the works of Orlitzky, Schmidt,

and Rynes (2003), Margolis and Walsh (2003), and MacWilliams and Siegel (2001) are some

examples used.

Orlitzky, Schmidt, and Rynes (2003) conducted an empirical review of studies that examined the

relationship between Corporate Social Responsibility (CSR) and business performance. The
review included 52 studies published in academic journals between 1972 and 2002, which

collectively reported 75 independent samples.

The authors found that the relationship between CSR and business performance was generally

positive, but the strength of the relationship varied depending on the type of CSR activity and the

measures of business performance used. Specifically, the authors found that:

The relationship between CSR and financial performance was generally weak, but it varied

depending on the measures of financial performance used. For example, studies that used

measures of accounting profitability tended to find a weak positive relationship between CSR

and financial performance, while studies that used measures of stock market performance tended

to find no significant relationship.

The relationship between CSR and non-financial performance, such as employee retention and

customer satisfaction, was generally stronger than the relationship between CSR and financial

performance. Studies that focused on specific types of CSR activities, such as environmental

performance or ethical behavior, tended to find stronger relationships with non-financial

performance measures.

The relationship between CSR and business performance was stronger for companies that had

strong reputations for CSR and were committed to implementing CSR activities as part of their

core business strategy.

Overall, Orlitzky, Schmidt, and Rynes (2003) concluded that there is a positive relationship

between CSR and business performance, but the strength of the relationship depends on the type

of CSR activity and the measures of business performance used. They also suggested that the

relationship may be influenced by the company's commitment to CSR and the extent to which

CSR activities are integrated into the company's core business strategy.

Margolis and Walsh (2003) conducted a meta-analysis of 52 empirical studies to examine the

relationship between CSR and financial performance. They found that CSR was positively

related to financial performance in 42% of the studies, while 8% found a negative relationship,

and 50% found no significant relationship. Margolis and Walsh suggested that the mixed results

could be due to differences in how CSR and financial performance were measured across studies,

as well as the varying contexts in which the studies were conducted.

Waddock and Graves (1997) conducted a content analysis of 24 case studies to explore the

relationship between CSR and financial performance. They found that the case studies provided

evidence of both positive and negative relationships between CSR and financial performance,

with some companies experiencing improved financial performance as a result of their CSR

efforts, while others experienced financial losses. Waddock and Graves suggested that the impact

of CSR on financial performance depended on various factors, such as the company's industry,

the extent of the company's involvement in CSR, and the specific CSR initiatives undertaken.

Overall, both studies provide evidence of the mixed and complex relationship between CSR and

business performance. While some studies have found a positive relationship, others have found
no significant relationship or even a negative relationship. The studies also suggest that the

relationship may depend on various contextual factors, such as the industry and the specific CSR

initiatives undertaken. Thus, it is crucial for firms to carefully consider their specific context and

objectives when implementing CSR initiatives.

McWilliams and Siegel (2001) conducted a meta-analysis of 52 empirical studies to investigate

the relationship between CSR and financial performance. They found that CSR was negatively

related to short-term financial performance, such as accounting measures of profitability, but

positively related to long-term financial performance, such as stock market returns and

accounting measures of asset utilization.

McWilliams and Siegel suggested that the negative relationship between CSR and short-term

financial performance could be due to the costs associated with CSR initiatives, such as

increased expenses for environmental compliance or investment in social programs. However,

they argued that the positive relationship between CSR and long-term financial performance

could be due to the potential benefits of CSR, such as enhanced reputation, increased customer

loyalty, and improved employee morale.

