Accounting | Effect of corporate social responsibility on the performance of the Nigerian ban...

Effect of corporate social responsibility on the performance of the Nigerian banking sector

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CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The last twenty years have seen a radical change in the private sector’s relationship both with the state and the civil society. Globalization, deregulation, privatization, and the withdrawing of line between state and market have changed the basis on which private enterprise is expected to contribute to the public goods. Meanwhile, the relationship between company and civil society has move from being paternalistic philanthropy to re- examination of roles, rights and responsibilities of business in society (Alawiye and Babatunde, n.d).

In the Nigeria society, corporate social responsibility (CSR) has been a highly contemporary issue to all stakeholders including the government, the corporate organization itself, and the general public (Olanrewaju, 2012). Corporate social responsibility is an integral part of business corporations as it not only provide support to beat business competitors but also provide help to grow the business in the society. So by focusing on the financial success and community growth, the company can increase it performance rapidly as compare to their competitors.   Commercial banks in Nigeria today adopts corporate social responsibility not only as a philanthropy spending but as a social investment and environmental sustainability, it has also become a normal practice by banks to disclose on the face of financial statements how much they have spent on CSR pertaining to donations and charitable gifts.

Many researchers tend to focus on societal benefit of CSR neglecting the impact on the organization itself. Today management of banks have found the need to provide for environment in which they operate and hence need to evaluate the corporate social responsibility engaged in them on their performance. According to Pierre, Timothy, George and Garry (2009) organizational performance encompasses three specific three areas of firm outcomes: (a) financial performance (profits, return on asset, return on investment, etc); (b) product market performance (sales, market share etc); (c) shareholders return (total shareholders return, economic value added etc). Therefore this study propose to measure the organizational performance in three aspect, using banks profit, turnover and earnings per share (EPS).

1.2 Statement of the problem  

According to Robbins (2005), manager of banks are often faced with the challenge of determining how socially responsible their banks are particularly with the increased competition in the banking industry. There have been arguments that managers should integrate economic, social and environmental concerns into their business strategies. Recognizing the potential benefit of improve public relations, many banks publicizes their dedication to corporate social responsibility, and provides stockholders with a formal report of their corporate social responsibility accomplishment. However many researchers have come out with different view on the influence of corporate social responsibility has on the organization in terms of performance. Therefore this study proposed to examine the impact of CSR on organization performance in Nigeria banks.

1.3 Research Question

i. Is there any relationship between corporate social responsibility spending and Nigerian banks profitability?

ii. Does corporate social responsibility spending have any influence on the turnover of Nigerian banks?

iii. Does corporate social responsibility spending have any impact on the earnings per shares of Nigerian banks?

1.4 Research Objectives

i. To examine the relationship between the spending on corporate social responsibility and profitability in the Nigeria banking sector.

ii. To investigate the influence of corporate social responsibility spending on turnover of Nigerian banks.

iii. To examine the effect of corporate social responsibility on earnings per share (EPS) of Nigerian banks.

1.5 Research Hypotheses

Ho1: There is no relationship between corporate social responsibility spending and   

          Profitability on Nigerian banks.                              

 Ho2: Corporate social responsibility does not have any impact on turnover of Nigerian   

            banks.                           

1.6 Justification for the Study

Several researches have been carried out on corporate social responsibility of firms but focuses on the social and environment benefit in which the firm operate. Thus this research will consider the effect corporate social responsibility has on the performance of banks in Nigeria. Also previous researches have been done on organizational performance in other sectors also using different variables but for the purpose of this research the effect of CSR on organizational performance will be review on profit, turnover and earnings per share (EPS) of Nigerian banks.  

The study will also contribute to the existing knowledge of corporate social responsibility and its effects on organizational performance of Nigerian banks and will also create an avenue for further researches on CSR and organizational performance.

1.7 Scope of the Study

This study will cover 6 selected banks in Nigeria and will access the financial report of these banks for 5years which will be from period 2011 to 2015.

1.8 Definition of Terms

CSR: This is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large. 

Organizational Performance: This comprise of the actual output or result of an organization as measured against its intended outputs (or goals and objectives) 

Bank: A bank is a financial establishment that uses money deposited by customers for investment, pays it out when required, makes loans at interest, and exchanges currency.

1.9 Plan of the Study

Chapter one will discuss the general overview of the study. This will include the background to the study, statement of the problem, research question, objective of the study, hypothesis of the study, justification of the study, scope of the study, definition of term and the plan of the study for chapter two shall contain the review of relevant literature on different concepts, theories and empirical evidence. Chapter three will discuss the methodology and techniques to be adopted for the study and chapter four will deal with data presentation, analysis and findings discussion. Chapter five will be on the summary, conclusion and recommendations of the study.

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