CORPORATE SOCIAL RESPONSIBILITY REPORTING AND FIRM PROFITABILITY
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
In the few decades, the concept of corporate social responsibility has grown exponentially. In the 21st century, the firms face large number of changes and challenges including the corporate social responsibility as being one of the key problems. It suggests the importance of understanding the concept of corporate social responsibility by the organization towards the society which also impacts the financial performance of the firm.                                                     
The issue of corporate social responsibility (CSR) and sustainable              development have attracted worldwide attention, especially in the media and academia. Modern business organizations expectations are beyond making and maximizing profit towards being socially responsible to the society. Since business organizations do not exist in isolation, but exist within a society, therefore business organizations need to contribute positively to the development of the society in which they are operating. The Banking sector occupies important key position in the economy of a nation. In Nigeria, virtually all the banks report their expenses on social responsibility towards sustainable development in their annual reports. Most of them strive to meet the demand of charitable organizations, Government agencies, religious organizations and tertiary institutions.
Many empirical studies have been carried out in order to examine the effect of corporate social responsibility on the profitability of business organizations, especially in developed countries. While little studies were carried out in developing countries, Nigeria inclusive. It is against this background that this research paper tries to examine social responsibility in Nigerian banks and determine whether or not there is a significant relationship between corporate social responsibility and profitability of Nigerian banks.
Corporate social responsibility has been present in the management and accounting literature for about 45 years (Wood, 2010). Both organizations and societies have significantly increased their focus on corporate social responsibility in recent years (Adams and Frost, 2006; Gulyas, 2009; Young and thyil, 2009). Traditionally, companies have to focus strategies for their business operations and profit such as differentiation, diversification, turnaround, concentration and globalization. However, recent development in strategic thinking support the need to add activities that expand out from company into society. Scholars have identified these activities as corporate social responsibility activities (Carroll, 1979; Margolis and Walsh, 2009). Further corporate social responsibility scholars, managers and authors have recognized the actions of cause marketing, donation, society improvement, disaster relief, protection, peace initiatives and pollution reduction as companies’ social responsibility activities.
Among the many reasons identified to persuade companies to implement corporate social responsibility are popularity (Fernando, 2007), business strategy (Dentchev, 2004) and stakeholder pressure (McWillians and Siegel, 2001). As a result, studies are used to examine the relationship between corporate social responsibility performance and company performance to identify the above benefits.
1.2 PROBLEM STATEMENT
In the Nigerian society, corporate social responsibility has been a highly contextual issue to all stakeholders including the government, the corporate organization itself and the general public. Recently, what characterized the Nigerian society was fragrant pollution of the air, of the water and of the environment. Most corporate organizations are concerned about what they can take out of the society and de-emphasized the need to give back to the society (their host community). This attitude often renders the entire community inhabitable. A case in mind is the Niger Delta area of Nigeria. This translated to negative integrity and reputation on the part of the corporate identity as people perceived this as exploitation and greed for profitability and wealth maximization within a decaying economy of Nigeria. However, the general belief is that both business and society gain when firms actively strive to be socially responsible. That is, the business organization gain from enhanced reputation while the society gains from social projects executed by the business organization. This study is therefore intended to consider the impact of corporate social responsibility on firm profitability in Nigeria. The perceived gap supposedly created is harnessed and investigated for possible resolution, using six banks in the Nigerian banking industry.
1.3 OBJECTIVE OF THE STUDY
The main purpose of this study is to examine the impact of corporate social responsibility on financial performance of firms.
(1)    To find the relationship between corporate social responsibility cost and economic benefit.
(2)    To find the relationship between corporate social responsibility and firms profitability with regard to her net profit and total assets.
1.4 STATEMENT OF HYPOTHESIS
HO: There is no significant relationship between corporate social responsibility and firms’ net profit.
HA: There is a significant relationship between corporate social responsibility and firms’ net profit.
HO: There is no significant relationship between corporate social responsibility and firms’ total assets.
HA: There is a significant relationship between corporate social responsibility and firms’ total assets.
1.5 SCOPE OF THE STUDY
The study basically examines the relationship between corporate social responsibility disclosures and the profitability of six listed banks (First bank of Nigeria plc, Union bank of Nigeria plc, United bank for Africa plc, Zenith bank plc, Guaranty trust bank plc and Ecobank of Nigeria plc.) in the banking industry of Nigeria between 2003 and 2012. To achieve this, the corporate annual report for the above period shall be analyzed. The choice of these firms arises based on their direct and indirect contribution to the environment.
1.6 RELEVANCE OF THE STUDY
The motivation for carrying out this study in Nigeria is that stakeholders are blamed for the low level corporate social responsibility disclosures in Nigeria, perhaps as a result of misunderstanding of the nature of corporate social responsibility disclosure. This study will therefore enlighten the various stakeholders on corporate social responsibility disclosure and its impact on firms profitability.