The Determinants of Foreign Direct Investment in Kenya: an Empirical Investigation (1976-2016)

Abstract

Corporate Social Responsibility (CSR) is gaining momentum in Kenya as organisations are recognizing the vital role it plays on firms’ performance. This is so mostly with the large corporations who are using it as a corporate positioning tool and have continued to enjoy high profits from positive market perception due to CSR. Whereas CSR is taken to have positive effect on financial performance, those opposed to it argue that CSR involves the undertaking of a set of actions which are potentially cost increasing. Whereas studies on effect of CSR on financial performance are intensive, the findings have been contradicting, concentrating on large firms and leaving SMEs out. This study sought to determine the effect of CSR on financial performance of small and medium sized enterprises in Kenya using the top 100 SMEs. The study used descriptive survey research design with data being obtained from secondary sources which were the published financial statements, Chairman’s Statement and notes to the financial statements for five years period from 2009 to 2013. The data obtained was analyzed using SPSS version 21 with multiple regressions being used to show the relationship between dependent and independent variables. The significance of the results was determined using Z tests, ANOVA and coefficient of correlation and determination. The study found CSR has significant positive effect on financial performance of small and medium sized enterprises in Kenya. The study also found that size of SME has significant effect on profitability where bigger SMEs have better financial performance than small ones. SME industry was also found to affect financial performance with SMEs in service industry having highest financial performance followed by trading and manufacturing being least profitable as measured by return on assets. The study recommends for more investment in CSR as a way of boosting SMEs profitability