Overall, the study by McWilliams and Siegel provides evidence of a complex and nuanced

relationship between CSR and financial performance. While CSR may have short-term costs, it

may also provide long-term benefits that lead to improved financial performance. This suggests

that firms should carefully consider the potential costs and benefits of their CSR initiatives and

aim for a balance between short-term financial goals and long-term sustainability objectives.
2.4. HYPOTHESIS FORMULATION

2.4.1. Social

Companies’ role or responsibilities towards society has come to be known as Corporate

Citizenship (CC). Carroll (1991) sums up CC as actively engaged in acts or plans to encourage

human welfare. CC looks at expectations of society that are not mandated by law or any business

in an ethical manner. The social aspects of CC are actually a different method in applying the

business role in society, thus CC has been very compatible with CSR (Wood and Logsdon,

2002). According to Logsdon and Wood, the researcher believed that CSR does get involved

with social responsibilities that have an effect on the external affair. Therefore, the CC would

imply that there is an effect on the business. There is a profound change in the understanding of

the ways businesses should react to the stakeholders happens when CSR is changed to CC (Wood

and Logsdon, 2002).

H10: There is no relationship between social effect and business performance

H11: There is a significant relationship between social effect and business performance

2.4.2. Economic

In the past, economic entities were designed to engage goods and services by the businesses to

the representatives in society. Profits were recognized as the main motive of incentives for

entrepreneurship. The business organization was the elementary economic unit in society.
Nevertheless, the main role of businesses was to create goods and services for clients that were

needed to make substantive profits in the undertakings. The idea of the profit motive would be

transformed into a notion of higher profits had made the economic factors stable ever since. The

firm’s doubtful consideration would decrease if the business responsibilities are based on

economic responsibilities. According to the theoretical perspectives, the reputation of the

organization are distinguished as the utmost importance in mediating variables that were to link

CSR with business performance (Fombrun and Shanley, 1990). In addition, it may seem that the

information intensity and customer decision process would have an effect by studying the

external reputation effects (Schuler and Cording 2006).

Employees can display more goodwill towards their high “CSR employer, a hint that reputation

effects are not only external but internal as well and, because of increased organizational

dedication and task motivation, produce enhanced results and demonstrate more organizational

citizenship behaviors” (Davis, 1973 and McGuire et al., 1988). The aggregate on the internal and

external effects would justify the reason for the growth in the financial performance of the firm.

It also explains that the reputation of the firm is based highly on the increase in CSR activities.

H20: There is no relationship between economic effect and business performance

H21: There is a relationship between economic effect and business performance

2.4.3. Environment

Organizations are able to reduce business risk by performing environmental upheavals more

efficiently (King, 1995). Effective environmental assessment of organizations is typically

characterized by CSR (Wood, 1991), which would raise the support of companies in addressing

the concerns proactively and interactively (Waddock, 2002). The firm are able to reduce the

chances for legal lawsuits by balancing the stakeholder concerns, it allows the unaddressed

stakeholder interest to be clarified and safeguards negligent companies to be sued. Companies

which have a higher CSR practice would also be able to attract better staff. There are some

researches that support these explanations (Backhaus et al., 2002). The employees of the

particular organization would significantly have a responsible employer that upholds ethical

values. Employers’ associations between CSR and the company attractiveness would be found in

the firm’s level (Turban and Greening, 1997) and also the individual level of analysis (Backhaus

et al., 2002). The quality workforce would directly have an effect when there is an increase in

competitive advantage (Huselid, 1995), normally the selected employees from a large labor pool

would be beneficial for the companies. Certain companies do have low CSR which would

inadvertently restrict the chances for companies to recruit from the labor pool that is unappealing

for job some applicants. Thus, there is a disadvantage on human resources and economics with

companies that practice high CSR values (Orlitzky and Benjamin, 2001). Companies would be

relatively more efficient not just only by reducing its own costs; therefore sometimes there is an

effect when competitor’s costs are raised. In addition, there are also situations where the effect of

CSR would have an influence politically to increase rival’s costs (McWilliams et al., 2002).
Restricting access of new technology and industry-standard through substitute resources can be

practiced by high CSR firms. Large companies could practice occupational safety and health as

well as regulations on the environment that strategically to raise rivals’ costs. Pushing various

stakeholders’ coalitions for broader adoption of policies in the organization may seem relatively

easy to concentrate on the social and environmental criteria. Firms may find CSR practices to be

valuable, costly, and rare to duplicate in order to have a competitive edge more sustainable.

