Does Corporate Social Responsibility Influence Financial Performance of Commercial Banks in Kenya?

Abstract

Corporate Social Responsibility (CSR) is the corporate philanthropy efforts of companies to increase their competitive advantage. Corporate philanthropy aligns the social goals of the organisation with economic goals of profitability thereby creating long-term business success. This study examined the relationship between CSR and Financial Performance (FP) of commercial banks in Kenya. The objective of this research was to establish the influence of corporate social responsibility on the financial performance of commercial banks in Kenya for the period of 2007 to 2013. Previous, relevant literature review indicated varied result between CSR and FP relationships; some studies indicated positive effects and others indicated negative effects and while others no existence of such a relationship. The study collected secondary data on CSR and Financial Performance from audited financial reports, bank websites and the Central Bank of Kenya annual supervision reports. In the study, CSR was the independent variable while Financial Performance was the dependent variable. Financial Performance was measured in Return on Asset (ROA) and Return on Equity (ROE) and the CSR and FP relationship was tested using regression model analyzed using statistical package for the social sciences (SPSS). The study concluded that CSR has a fair positive effect and influence the financial performance (ROA and ROE) for all aggregated commercial banks. The Regression analysis on banks based on the market size concluded that CSR influenced the ROE and ROA on all banks. Keywords: Corporate Social Responsibility (CSR), Financial Performance (FP), Return on Asset (ROA), Return on Equity (ROE).