THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON FINANCIAL PERFORMANCE AND SHAREHOLDERS WEALTH IN NIGERIAN FIRMS
Abstract
This study seeks to assess the impact of corporate social responsibility on financial performance and shareholders wealth in Nigerian firms. However, it is set to achieve the following specific objectives: to know if there is any positive relationship between corporate social responsibility and return on asset of Nigerian firms, to examine the positive impact of corporate social responsibility on return on equity of Nigerian firms, to ascertain the improvement of corporate social responsibility on earning per share of shareholders, to evaluate the relationship between size of firm and corporate social responsibility, to examine the impact of industry type on corporate social responsibility
The secondary source of data collection w as adopted in this work ranging from the period of 2009 to 2013. Data are analyzed using tables and simple percentages. The statistical tool employed is the Ordinary Least Square (OLS) regression.
This research find out that the model suggest that type of industry that a firm operates in has a significant relationship with it’s corporate social responsibility. In this case, we reject the null hypothesis  and accept  the alternative. The coefficient   of earnings per share has a positive significance impact return on asset implying that a significant relationship exist between earnings per share (EPS) and a corporate social responsibility.  The research findings equally suggest that a firms profitability does not have a significant relationship with it’s corporate social responsibility. The model also reveal that that firms size has a significant relation with the corporate social responsibility.
CHAPTER ONE       
INTRODUCTION
1.1     BACKGROUND TO THE STUDY
The concept of corporate social responsibility was presented in 1910, perceived in 1950, and was formalized in 1960. The first book of corporate social responsibility was published by Howard Bowen in 1953. Before the development of the concept, the basic aim of firms was to make maximum profit for the shareholders not taking consideration how their operations affect the society at large. The issue of firms carrying out social responsibility has generated mixed reactions, argument and thought by diverse groups of the corporate world and the academia. The proponents argue that “it fosters and promotes ethical behaviour by managers, and this has a positive impact on firm reputation”. On the other hand, the burden of social responsibilities is detrimental to corporate reputation.
However, critique of CSR “claim that it is expensive and inconsistent with the absolute goal of maximizing shareholder wealth.” To these opponents this paper express the case of the festering wound of Nigeria’s Niger Delta region in order for them to judge lucidly: to be committed to the environment and still achieve a high shareholders’ value or to neglect the society and risk public odium and the likelihood that shareholders would either risk their stake in the organization or engage perpetually in damage control activities while also remaining in the negative spotlight which is dangerous to the firm.
The concept of CSR has tremendously increased and has given much importance to analyze the effect on shareholders’ wealth and firm’s financial performance. Firm’s now pays much attention to show their commitment to CSR by including it in their information provided to their stakeholder (Kotonen2009). In today’s competitive environment between successful firms, CSR is a basic part of every corporate strategy. Many firms have integrated CSR in all aspect of their operations. The concept has forced firms to not only focus on financial growth but to concentrate on the importance of working for the welfare of the society and also in employees’ satisfaction. Given their over-riding priority compared with other stakeholders, the consumer has assumed a focal role, which has led firms to act ethically on their behalf as part of a new ‘social consciousness’. Albuquerque (2013) expresses that CSR can be used to maximize firms value by minimizing the systematic risk, and can be considered as the investment in maintaining customer’s loyalty.  We can see that once the ‘primary needs’ of firms have been meet, advanced firms increasingly want to meet ethical values.
As often happens when new terms are coined, they tend to lose their conceptual precision, leaving their evocative value which is however watered down by the multitude of different meanings and contexts in which it is used. The concept of CSR indeed, takes on different meanings depending on the organization or group that uses it. Some tend to emphasize individual aspects that they believe to be more important than others e.g., the environment, safety, education, ethics or human rights. Definitions often vary as they represent historical and social differences between countries. Indeed, certain definitions underline a particular theme because it is more relevant in that particular state. At other times the concept of CSR reflects the level of economic and therefore social development of a country, (Poddi and Sergio, 2009). Due to the different weight given to the term by different countries, the World Business Council for Sustainable Development (WBCSD5) has given the following definition: “CSR is the task of a business to tremendously contribute to sustainable economic development, working together with workers, the local community and society in general to improve quality of life.”
Corporate Social Responsibility has begun to be discussed in Italy only recently and in particular since the European Council of Lisbon (2000) included it as a fixed strategy. In 2001, the European Commission published a Green Paper that contained its guidelines. In the United States, the topic  has been of interest for longer. Already in the mid 70’s the American Securities and Exchange Commission requested by the Natural Resources Defence Council – introduced certain social variables in the information that a publicly quoted company should give to its investors and the general public. So, business ethics and corporate responsibility began to spread among economically developed countries, (Hall and Rieck,1998). It is obvious that this transformation caused a shake-up in the accepted aspect of firms as they introduced the perception that the source could not ignore respect for working conditions or other social implications. Recently, we have seen a growing, ‘race’ for social certification as a response to the changed relation between firm and consumers as witnessed by the growing number of CSR firms in particular in some countries.