According to the resources view in CSR applications, the efficient use of resource allocation was

due to CSR’s ability to enhance managerial skills. Internal efficiency increases could directly

lead to savings from high CSR applications (Holliday et al., 2002: 83 – 102). Furthermore, CSR

may assist top management improve better scanning processes, information systems, and skills.

This action would indefinitely have increase in the preparation, changes externally, and

anticipation. It is argued that respect for corporate environmental performance would be

important for growing industries (Russo et al., 1997). The CSR The organization’s learning and

development of the internal capabilities does not need to depend too much on the communication

of the firm but committing to CSR for various stakeholders in much more important.

H30 : There is no relationship between environmental effects and business performance

H31: There is a relationship between environmental effects and business performance

2.4.5. The Effect of CSR On Performance.

In a typical organization, it makes business sense to fully integrate the interests of all the

stakeholders into corporate strategies over the long term, this approach can generate more growth

and profits. CSR may not be about financial value, but the value derived from sound governance,

transparent reporting, satisfied employees and customers and the overall integration of

stakeholders. CSR has brought forth a number of initiatives, which find ways to make a better

link between social and financial performance (Wood, 1991). In essence, there is a need to align

social priorities while focusing on bottom-line imperatives. Historically, any business would

depend on the measurement of the income statement and balance sheet to determine the success

of the company, it would also have an effective measurement of the total revenue, total expenses

and the assets of the company. The companies still maintain to practice the measurement but are

starting to recognize that the profit does not signify a value. Moneymaking companies believe

that the stock price and the market shrink or will remain fluctuating (Bishop & Beckett, 2000). A

poor measurement instrument for evaluating the company’s performance is by using shareholder

value, thus the business should include ethnic diversity, competitive practices, and the

environment.

“These firm performance indicators have long been associated less with firm financial

performance and more with the concept of firm sustainability or stewardship” (Porter & Kramer,

2006). Marquez and Fombrum (2005) understand that the efforts to assess the company in the

early stages then those wwhodid not would have given away a more focused analysis on the risk
of the business with specific production activities, service activities and management practices.

The performance of an organization, important as it may be, needs to be planned for with social

responsibility in mind. The traditional financial method (Triple Bottom Line) is an indicator that

measures the environmental and social effect of the company’s activity that would ultimately

allow a broad range of information in the organization’s social performance (Davis, 1973).

The mixed reporting of companies’ performance in both financial and sustenance of the company

is a recommended norm that can take place in the form of single or dual reporting (King III,

2009). King III was of the view that integrated sustainability performance and integrated

reporting enable stakeholders to create a more updated valuation of the economy in the particular

organization. Reporting should be integrated across all areas of performance. Furthermore, the

company should provide a reporting method on the triple-bottom-line context issues. The

integrated report should describe the method of the income that the company is currently

ongoing; thus, the information on the financial result is needed to report of positive and negative

impacts to the organization.

The sustainability reports and disclosure ought to be shared in the organization for future

planning that would improve the plan and remove any negative issues in the financial year ahead.

The early adoption of measuring the business risk will be able to yield valuable management

information (Davis, 1973). There are some researchers who hypothesized that additional costs

would occur when a high investment in organizations has an effect of CSR on business

performance that will cause a negative effect. Based on McGuire et al (1988), the additional
costs that would incur may be resulted in "making extensively charitable contributions,

promoting community development plans, maintaining plants in economically depressed

locations and establishing environmental protection procedures". These additional burdens on the

organization have caused a financial disadvantage for other competitors such as less socially

responsible firms (Lyall, 2003). Managed social responsibility can generate information about

how the use of resources with environmentally and socially related effects influences the

financial performance and position of organizations and how organizational operations affect

environmental and social systems.

