Impact of Corporate Social Responsibility on Organizational Performance (A Case of Selected Banks in Nigeria)

Abstract

This study examines the relationship between corporate social responsibility (CSR) and financial performance in Nigerian banks, using return on assets (ROA) and return on equity (ROE) as key indicators. Employing panel least squares regression on data from 2019 to 2023, the results reveal a statistically significant negative relationship between CSR expenditure and both ROA and ROE. Specifically, the coefficient of LOG(CSR) in the ROA model is -0.302233 (p = 0.0022), indicating that a 1% increase in CSR spending leads to a 0.30% decline in ROA. Similarly, the coefficient of LOG(CSR) in the ROE model is -0.167564 (p = 0.0337), suggesting that a 1% rise in CSR investment results in a 0.17% reduction in ROE. These findings suggest that while CSR initiatives contribute to social and environmental sustainability, they may not provide immediate financial returns. High CSR expenditures could divert funds from core banking operations, affecting shortterm profitability and shareholder value. However, strategic CSR alignment with financial goals can mitigate these negative effects. Banks should optimize CSR investments by prioritizing initiatives that enhance both corporate reputation and long-term financial performance. This study highlights the need for a balanced approach to CSR, ensuring that social impact efforts support sustainable economic growth.