CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE OF QUOTED CONGLOMERATE IN NIGERIA

CHAPTER ONE

INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

Abstract

The study examined the impact of corporate social responsibility on the financial performance of Quoted Conglomerates in Nigeria. The research design adopted by the study is correlational and the population constitutes of the eight (8) conglomerate companies quoted on the Nigeria Stock Exchange as at 31st December 2011. Due to the data availability of the companies and the fact that they are few in number, the study uses census approach. The study uses secondary data and the instrument used for the collection of the data is documentation. The data used are extracted from the annual reports of the conglomerates, NSE factbooks and Daily official lists of the NSE official lists of the NSE. The data is for the period of 6 years ranging from 2006-2011. The study used Multiple Regression Model as the techniques of analysis using SPSS 16.0 software. The study found that two of the independent variables (i.e. ER and CP) have significant positive impacts and other one (i.e. EMS) negative impact. In line with the findings of the study, we conclude that corporate social responsibility plays a significant role on the profitability of conglomerates in Nigeria.

CHAPTER ONE

INTRODUCTION

• Background of the study

Conglomerates are often large and multinational companies in nature that embarks on various types of businesses. In Nigeria, they are under the regulation of the Nigerian Stock Exchange (NSE) and are mainly established to accomplish synergies, diversification and earnings growth. In early 1960s conglomerates were very popular in developed countries, but due to the difficulty associated with managing unrelated business units effectively they are now less popular. In developing countries like Nigeria, apart from the problem of managing unrelated units, conglomerates also face the problem of managing conflicts with the immediate environment in which the business units are established. In an effort to address that most of the conglomerates embark on Corporate Social Responsibility (CSR).    CSR simply means that companies in the cause of discharging their day to day activities for the purpose of profit realization should also take into consideration the effect of their activities on the members of the society in which the companies are residing and the environmental sustainability of their operations. The origin of CSR in the Nigerian context can be traced back to the presence of unbridled of oil in the southern part of Nigeria (South-South Geo-Political Zone). The discovery of the oil brought a serious conflict between the companies and the environment. On one hand, members of the community are complaining of environmental degradation that led to various types of hardships and on the other, the companies are not willing to accept that they are the major cause of the hardships. These conflicts of interest led to the emergence and implementation of CRS. The overall objective being protecting human rights against corporate abuses and on that basis various legislations designed to regulate business and industry in Nigeria were come up with that includes recognition of public interests by companies (Gunu, 2008). There are various views in the literature on CRS. Some authorities like Friedman (1962) are of the view that the concern of businesses should be profit making and any activity to deter that should be stayed away by companies because no legal and democratic backing to pursue such activities. Others like Freedman and Liedtka (1991) are of the view that companies are responsible for all their stakeholders and should therefore take greater responsibility for the society at large and seek to solve social and environmental problems in their market place.  Today, most corporate managers believe that business operations should go beyond the simple prospect of money making. Thus, managers should try as much as possible to incorporate the interest of the employee, business partners, customers, shareholders and the society at large into their decision making which offers the best guarantee for consistent profitability. This view in favour of CRS implementation creates difficulty on measuring the real effect of the implementation on consistent profitability of companies. This has become more compounded as various ratios for measuring profitability exists.  Against the above backdrop, this study is undertaken with a view to evaluating the effect that implementing CRS has on the performance of conglomerates quoted on the NSE. The performance of business organizations is affected by their strategies and operations in market and nonmarket environments. Hence, there is a debate on the extent to which company directors and managers should consider social and environmental factors in making decisions. In essence, Corporate Social Responsibility (CSR) may be described as an approach to decision making which encompasses both social and environmental factors. It can therefore be inferred that CSR is a deliberate inclusion of public interest into corporate decision making, and the honoring of a triple bottom line which are People, Planet and Profit (Harpreet, 2009). CSR has been defined in various ways. Majority of these definitions integrate the three dimensions: economic, environmental and social aspects into the definition, what is usually called the triple bottom line. The triple bottom line is considering that companies do not only have one objective; profitability, but that they also have objectives of adding environmental and social value to society (Mirfazli, 2008). CSR has been defined as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis (Green Paper Promoting a European Framework for Corporate Social Responsibility (2001). Helg (2007) also defines CSR as the set of standards to which a company subscribes in order to make its impact on society. A wide variety of definitions of firm performance have also been proposed in the literature. Both accounting and market definitions have been used to study the relationship between corporate social responsibility and firm performance (Orlitzky et al. 2003). However, since most social responsibility scholars seek to understand the ways that socially responsible corporate activities can create or destroy shareholder wealth, market definitions of firm performance seem likely to be more appropriate than accounting definitions of firm performance in this context (Margolis & Walsh 2001). Today`s competitive and dynamic market environment has created new set of challenges for any business which are not only related to economics. To survive and prosper, firms must bridge the gaps in economic as well as social systems. Maximizing shareholder`s wealth is an every time essential but fulfilling that condition alone is no more valid in measuring the financial prosperity (Senaratne & Wijesinghe 2011). Corporate reports are required to furnish all stakeholders with financial and non-financial information, which are relevant, faithfully represented and useful for making prudent, reliable, effective and efficient decisions. Companies worldwide are now focusing on how best to integrate their financial and non-financial information, particularly as businesses are experiencing unprecedented environmental and social changes. Hence, the need for every organization to disclose in their annual reports the various activities that affect the stakeholders. This practice is becoming a very fundamental issue the world over. Corporate Social Responsibility (CSR) is a form of internal monitoring, management and external communication, which allows organizations of all sizes to meet the growing information needs of internal and external stakeholders. In essence, it conveys information about an organization’s economic, environmental, and social operations, the related impacts it has through its everyday activities; and the consequences of those impacts for the company and others. Stakeholders (investors, government, employees, customers, suppliers, trade associations and environmental groups) are expecting companies to produce reports that will demonstrate financial value, drive innovation and promote learning. Long term business success depends not only on a healthy financial position, but also on vibrant social and environmental performance. CSR is a crucial step towards achieving a sustainable global economy. It enhances corporate accountability, builds trust, creates transparency, drives greater innovation, improves internal management and decision making processes, reduces compliance costs and gives competitive advantage.