Thanks to the response to the interrelationship between strategic corporate aims and respect for all players involved in a company, at a theoretical level the stakeholder theory seems to be useful to measure the social responsibility of a firm by means of social accountability.  This theory underlines the fact that relations are fundamental for the existence of a firm and therefore should be looked at in more detail as they could open up new opportunities for a firm. The subjects that established this network mainly include the community where the firm is situated, workers and customers, (Ngwakwe, 2009).
In response to consumer satisfaction and the reaction that CSR companies have had in developed countries we can realize that CSR certification is an evolutionary phase of growth and therefore needs structural and linking elements. One of the main aims of this work is to evaluate this concept by using econometric models. However, if we are to say that CSR is necessary for corporate strategy, given the recentness of the phenomena and absence of a well defined and universally accepted certification method, at present CSR has certain major limitations which we would like to rectify: i.e., 1) certification, that is an objective benchmark rather than a mere marketing tool for the public, 2) the principal motivation and elements that push firms into ethical behavior and suitable certification. It is actually this second point that has given rise to a proliferation of articles concerning social certification (Matthew, 2008) that have still not shed light on the motivation that entices firms to bear the cost of certification or looked at the experimental performance of CSR firms. As a result, various performance measures have been adopted both on the market and in accountability that all give rather discordant results.
1.2.1    STATEMENT OF RESEARCH PROBLEM
This issues of corporate social responsibility has generated a lot of debates, school of thought pioneered by Andrew Carnegie (in his book” the Gospel of Wealth”) has argued for CSR. Fasany & Onakokaya (2013) revealed that CSR is the basic tool to the financial development of the firm in terms of attaining higher profits by adopting the process of taking community and societal welfare into considerations by the firms. On the other hand, another school of thought led by Friedman has strongly opposed the principle of CSR. They argument that managers should make decisions that maximize the wealth of the firm’s shareholders (Friedman,1970). From Friedman’s perspective, the only social responsibility of a firm is t o increase the profit and wealth of shareholders, that any other activities disturbing the optimal allocation of scarce resources to alternative uses exert an adverse influence on firm performance.  Hence, does CSR affects firms financial performance and shareholders’ wealth?
From the foregoing background, this study raises the following question.  
i.    Is there any positive relationship between corporate social responsibility and return on asset of Nigerian firms?
ii.    Does corporate social responsibility has a positive impact on return on equity of Nigerian firms?
iii.    Is there any improvement of corporate social responsibility on earning per share of shareholders?
1.3     RESEARCH OBJECTIVES
Generally, this study seeks to assess the impact of corporate social responsibility on financial performance and shareholders wealth in Nigerian firms. However, it is set to achieve the following specific objectives:
i.    To know if there is any positive relationship between corporate social responsibility and return on asset of Nigerian firms.
ii.    To examine the positive impact of corporate social responsibility on return on equity of Nigerian firms.
iii.    To ascertain the improvement of corporate social responsibility on earning per share of shareholders.
iv.    To evaluate the relationship between size of firm and corporate social responsibility
v.    To examine the impact of industry type on corporate social responsibility
1.4    RESEARCH HYPOTHESIS   
    Hypothesis one
H1 there is a positive relationship between corporate social responsibility and return of asset of firms.
H0: there is a negative relationship between corporate social responsibility and return of asset of firms.
Hypothesis two
H1:     there is a positive impact of corporate social responsibility Return on Asset of firms.
H0: there is negative impact of corporate social responsibility and Return on Asset of firms.
Hypothesis three
H1:     corporate social responsibility has improved the earnings per share of shareholders.
H0: corporate social responsibility has not improved the earnings per share of shareholders.
Hypothesis four
H1: there is a positive  relationship between size of firm and corporate social responsibility
H0: there is no positive  relationship between size of firm and corporate social responsibility
Hypothesis five
H1: Industry type has a positive impact on corporate social responsibility
H0: Industry type has no positive impact on corporate social responsibility
1.5    SIGNIFICANCE  OF THE STUDY
The findings of the study will be of importance to difference stakeholders in many ways
1.    It enables the management to assess the impact of corporate social responsibility of the company on its performance.
2.    It increases the awareness of corporate social responsibility in Nigeria.
3.     It will be of great benefit to government and regulations as its aid policy formulation and the extent of compliance by Nigerian companies on corporate social responsibility
4.    It will enable managers to know the need for it’s wonderful responsibility  and its impact on the economy
5.    It will make manager to assess their role and activities hence, score themselves
6.    It will serve as a lead way for various Non-governmental organizations (NGOs) in pursuit of increased corporate social responsibility.
1.6         SCOPE OF THE STUDY
This study focused on the impact of CSR on firm financial performance and shareholders wealth in Nigeria. A cross-sectional data of 20 firms covering a period of (2009-2013) is used for the study.
1.7    LIMITATION OF THE STUDY
This study is primarily restricted to the impact of CSR on firm performance and shareholders’ wealth. But however, this research work is limited to the following:  
1.    Statistical limitations: the study was based on statistical methods and techniques.
2.    Location: sample was drawn from Benin City.
3.    Availability of data: This research had to work with the informative that could each him within the specified time limit
4.    Time: This study was conducted and submitted within a short period of time. And this has placed restriction of the scope.
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