2.5. CONCEPTUAL FRAMEWORK

Figure 1: Conceptual framework on the factors that influence corporate social

responsibility on business performance

The concept of corporate social responsibility (CSR) encourages businesses to recognize the

significance of the social and environmental effects on their customers, employees, and society

as a whole. The CSR model counsels businesses to pursue the most profits while abiding by a

particular level of ethics. This perception of the corporation, according to Berle and Means

(1932), "put the community in a position to demand that the modern corporation serve not only

the owners or the control but all society." The awareness of stakeholder theory is to respond to

the stakeholder expectations of CSR, so the directors would give the organization's activities a

great deal of priority (Sirsly, 2009). According to the notion, an organization's effectiveness

depends on how satisfied its various stakeholder groups are (Donaldson and Preston, 1995). The

management's scanning abilities, information systems, and overall preparation for changes,

crises, and fluctuations would all be improved by investments in CSR (Russo and Fouts 1997).

The CSR process would develop these internal skills, enabling more effective use of resources

and organizational effectiveness (Majumdar and Marcus, 2001). The conceptual framework that

is shown in the Figure above demonstrates how social, economic, and environmental factors may

have a direct impact on an organization's success.

According to several scholars, the goal of social impact is to create, maintain, and strengthen

relationships between an organization and its audiences that are mutually beneficial (Ledingham,

2006). According to some academics, public perceptions, needs, and motivations toward an

organization are precursors to the results on customers. Additionally, according to some studies,

the public's communication participation and access to corporate information are crucial

indications of the health of their connections with firms. The economic effect covers actions that

are intended to have a direct or indirect favorable economic influence on the firm (motive: to be

profitable). This can be interpreted in terms of maximizing profit or shareholder value.

Activities with a direct impact relating to any action that will result in an instant rise in either

profit or shareholder value, thus they don't need to be discussed in great detail. However, the

indirect economic impact is harder to define. It may involve actions that enhance a firm's

reputation and ultimately boost sales, or it may involve actions that enhance the working

conditions for suppliers or other value-chain participants, which in turn raises the caliber of the

goods and services the company provides. CSR initiatives come in numerous forms and have a

variety of indirect economic effects. Effective environmental assessments are often characterized

by CSR (Wood, 1991), which would increase the support of businesses in resolving the issues

pro-actively and collaboratively (Waddock, 2002). Additionally, it clarifies unmet stakeholder

interests and protects businesses from liability.

 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

The methods employed to accomplish the research objectives are described in this chapter. It

includes the study's estimating strategy as well as the research paradigm, research design,

population and sampling, data instruments and collection, and ethical considerations

3.1 Research Paradigm and Philosophy

The research paradigms are used to develop the acceptable sets of theories that the framework

provides, and it includes ways for determining the data collection (Collis and Hussey, 2003).

According to Creswell (1998, pp 74), paradigms provide a guidance for researchers' enquiries

based on a basic set of assumptions and ideas. It is very dependent on the subject being

investigated; nonetheless, the assumptions would be related to the nature of reality and the

function of values in the research processes.

3.2 Research Design

According to Bryman (2012), there are five primary research designs: experimental design,

cross-sectional design (or survey research), longitudinal design, case study, and comparative

design. The sort of design used to give guidance and framework for extensive data gathering and

analysis influences the research approach chosen. This study used a survey-based design using

probability a structured questionnaire collecting quantitative data. A cross-sectional analysis is

observational research that collects data from a specific population at a certain period in time.

3.3 Population of the Study

Large and medium-sized businesses, notably in the Oforikorom Municipality, make up the

study's population. Sampling design is required to identify the precise target population.

