The relationship between corporate social responsibility and financial performance for commercial banks in kenya

Abstract

The study established the relationship between Corporate Social Responsibility and Financial performance in all commercial banks in Kenya. Corporate Social Responsibility was measured in using Staff costs. Financial performance was measured using the Return on Assets for the various banks. The control variables were defined using the CAMEL approach in which it included: Capital Adequacy Ratio, Net performing loans Ratio, Total Loans over Total Assets ratio and the Net Asset growth rate. In previous studies, research has been done and the scholars came up with a positive, negative or neutral relationship between Corporate Social Responsibility on financial performance. Different theories were stated like the Agency Theory, Stakeholders Theory, Legitimacy Theory and empirical studies in regards to the research problem. This study used descriptive survey and indicated the mean and standard deviation of the various variables. The population consisted of the 42 commercial banks in Kenya. The study opted not to have a sample since the population was quite small. The period of study was 7 years from year 2009 to 2015. Data from secondary sources was purely obtained from the Central Bank Supervisory Reports and the various banks’ published financial statements as at 31st December for the period of study. These sources were used to derive the various ratios as indicated above. The study used SPSS version 21 package to do the data analysis. The dependent variable was financial performance (FP) while the independent variable was Corporate Social Responsibility (CSR).The study showed the correlation coefficient, the correlation matrix, the analysis of variance and the regression model coefficients. The study indicated a positive relationship between the two variables