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DETERMINANTS OF CORPORATE SOCIAL RESPONSIBILITY DISCLOSURES IN NIGERIAN QUOTED COMPANIES

ABSTRACT

This study is an empirical analysis of the determinants of corporate social responsibility disclosure in quoted deposit money banks in Nigeria for the period of 2006-2016. The quoted deposit money banks are fifteen (15) as at 31st December, 2016, out of which eleven (11) banks was selected as sampling of the study with the aid of filters. Specifically, the study examined the effect of firm size, liquidity, return on investment, gearing ratio, dividend and firm growth of the quoted deposit money banks. The study employed correlation, and data were analyzed with the aid of multiple regression technique. Using 121 firm year panel observations, OLS regression model was used as no heteroscedasticity was observed. Quantitative approach was adopted in the study and the study aligns itself to positivist paradigm.  The study reveals that firm size and firm growth positively and significantly influence the corporate social responsibility disclosure of quoted deposit money banks in Nigeria at 5% and 10% levels of significance, respectively. However, liquidity, return on investment, gearing ratio and dividend positively but insignificantly impact on corporate social responsibility disclosure. While dividend negatively and insignificantly affects the corporate social responsibility disclosure of quoted deposit money banks in Nigeria. The study concludes that firm size and growth are influential in explaining the corporate social responsibility disclosure of quoted deposit money banks in Nigeria. Therefore, the study recommends amongst others that the management of quoted deposit money banks should maintain quality assets that are durable. This is in view of the potential for the organizations that have such assets to disclose more of its corporate social responsibility activities.  The management of the quoted deposit money banks in Nigeria should improve upon the banks’ growth by extending into other profitable opportunities as the higher their growth rate the more they will be willing to disclose more of its corporate social responsibility. However, as for the liquidity, return on investment, gearing ratio, dividend they should be improved upon as they also have positive influence on the corporate social responsibility disclosure of quoted deposit money banks in Nigeria.

CHAPTER ONE

INTRODUCTION

1.1   Background to the study

In developed economies the concept of business has focused not only on profit making activities but also social welfare activities where businesses are not only responsible to its shareholders but also to all of its stakeholders. Empirical works revealed that there has been a growing global public awareness of the role of corporations in society. Many companies which have been credited with contributing to economic and technology progress have been criticized for creating social problems. Issues such as pollution, waste, resources depletion, product quality and safety, the rights and status of workers and the power of large corporations have become the focus of increasing attention and concern. (Islam, 2012).

Corporate Social Responsibility (CSR) is the process of communicating the social and environmental effects of organizations‟ economic actions to particular interest groups within society and to society at large. As such, it involves extending the accountability of organizations (particularly) companies; beyond the traditional role of providing a financial benefit to the owners of capital, particularly shareholders but also to the community. Such extension is predicated upon the assumption that companies do have wider responsibilities than simply to make money for their shareholders (Rizk, Dixon, and Woodhead, 2008).

Similarly, Nigeria Deposit Money Banks (DMBs) despite being profit making and service oriented firms also participate in CSR. Most of the quoted deposit money banks in Nigeria have recently realized that in order for them to survive and continue business as a going concern, they must adopt a system that bridges the gap between financial performance and the social system within which they operate.

In addition, CRS in Nigeria can be traced back to the practices in the oil and gas multinationals. The CSR activities in this sector are majorly centered on the local communities. The companies provide pipe-borne water, hospitals and schools among others. These initiatives are special and not always sustained (Amaeshi, Adi, Ogbechie, and Amao, 2006). The main influencing factors driving the CSR practice in Nigeria have been foreign; multinational companies operating in Nigeria together with foreign governments and international Non Governmental Organizations (NGOs) have been the primary drivers (Helg, 2007).

The concept has been a growing field of interest by sociologists, economist and accountants since 70s. The accounting struggle was to ensure that all social costs are adequately identified, measured and disclosed in the corporate periodic financial reports. Stakeholders are challenging firms to account for the level of their involvement in CSR (Tsoutsoura, 2004). CSR issue has therefore maintained its momentum continuously not only in developed economies but also in underdeveloped and developing countries particularly in Nigeria. Because, companies disclose information on CSR as a result of pressure from stakeholders such as customer, communities, investors, employees and creditors also due to the increase of global awareness of the role of companies in the society. 

Moreover, many empirical studies have focused on the variation in CSR practice across developed countries (Smith, Adhikari  Tondkar 2005; Gray and Bebbington 2007), only a few have addressed this issue in developing countries (Haniffa and cooker, 2005; 2007; Akintola 2010). This suggests that CSR is more relevant to corporations operating in the developed nations due to community awareness and expectations of society responsible behavior. Also societal awareness and expectations in the developing nations on CSR is less important to the society.

Firm size, profitability, liquidity, leverage, dividend and firm growth are the most key considered in determining firm CSR investment, disclosure and practice in previous studies. Firm size is one of the determining factors of CSR disclosure in developed and developing countries. This study extended as far as determining the extent to which firm size contributes to CSR. Firm size measured in different ways by different authors such as turnover, total assets, fixed assets, paid up capital, shareholders equity, capital employed, number of employees and market value of the firm. This study measured firm size as total assets of the firm which is in line with the work of Shehu and Faruk (2013); Abdu Abubakar (2016); and Tazul-Islam(2010). It is expected that large firm would like to practice and disclosure more information on CSR because of economic advantages.

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