The Effect of Corporate Social Responsibility on Financial Performance of Socially Screened Out Companies Listed at Nairobi Securities Exchange.

Abstract

A business cannot thrive on a fraction of its stakeholders while excluding the others. In recent years, organizations have embraced corporate social responsibility and incorporated corporate social responsibility activities in their practices as a way of satisfying the various stakeholders. This study sought to investigate the effect of corporate social responsibility on financial performance of socially screened out companies listed at Nairobi Securities Exchange. The population of interest comprised all 23 socially screened out companies but due to non-availability of data for some companies, a census could not be carried out. The research only studied 15 companies. Secondary data used in the study for the period 2010-2014 was obtained from publications, annual reports and audited financial statements of the companies. The study employed multiple linear regression analysis to analyze data. Control variables of size, leverage and growth of sales were introduced in the model. The results indicated that there was a significant positive relationship between corporate social responsibility and financial performance. Leverage had a significant relationship whereas growth of sales had an insignificant positive relationship. Size of the company was also found to have a significant inverse relationship with financial performance.