Effect of Corporate Social Responsibility on Accounting Conservatism in Nigerian Banking Industry
Chapter One
The main objective of the study is to examine the impact of corporate social responsibility on accounting conservatism in the Nigerian banking industry. The specific objectives of the study are:
- Examine the effect of corporate social responsibility on the net profit margin of listed deposit money banks in
- Examine the effect of corporate social responsibility on the return on total assets of listed deposit money banks in Nigeria.
- Assess the effect of corporate social responsibility on the return on equity of listed deposit money banks in
CHAPTERย TWO
ย LITERATUREย REVIEW
ย Introduction
Inย thisย chapter,ย aย review ย ofย extantย literatureย onย theย subjectย matterย isย carriedย outย coveringย conceptualย framework,ย theoretical literature andย empirical literature.
ย Corporateย Socialย Responsibility
A key indicator to determine the true worth and value of modern organizations is their ability toย giveย backย toย theย societyย partย ofย theirย incomeย throughย someย mutuallyย beneficialย initiativesย otherwise often referred to as corporate social responsibility (Nkanbra & Okorite, 2007). Theย concept of CSR as a social obligation was first advocated by Carroll (1979). Carroll (1979) CSRย pyramid isย oneย ofย the best-known CSR concept which covers economic,ย legal, ethical andย philanthropicย expectationsย thatย aย societyย hasย inย relationย toย aย company.ย Accordingย toย Rendtorff
and Mattson (2012), companies are perceived as human communities that use social practices inย order to achieve common goals. These objectives are realized through bond of trust and authenticย relationships with customers. The most important ethical principles that promote good life ofย customers are customerโs autonomy, dignity, honesty, customerโs vulnerability that representsย basicย presumption for decent access to customers.
Yeungย (2011)ย definesย keyย elementsย ofย CSRย inย theย bankingย sectorย toย includeย asย understanding of financial services complexity, risk management, ethics in the banking business,ย strategy implementation for financial crisis, protection of customersโ rights and channels settingsย for customer complaints. Macdonald and Rundle-Thiele (2008) examine a relationship betweenย CSRย andย customersโย satisfactionย inย theย bank.ย Accordingย toย theย conclusionย ofย theirย study,ย customersโ satisfaction is more affected by pro-client oriented events than CSR activities. And ifย theย bank decidesย to developย CSR activities,ย focus ofย theseย activitiesย has to beย properlyย chosen.
Robin (2008) states that society would like to have an economic system that createsย opportunities for the growth of economic welfare and a happy life of people. The mission ofย ethics is to minimize the abuse of companiesโ power in the bilateral exchange relations and toย reduce a negative impact on a peopleโs daily live. A fundamental issue of business ethics is howย to make capitalism more ethical. According to Sigurthorsson (2012), risk of CSR consists in theย fact that it tends to become an excuse for soft law and corporate self-regulation. Icelandic banksย implement their CSR concept through a financial support of charitable activities and they did notย pay attention to a formation of socially responsible practices but reduced CSR tools only forย public communication. Corporate social responsible practices should focus more on processesย that make socially responsible profit and not on its distribution. Fassin and Gosselin (2011) alsoย reportย that largeย institutions haveย aย strongย CSR and ethical culture.
CSR models present companyโs social obligations as comprising economic, legal, ethicalย and philanthropic responsibilities. Carroll (1991) notes that businesses were created as economicย entities driven by a profit motive, thus economic performance undergirds the other three CSRย components. Legal responsibility involves businesses complying with federal, state and localย government laws and regulations (Carroll, 1991). This was followed by ethical responsibilities,ย those standards, norms and expectations that reflect a concern for what consumers, employees,ย shareholders and the community regard as fair, just and respectful of stakeholdersโ moral rightsย (Carroll, 1991). Finally, philanthropic responsibility was the expectation that businesses be goodย corporateย citizens,ย activelyย engagingย inย programsย toย promoteย humanย welfareย andย goodwillย (Carroll, 1991).ย A considerable amount of research effort has been directed towards identifyingย theย positive impact of CSR initiatives on customers.