The target population for the researcher's information acquisition would be a collection of

elements or objects because this is where the influences are created. The primary goal of the

study is to comprehend and record respondents' opinions regarding how CSR affects business

performance

3.4 Sampling Technique

The sampling technique refers to the techniques used to choose a subset of groups, persons, and

things of similar value from the whole population. There are two types of sampling strategies

that can be employed in this study: probability sampling techniques and non-probability

sampling approaches. The non-probability approach was chosen in this research because it is

affordable, widely utilized, and does not require a bigger population. As a result, it can assist in

saving or lowering the cost of the sample. In this study, convenient sampling, a non-probability

sampling approach, was also applied. Convenience sampling was a superior option for selecting
research participants since it allows for theoretical generalizations of findings (Mohammad,

Habib, and Zakaria 2010).

3.5 Sample Size

A smaller group drawn from a broader population is referred to as a sample size. According to

Babbie (2010), sample size is viewed as the analytical unit from which generalizations about the

entire community can be formed. The study’s sample size was fifty (50), and participants were

chosen using the convenience sampling proximity.

3.6 Data Collection

Primary sources were used to collect data. The study focuses on primary sources of data since

they give empirical information for the study. Primary data is better since it is more dependable

because it is gathered from original sources and for a specific purpose.

3.6.1 Types and Sources of Data

Primary data according to Malhotra, Hall, Shaw, and Oppenheim (2002, p.157), data originated

for the goal of identifying an issue at hand. Primary data are original research studies or raw data

without analysis that represent an authoritative point of view. Secondary data according to Hair,

Bush & Ortainau (2006, p. 80) refers to data not gathered for the direct study at hand but for a

different purpose.

As a result, because primary data information is not vetted or interpreted by any party, it is the

most authoritative (Cooper & Schinder, 2006). There are numerous methods for collecting

primary data; however, in this study, primary data was obtained using a person-administered
questionnaire survey. This approach is used as a questionnaire survey to create standardization in

which all respondents answer the same question and are visible to the comparable response

choice for each question, resulting in simplicity of administration and analysis (Burns & Bush,

2006, p. 235).

3.6.2 Methods of Data Collection

Collis and Hussey (2003, pg. 54) define research methods as the various means by which data

can be collected and/or analyzed. Primary data was collected for this study. The researcher

identified a questionnaire survey as the method of collecting primary data for this study.

3.6.3 Instrument for Data Collection

Among the various primary data collection instruments such as questionnaires, interviews, and

laboratory experiments, a Self-Administered Questionnaire was used to collect data. A

questionnaire was used in this study because it ensures the best possible response from

respondents (Bird, 2009). A questionnaire was also used because it is a convenient way of

gathering information. A questionnaire is also a less expensive method of data collection which

has a higher reliability (McGuirk and O’Neill, 2016; Nemoto and Beglar, 2013). The

questionnaire which was designed based on the objectives of the research were both open-ended

and closed-ended in nature. The open-ended questions gave respondents the opportunity of

providing additional information.

3.7 Data Analysis

3.8 Validity and Reliability

To ensure the validity and reliability of the results, the questionnaire was tested before it was

administered. The study tested the validity and reliability of the questionnaires using Cronbach's

alpha (CA) and average variance extracted (CR) (Hair et al., 2014). Respondents were educated

on the relevance of the exercise before questionnaires were administered in order to avoid bias in

data collection. Also, the anonymity of respondents was ensured so as to enhance the

confidentiality of information. Misleading questions were also avoided.

3.9 Ethical Consideration

The core values that guide researchers in conducting and manipulating data are taken into

account in research ethics (Fleming and Zegwaard, 2018). The consent of the respondents was

sought prior to administering the questionnaire. Respondents were voluntarily allowed to

participate in the survey and they were assured of anonymity and confidentiality regarding the

information they provided on the questionnaire. This study asked respondents not to write their

names or their staff numbers on the questionnaire so as to ensure strict adherence to

confidentiality.

3.10 Profile of Study Settings/ Organization(s)

This research was conducted within the business sector of Ghana in the Oforikrom Municipality

of the Ashanti region. The current research was conducted in the Ashanti region due to the

growing trading rate and CSR in the region particularly the Oforikrom Municipality coupled

with convenience in data collection.

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