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
CHAPTER TWO
LITERATURE REVIEW
Introduction
In this chapter, a review of extant literature on the subject matter is carried out covering conceptual framework, theoretical literature and empirical literature.
Corporate Social Responsibility
A key indicator to determine the true worth and value of modern organizations is their ability to give back to the society part of their income through some mutually beneficial initiatives otherwise often referred to as corporate social responsibility (Nkanbra & Okorite, 2007). The concept of CSR as a social obligation was first advocated by Carroll (1979). Carroll (1979) CSR pyramid is one of the best-known CSR concept which covers economic, legal, ethical and philanthropic expectations that a society has in relation to a company. According to Rendtorff
and Mattson (2012), companies are perceived as human communities that use social practices in order to achieve common goals. These objectives are realized through bond of trust and authentic relationships with customers. The most important ethical principles that promote good life of customers are customer‘s autonomy, dignity, honesty, customer‘s vulnerability that represents basic presumption for decent access to customers.
Yeung (2011) defines key elements of CSR in the banking sector to include as understanding of financial services complexity, risk management, ethics in the banking business, strategy implementation for financial crisis, protection of customers‘ rights and channels settings for customer complaints. Macdonald and Rundle-Thiele (2008) examine a relationship between CSR and customers‘ satisfaction in the bank. According to the conclusion of their study, customers‘ satisfaction is more affected by pro-client oriented events than CSR activities. And if the bank decides to develop CSR activities, focus of these activities has to be properly chosen.
Robin (2008) states that society would like to have an economic system that creates opportunities for the growth of economic welfare and a happy life of people. The mission of ethics is to minimize the abuse of companies‘ power in the bilateral exchange relations and to reduce a negative impact on a people‘s daily live. A fundamental issue of business ethics is how to make capitalism more ethical. According to Sigurthorsson (2012), risk of CSR consists in the fact that it tends to become an excuse for soft law and corporate self-regulation. Icelandic banks implement their CSR concept through a financial support of charitable activities and they did not pay attention to a formation of socially responsible practices but reduced CSR tools only for public communication. Corporate social responsible practices should focus more on processes that make socially responsible profit and not on its distribution. Fassin and Gosselin (2011) also report that large institutions have a strong CSR and ethical culture.
CSR models present company‘s social obligations as comprising economic, legal, ethical and philanthropic responsibilities. Carroll (1991) notes that businesses were created as economic entities driven by a profit motive, thus economic performance undergirds the other three CSR components. Legal responsibility involves businesses complying with federal, state and local government laws and regulations (Carroll, 1991). This was followed by ethical responsibilities, those standards, norms and expectations that reflect a concern for what consumers, employees, shareholders and the community regard as fair, just and respectful of stakeholders‘ moral rights (Carroll, 1991). Finally, philanthropic responsibility was the expectation that businesses be good corporate citizens, actively engaging in programs to promote human welfare and goodwill (Carroll, 1991). A considerable amount of research effort has been directed towards identifying the positive impact of CSR initiatives on customers.
CHAPTER THREE
METHODOLOGY
Introduction
This chapter addresses methodological issues which include research design, population and sample size; sources and methods of data collection; techniques of data analysis and definition and measurement of variables. It also consists of diagnostics and post estimation tests. This study adopts a longitudinal panel research design and uses panel data (cross sectional and time series data) to analyze the effects of CSR on the profitability of listed deposit money banks in Nigeria. This type of research design seeks to establish causal relationship between the dependent and independent variables (Robson, 2002; Nelling & Webb, 2009 and Saunders, Lewis & Thornhill, 2009). According to Kerlinger and Lee (2000), this research design is appropriate where the study is attempting to explain how the phenomenon operates by identifying the underlying factors that produce change in it in which case there is no manipulation of the independent variables.
Population and Sample Size of the Study
The population of the study is 15 deposit money banks listed on the floor of the Nigerian Stock Exchange. Ecobank Transnational Incorp is excluded from the sample having been listed on 24th April, 2006 (meaning that the data for 2006 is not for full year), therefore the sample size is reduced to 14 deposit money banks listed and had full accounts for period 1st January, 2006 through to 31st December, 2015 as shown in Table 1.
CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION
Introduction
This chapter presents the research data, results and a discussion of same in line with the specific objectives of the study as guided by the techniques mentioned in chapter three. It starts with a discussion of the descriptive statistics, and then diagnostic tests performed to validate the use of the techniques as appropriate and inferential statistics coupled with their interpretations.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
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 relationship with an explanation of 72.25 per cent with regard to NPM and 95 per cent with regard to ROTA and 91% with regard to ROE. NPM, ROTA and ROE models were found to be significant at 5% level of significance too. The study employed both causal and explanatory research designs with a census of 14 firms or 93.33 per cent % of target population.
Diagnostic tests such as multicollinearity, serial correlation, stationarity, heteroskedasticity, normality and hausman specification were performed in support of the application of the Random Effects Models used to analyze the nature and the degree of the relationships. Conclusions on the statistical significance between CSR and profitability measured by NPM, ROTA and ROE were drawn. The moderating effect of firm size and interest rate on the effect of CSR on profitability was also looked. The summary of each is itemized based on the specific objectives of the study.
On the effect of CSR on NPM of listed deposit money banks in Nigeria, the study finds that CSR had significant positive effect. A unit increase in CSR leads to 0.0553 increase in NPM. Similarly, CSR has significant positive effects on ROTA and ROE. A unit increase in CSR leads to increases of 0.03 in ROTA and 0.009 in ROE. On the moderating effects of firm size and interest rate on the effect of CSR on profitability of listed DMBS in Nigeria, both were positive and significant when profitability is measured by ROTA. However, when profitability was measured by ROE, only firm size was found to be significant.
Conclusion
Based on the findings of the study, the following conclusions are 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 to be positive and significant at 5% level of significance. In addition, results on the effect of CSR on NPM, ROTA and ROE suggest that stakeholders theory is applicable based on the 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. This is realistic since as expected the size of a firm measured by natural logarithm of total assets dictates a lot on the availability of resources to use to fund corporate social responsibility
Recommendations
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
REFERENCES
- Abbasi, A., & Malik, Q. A. (2015). Firms‘ size moderating financial performance in growing firms: An empirical evidence from Pakistan. International Journal of Economics and Financial Issues, 5(2), 334-339.
- Abdul-Hamid, F. Z. (2004). Corporate social disclosures of banks and finance companies: Malaysian evidence. Corporate Ownership and Control, 1(4), 118- 129.
- Abdulrahman, S. (2013). The influence of corporate social responsibility on profit after tax of some selected deposit money banks in Nigeria. Educational Research Journal, 4(10) 722-732.
- Abiodun, B. Y. (2012). The impact of corporate social responsibility on firms’ profitability in Nigeria. European Journal of Economics, Finance & Administrative Sciences, (45), 39- 51.
- Aborade, R. (2005). A practical approach to advanced financial accounting. 2nd ed. Lagos:
- Master Stroke Consulting, 1-12.
- Abu-Baker, N., & Naser, K. (2000). Empirical evidence on corporate social disclosure practices in Jordan. International Journal of Commerce and Management, 10(3/4), 18- 34.