Determinants Of Corporate Social Responsibility Disclosures In Nigerian Quoted Companies
This study focused on determinants of corporate social responsibility disclosure in Nigeria. Data was collected from the annual report and account of quoted banks in Nigeria stock exchange market. The result was presented in a tabular form of which the panel regression model was used to analysis the data collected. The result showed that firm size and return on asset was positively related to corporate social responsibility disclosure while leverage was found to exhibit a negative relationship with corporate social responsibility. It was therefore recommended that further research is need to explore the debt/equity hypothesis in other context or different time periods, that inconsistency of previous results is a common feature of CSR research.
Table of Content
- 1.1 Background of the Study
- 1.2 Statement of the Problem
- 1.3 Objective of the Study
- 1.4 Research Questions
- 1.5 Research Hypothesis
- 1.6 Significance of the Study
- 1.7 Scope of the Study
- 1.8 Limitation of the Study
- 1.9 Definition of Terms
- 1.10 Organization of the Study
Review of Literature
- 2.1 Conceptual Framework
- 2.2 Theoretical Framework
- 2.3 Empirical Review
- 3.1. Research Design
- 3.2. Sources of Data
- 3.3 Population of the Study
- 3.4 Sample size determination
- 3.5 Sample size selection technique and procedure
- 3.6 Model Specification
- 3.7 Measurement of Variables
- 3.8. Estimation Techniques employed
Data Presentation and Analysis
- 4.1 Presentation Data
- 4.2 Analysis of Data
- 4.3 Test of Hypotheses
- 4.4 Discussion of Findings
Summary, Conclusion and Recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
1.1 Background to the Study
Corporate Social responsibility disclosure by corporations has been increasing steadily in both size and complexity over the last two decades (Smith, 2003). Research attention over the years has attempted to understand and explain this area of corporate reporting which appears to lie outside the conventional domains of accounting disclosures. The evolving challenge in contemporary business firms is the need to reconfigure their performance indices to incorporate Societal and environmental concerns as part of the overall objective of business. Corporate Social Responsibility (CSR) practices and reporting provides a strategic framework for achieving this holistic reappraisal of corporate performance. Although it is not a new concept, Corporate Social Responsibility (CSR) remains an interesting area of discourse for academics and an intensely debatable issue for business managers and their stakeholders.
The most commonly used definition of Corporate Social Responsibility is that given by the Commission of the European Communities in 2001. According to the Commission, Corporate social responsibility is the integration of social and environmental concerns by companies in their business operations and in their interaction with their stakeholders on a voluntary basis. It is related to complex issues such as environmental protection, human resources management, health and safety at work relations with local communities, relations with suppliers and consumers.
The increasing demand for companies to be socially responsible seems to have witnessed considerable perceptual divergences especially within the context of the stakeholder-shareholder debate. The idea which underlies the “shareholder perspective” is that the only responsibility of managers is to serve the interests of shareholders in the best possible way, using corporate resources to increase the wealth of the latter by seeking profits. In contrast, the “stakeholder perspective” suggests that besides shareholders, other groups or constituents are affected by a company’s activities (such as employees or the local community), and have to be considered in managers’ decisions possibly equally’ with shareholders.
By reporting CSR information, a firm addresses the information needs of stakeholders and provides a basis for dialogue between the firm and its stakeholders. As a critical avenue of stakeholder management, CSR reporting shapes external perceptions of the firm, helps relevant stakeholders assess whether the firm is a good corporate citizen, and ultimately justifies the firm’s continued existence to its stakeholders. Gelb and Strawser (2001) argued that a greater level of reporting is itself a form of socially’ responsible behaviour. Branco and Rodrigues (2006) noted that Corporate Social Responsibility is now seen as a source of competitive advantage and not as an end in itself.
Specifically, CSR may signal to the market that the firm is social and environmentally responsible and may create goodwill for the firm leading to positive effects for firm financial performance. Bowen (2000) in this regards, identified that corporations engage and report their CSR activities in order to increase their social visibility and to improve stakeholder relations as it creates promotional opportunities for the firm. Furthermore, many CSR activities are made on the basis of presenting corporations in a positive light and providing reputation effects that improves on how the organization is perceived.
Though several studies have been done to investigate the determinants of corporate social responsibility reporting in developed economies, the evidence for developing economies like Nigerian seems to be largely anecdotal and where empirically examined, the studies has not been adequate. Hence the focus of this study to empirically examine the determinants of corporate social responsibility reporting using a selection of quoted firms in Nigeria.
1.2 Statement of Problem
One approach to evaluating company’s corporate social responsibility behavior is to examine if they engage in social responsibility disclosure. It is believed that when a company engages in corporate social reporting it presents a balanced reporting of its activities and impacts and provides a basis for stakeholders to evaluate its performance.