CHAPTERย THREEย
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METHODOLOGY
Introduction
This chapter addresses methodological issues which include research design, population andย sample size; sources and methods of data collection; techniques of data analysis and definitionย and measurement of variables. It also consists of diagnostics and post estimation tests. This studyย adopts a longitudinal panel research design and uses panel data (cross sectional and time seriesย data) to analyze the effects of CSR on the profitability of listed deposit money banks in Nigeria.ย This type of research design seeks to establish causal relationship between the dependent andย independent variables (Robson, 2002; Nelling & Webb, 2009 and Saunders, Lewis & Thornhill,ย 2009). According toย Kerlinger andย Lee (2000),ย this research design isย appropriate where theย study is attempting toย explain how the phenomenon operates by identifying the underlyingย factors that produce change in it in which case there is no manipulation of the independentย variables.
Populationย and Sampleย Sizeย of theย Study
The population of the study is 15 deposit money banks listed on the floor of the Nigerian Stockย Exchange. Ecobank Transnational Incorp is excluded from the sample having been listed on 24thย April, 2006 (meaning that the data for 2006 is not for full year), therefore the sample size isย reduced to 14 deposit money banks listed and had full accounts for period 1stย January, 2006ย throughย to 31stย December, 2015ย as shown in Tableย 1.
CHAPTERย FOUR
DATAย ANALYSISย ANDย INTERPRETATION
ย ย Introduction
This chapter presents the research data, results and a discussion of same in line with the specificย objectives of the study as guided by the techniques mentioned in chapter three. It starts with aย discussion of the descriptive statistics, and then diagnostic tests performed to validate the use ofย theย techniquesย asย appropriateย andย inferential statisticsย coupledย with theirย interpretations.
CHAPTERย FIVE
SUMMARY,ย CONCLUSIONย ANDย RECOMMENDATIONS
ย Summary
The overall objective was to study the Effect Of Corporate Social Responsibility On Accounting Conservatism In Nigerian Banking Industry. The findings indeed supported the overall relationshipย with an explanation of 72.25 per cent with regard to NPM and 95 per cent with regard to ROTAย and 91% with regard to ROE. NPM, ROTA and ROE models were found to be significant at 5%ย level of significance too. The study employed both causal and explanatory research designs withย aย census ofย 14ย firms or 93.33 per centย %ย of targetย population.
Diagnosticย testsย suchย asย multicollinearity,ย serialย correlation,ย stationarity,ย heteroskedasticity,ย normalityย andย hausmanย specificationย wereย performedย inย supportย ofย theย application of the Random Effects Models used to analyze the nature and the degree of theย relationships. Conclusions on the statistical significance between CSR and profitability measuredย by NPM, ROTA and ROE were drawn. The moderating effect ofย firm size and interest rate onย the effect of CSR on profitability was also looked. The summary of each is itemized based on theย specificย objectives of theย study.
On the effect of CSR on NPM of listed deposit money banks in Nigeria, the study findsย thatย CSRย hadย significantย positiveย effect.ย Aย unitย increaseย inย CSRย leadsย toย 0.0553ย increaseย inย NPM. Similarly, CSR has significant positive effects on ROTA and ROE.ย A unit increase inย CSR leads to increases of 0.03 in ROTA and 0.009 in ROE. On the moderating effects of firmย size and interest rate on the effect of CSR on profitability of listed DMBS in Nigeria, both wereย positive and significant when profitability is measured by ROTA. However, when profitabilityย was measured byย ROE, onlyย firm sizeย was found to beย significant.
ย Conclusion
Basedย onย theย findingsย of the study, theย followingย conclusionsย areย drawn:
- CSR influences the profitability of listed deposit money banks in Nigeria. Overall, thereexist a strong effect of CSR on NPM, ROTA and ROE. These effects were also found toย be positive and significant at 5% level of significance. In addition, results on the effect ofย CSR on NPM, ROTA and ROE suggest that stakeholders theory is applicable based onย theย investors return on investment.
- On the moderating effect of corporate social responsibility on profitability by firm size,the study concludes that indeed firm size had significant positive moderating effect. Thisย is realistic since as expected the size of a firm measured by natural logarithm of totalย assetsย dictatesย aย lotย onย theย availability ofย resourcesย toย useย toย fundย corporateย socialย responsibility
Recommendations
Fromย theย findingsย andย conclusions, theย followingย recommendationsย areย 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
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