Relationship between corporate social responsibility and financial performance of commercial banks in Kenya

Abstract

The main objective of the study was to determine whether there exist a relationship between corporate social responsibility and financial performance of commercial banks licensed by central bank of Kenya. Corporate social responsibility and financial performance in the banking system have been neglected in many studies conducted in developing counties hence the study sought to plug that gap. The study adopted casual design. The population of the study comprised of all the 41 commercial banks licensed by central bank of Kenya that were in operational between Jan 2007 and Dec 2011.Secondary data was obtained from the audited financial reports of the central bank of Kenya for the period from 2007 to 2011. A multiple regression model was adopted to determine the relationship between the two variables. Corporate social responsibility score was obtained using content analysis of reports of the banks on various components of corporate social responsibility as reported in their audited financial reports. One major finding of the study was that there is a strong relationship between the independent variables corporate social responsibility and the dependent variable financial performance. In conclusion Commercial banks should enhance efficiency in the banking services so as to improve financial performance as there was a significant relationship between the two variables. It was recommended that the commercial banks should invest more in corporate social responsibility to improve on company performance. Suggestions that in the years to come and given the availability of a wider pool of data the same could be under taken over a longer time span to assess whether there are any major difference in the findings when data is taken over a longer time of ten or more years.