The relationship between corporate social responsibility and financial performance of companies listed in the Nairobi securities exchange

Abstract

In recent years, firms have greatly increased the amount of resources allocated to CSR activities. This paper studies the empirical relation between corporate social responsibility (CSR) and financial performance in Kenya of companies listed at the Nairobi Securities Exchange continuously for a period of five years; from 2007 to 2011.Corporate social responsibility is measured by the amount spent on CSR programs while Financial performance is measured by Net profit. According to the major findings of the study, CSR has positive relationship to the financial performance. The major significance is noted in the Net profit. The study found that there was a general upward trend in the amount invested in CSR activities between 2007 and 2011.The highest investment was seen in 2010 while the lowest in 2007.The study also found that there was an upward trend in the performance of firms listed in NSE. The year 2010 was marked with the highest expenditure on CSR followed by 2009 in most companies whereas 2007 and 2009 were the years that recorded the lowest expenditure on CSR among the companies. The best performing year was 2011 where most of the companies registered highest profit followed by 2010 whereas 2008 and 2007 were the years that recorded the lowest turnover .along the years in all sectors the net profit has been increasing since 2007. A recommendation for improvement of all stakeholders should embrace the importance of CSR in order to achieve the greater performance efficiency. The government should develop corporate social responsibility index for all companies and annually published in order to promote this emerging phenomenon.