The Impact of Corporate Social Responsibility Practice on Financial Performance of Banking Industry: Case Study: East African Commercial Banks
Hussein Abdi Mohamud *
Faculty of Management Sciences, SIMAD University, Somalia.
*Author to whom correspondence should be addressed.
Abstract
The purpose of the study is to investigate the impact of corporate social responsibility on financial performance in the banking sector in East African countries. The required data are collected from the Annual report and web sites issued by the banks for the year 2010 to 2016 and analyzed using Ordinary least squares (OLS) model by using Eviews9. The sample of the study consists of 35 banks in six countries. 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 also the variables of Financial performance was obtained from bank’s financial statements. A multiple regression model was established to determine the relationship between the two variables. Control variables of GDP and financial leverage were also introduced in the regression model. The result showed that there is a positive strong relationship between CSR and ROA, while there is a negative relationship between CSR and ROE, therefore the study recommends the banks critically evaluate its existing CSR policy and to increase the wealth of shareholders.
Keywords: Corporate social responsibility (CSR), ROA, ROE, GDP, financial leverage