The reporting entity can also be held accountable for its impact since it is disclosed. However, environmental reporting has developed rather voluntarily and this implies that companies can choose what to disclose and may even decide not to. Research attention (Sharfman & Fernandoi, 2008; Schneider, 2010; Roberts 1992) in this regard has been focused largely on why and what factors could influence a company to engage in social responsibility disclosures voluntarily. Studies (Hackston & Mime, 1996; Adams & Hart, 1998) highlighted the importance of the company size. Connors and Gao (2009), Sharfman and Fernandoi (2008) and Schneider (2010) examined the role of leverage. Dye and Sridha (1995) and Hackston and Mime (1996) have considered the role of industry type. Roberts (1992) examined the role of profitability. However, the research evidence in this regards has been inconclusive and the role of the firm specific factors have been vacillating indicating that the issues are still quite unresolved in the literature and this defines the contribution and relevance of the study.
In addition, the empirical evidence in this area from developing economies is still largely inadequate and a number of reasons may account for this and of paramount amongst them being the voluntary stance on CSR reporting. With the extensive empirical evidence from developed economies, there is a knowledge gap about how corporate characteristics will influence voluntary reporting for developed and developing economies as the magnitude: level of awareness and implications of social cost differs considerably. Consequently, do we expect differences in the influence of corporate factors on social responsibility disclosure for both developing and developed economies? The study findings are an important contribution in this regards.
1.3 Objective of the Study
The main objective of this study is to examine the determinants of corporate social responsibility disclosures in Nigerian quoted companies.
Other specific objectives are to:
- Examine the relationship between corporate social responsibility disclosure and firm size,
- Ascertain if there is any significant relationship between corporate social responsibility disclosure and firm leverage
- Ascertain the significant relationship between corporate social responsibility disclosure and firm bonus plan, and
- Examine the relationship between corporate social responsibility disclosure and the firm industry type.
1.4 Research Questions
The following are the research questions for this study;
- How is corporate social responsibility disclosure significantly related to firm size,
- What significant relation exist between corporate social responsibility disclosure and firm leverage,
- To what extent is corporate social responsibility significantly related to firm bonus plan, and
- How significantly related is corporate social responsibility with firm industry type?
1.5 Statement of Hypotheses
In order to achieve the objective of this research work, the following hypotheses have been formulated for empirical validation;
- H1: Firm’s size is positively associated with corporate social responsibility
- H2: Firms leverage is positively associated with corporate social responsibility disclosure level
- H3: Firm’s bonus plan is positively associated with its social and environmental disclosure level.
1.6 Significance of the Study
The subject of corporate social responsibility is an important issue not used for corporate entities alone, but also for society. The impact of corporate activities on society demands that corporations must act responsibly in finding ways to ensure that the social implications of their business concerns are addressed especially when it constitutes a cost to society.
In Nigeria, multinational now try to placate the restive host communities by embarking on series of ventures such as building classroom blocks, boreholes and roads: offering some employment opportunities to the natives in the community: and giving scholarships to selected students from the affected communities. On the overall, Corporate Social Responsibility (CSR) activities are gaining momentum in Nigeria as companies attempt to project a positive image to the society.
The study will also be useful to stakeholders who need to understand the concept and issues involved in the CSR disclosure. In addition, the study will significantly improve the existing studies from developing economies. The study will also serve as a valuable research material for subsequent researches in this direction.
It will serve as a reference point for the future researchers’ interest.
1.7 Scope of the Study
The study examines the determinants of corporate social responsibility disclosures in nigerian quoted companies. The study is restricted to banks listed on the Nigerian Stock Exchange as it is more feasible to access information on their social responsibility activities. The simple random sampling technique was employed in selecting the all the banks for 2010 – 2015 financial years.
1.8 Limitations of the Study
In writing this project, so many problems were encountered, which are listed below:
Factor that may likely affect the work is the issue of investigating the concerned people in carrying out the research work.
Problem of Sourcing for Material:
The research was faced with problems of getting current materials, textbooks, journals and seminar papers related to subject matter.
Un-cooperative Nature of the Studied Firms:
The researcher encountered problem of non-cooperation from some officials of the selected regions to carry out the research. Some of the personnel contacted for interview did not cooperate while some did reluctantly. The difficulty in getting access to official and up-to-date records and documents was also encountered.
1.9 Definition of Terms
1. Social Responsibility:
This is the obligation of an organization’s management towards the welfare and interests of the society in which it operates.
A factor which decisively affects the nature of outcome of something.
A person or group that has an investment, share or interest in something, as a business or industry.
