Effect of Corporate Social Responsibility on Financial Performance of Listed Companies in Nigeria

Abstract

This study investigates the effect of corporate social responsibility (CSR) on financial performance of companies listed on the Nigerian Exchange (NGX). It addresses the problem of whether engaging in CSR activities helps companies improve their financial performance. Employing an ex-post facto research design, adopting a quantitative approach that rests on a positivist philosophical world view, it applies panel data analysis on CSR expenditure, ROA, ROE, and Tobin’s Q, covering 124 companies from 2011 to 2020. Empirical results demonstrate that CSR had no significant influence on financial performance of listed companies when performance was measured as ROA and Tobin’s Q but had a significant positive effect when measured as ROE. The implication is that engaging in CSR activities may not always lead to improvement in financial performance. It therefore recommends that companies consider their motivations for engaging in CSR activities and temper such expenses if the motivation is improving financial performance.