• STATEMENT OF THE PROBLEM

Corporate Social Responsibility (CSR) is a form of internal monitoring, management and external communication, which allows organizations of all sizes to meet the growing information needs of internal and external stakeholders. In essence, it conveys information about an organization’s economic, environmental, and social operations, the related impacts it has through its everyday activities; and the consequences of those impacts for the company and others. Stakeholders (investors, government, employees, customers, suppliers, trade associations and environmental groups) are expecting companies to produce reports that will demonstrate financial value , drive innovation and promote learning. Long term business success depends not only on a healthy financial position, but also on vibrant social and environmental performance. CSR is a crucial step towards achieving a sustainable global economy. it is in view of this that the researcher intends to investigate the effect of corporate social responsibility and financial performance of quoted conglomerate in Nigeria

• OBJECTIVE OF THE STUDY

The main objective of the study is to investigate the efficacy of corporate social responsibility and financial performance of quoted conglomerate in Nigeria, but to aid the completion of the study, the researcher intends to achieve the following specific objectives;

1. To investigate the effect of corporate social responsibility on financial performance of quoted companies
2. To ascertain the impact of corporate social responsibility on the long term business success

• To examine if there is any relationship between corporate social responsibility and financial performance

1. To ascertain the effect of CSR on the image of the organization
   • RESEARCH HYPOTHESES

The following research hypotheses were formulated to aid the completion of the study,

H₀: there is no significant effect of corporate social responsibility on the financial performance of quoted companies

H₁: there is a significant effect of corporate social responsibility on the financial performance of quoted companies

H₀²: corporate social responsibility does not have any impact on the long run success of quoted businesses in Nigeria

H₂: corporate social responsibility does have an impact on the long run success of quoted businesses in Nigeria

• SIGNIFICANCE OF THE STUDY

It is believed that at the completion of the study, the findings will be of use to the management of quoted conglomerate, as the study will help them assess the merit of CSR in integrating the companies socio-economic benefit to their immediate host community, the study will also be of great importance to the leaders of the immediate community of this quoted conglomerate as the study will help them in them take a strategic advantage of the generosity of the conglomerate as this will enhance a symbiotic relationship between the host community and the conglomerate. The study will also be of great importance to intending researchers as the study will serve as a reference point for further research in a similar topic. The study will also be of great importance to students, academia’s lecturers, student and the general public as the study will contribute to the pool of existing literature on the subject matter.

• SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the corporate social responsibility and financial performance of quoted conglomerate in Nigeria, but in the cause of the study, there were some factors which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study.
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities        and examinations with the study.
3. c) FINANCE: The finance available for the research work does not allow for wider coverage as resources are very limited as the        researcher has other academic bills to cover

1.7 OPERATIONAL DEFINITION OF TERMS

CSR

Corporate social responsibility is a type of international private business self-regulation.

Conglomerate

A conglomerate is the combination of two or more corporations engaged in entirely different businesses that fall under one corporate group, usually involving a parent company and many subsidiaries.

Financial performance

Financial performance is a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. This term is also used as a general measure of a firm’s overall financial health over a given period of time.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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