A social unit of people that is structured and managed to meet a need or to pursue collective goals.
5. Promotional Opportunity:
This refers to a special offer, such as a sale or a product deal.
6. Financial Performance:
The level of performance of a business over a specified period of time, expressed in terms of overall profits and losses during that time.
The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
1.10 Organization of the Study
This research work is organized in five chapters, for easy understanding, as follows.
- Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
- Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
- Chapter three deals on the research design and methodology adopted in the study.
- Chapter four concentrate on the data collection and analysis and presentation of finding.
- Chapter five gives summary, conclusion, and recommendations made of the study.
Summary, Conclusions and Recommendations:
This chapter summarizes the findings into the determinants of corporate social responsibility disclosures in Nigerian quoted companies.. The chapter consists of summary of the study, conclusions, and recommendations.
5.1 Summary of the Study
This study examines the determinants of corporate social responsibility disclosures in Nigerian quoted companies. it evaluated the relationship between corporate social responsibility disclosure and firm size, ascertaining if there is any significant relationship between corporate social responsibility disclosure and firm leverage, ascertaining the significant relationship between corporate social responsibility disclosure and firm bonus plan, and examining the relationship between corporate social responsibility disclosure and the firm industry type. All the qouted banks were used for the study.
This study is undertaken in a Nigerian setting. Using a CSR disclosure index, we scored a sample of 15 Nigerian listed banks. We examined the main drivers of Nigerian listed banks to report CSR in their annual reports. We found that company profitability is the key driver for Nigeria listed banks to disclosure CSR information. We also found that firms’ size and return on asset was positively related to corporate social responsibility disclosure while leverage was found to exhibit a negative relationship with corporate social responsibility.
There are several implications of the study’s findings for both academics and /or practitioners. The study contributes to the accounting literature and more specifically to the literature on CSR disclosure for the listed banks. The findings of this study will advance our understanding of CSR practices in a developing country context by demonstrating how company’s characteristics could determine the level of a company’s CSR disclosure practices. Given these results in Nigeria, researchers could reasonably anticipate finding similar results in other countries.
In this study our contribution for the first time demonstrates the importance of company’s characteristics that play a vital role in CSR company disclosure practices. Moreover, the findings reported in this paper have three important practical implications. First, investors may find this study useful as it provides analysis of the relationship between the levels of CSR company disclosure practices and the company’s characteristics within a developing country context. Second, the subject firms (Nigerian listed banks) may use the findings of the study of improve their accounting disclosure systems. Finally, the Stock Market Authority in Nigeria and other emerging countries in that region can use the findings of the study to improve their CSR disclosure regulations and practices.
Like most research of its kind, the results of the study are subject to several limitations. One potential limitation of the current study is its use of a CSR disclosure index to investigate the phenomenon. The existing disclosure literature does not provide a great number of alternatives for measuring disclosure. We acknowledge that, as in in other disclosure studies, the selection of the items included in the disclosure index inevitably involved some degree of judgment and subjectivity (Marston and Shrives, 1991). Another limitation of the current study is that population and sample are limited to only listed banks in Nigeria stock exchange.
Further research could be undertaken to examine other factors that might affect CSR disclosure. It might be of interest of study the effect of internal control, the existence of internal auditor on CSR reporting. It might also be important to examine the effect of corporate governance internal and external mechanisms on CSR reporting. Finally, it might be of interest examining the extent to which CSR information provides value relevant information to the stock market. In this line of research, we recommend that further research is needed to explore the debt/equity hypothesis in other context or different time periods, that inconsistency of previous results is a common feature of CSR research.
From the findings and conclusions, the following recommendations are made:
- Listed deposit money banks should continue to invest in corporate social activities as much as practicable because they result into increase in profitability.
- Listed deposit money banks should leverage on their social responsibility expenditures by ensuring that they are linked or connected to profitable operations.
- Top management should understand the strategic financial benefits of CSR activities.
- Since banking industries considers investment in social responsibility as beneficial to the society and its own business operation, it will be necessary for the industry to earmark more funds as social responsibility investment fund so as to meet the increasing demands from members of the public for its social assistance.
- Banking industries must include CSR initiates in their strategic plans in order to get higher reputation.
- The corporate social responsibility of the banking industries should be more environmentally demanded rather than Marjory from angle of ethical consideration and philanthropic obligations.
- The banking industries should see corporate social responsibility as a marketing tool or strategy for marketing their products in order to achieve sales profit, customer’s satisfaction, maximization of shareholders return, stakeholders satisfaction and image promotion in the face of potential employees.
- The angles at which the banking industries are practicing the social responsibility should be equally extended to the areas such as community volunteering, cause related marketing, and so on.
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