e-sRC

CHAPTER ONE
INTRODUCTION
1.1
Background to the study
In developed economies the concept of business has focused not only on profit making
activities but also social welfare activities where businesses are not only responsible to its
shareholders but also to all of its stakeholders. Empirical works revealed that there has
been a growing global public awareness of the role of corporations in society. Many
companies which have been credited with contributing to economic and technology
progress have been criticized for creating social problems. Issues such as pollution, waste,
resources depletion, product quality and safety, the rights and status of workers and the
power of large corporations have become the focus of increasing attention and concern.
(Islam, 2012).
Corporate Social Responsibility (CSR) is the process of communicating the social and
environmental effects of organizations‟ economic actions to particular interest groups
within society and to society at large. As such, it involves extending the accountability of
organizations (particularly) companies; beyond the traditional role of providing a financial
benefit to the owners of capital, particularly shareholders but also to the community. Such
extension is predicated upon the assumption that companies do have wider responsibilities
than simply to make money for their shareholders (Rizk, Dixon, and Woodhead, 2008).
Similarly, Nigeria Deposit Money Banks (DMBs) despite being profit making and service
oriented firms also participate in CSR. Most of the quoted deposit money banks in Nigeria
have recently realized that in order for them to survive and continue business as a going

concern, they must adopt a system that bridges the gap between financial performance and
the social system within which they operate.
In addition, CRS in Nigeria can be traced back to the practices in the oil and gas
multinationals. The CSR activities in this sector are majorly centered on the local
communities. The companies provide pipe-borne water, hospitals and schools among
others. These initiatives are special and not always sustained (Amaeshi, Adi, Ogbechie,
and Amao, 2006). The main influencing factors driving the CSR practice in Nigeria have
been foreign; multinational companies operating in Nigeria together with foreign
governments and international Non Governmental Organizations (NGOs) have been the
primary drivers (Helg, 2007).
The concept has been a growing field of interest by sociologists, economist and
accountants since 70s. The accounting struggle was to ensure that all social costs are
adequately identified, measured and disclosed in the corporate periodic financial reports.
Stakeholders are challenging firms to account for the level of their involvement in CSR
(Tsoutsoura, 2004). CSR issue has therefore maintained its momentum continuously not
only in developed economies but also in underdeveloped and developing countries
particularly in Nigeria. Because, companies disclose information on CSR as a result of
pressure from stakeholders such as customer, communities, investors, employees and
creditors also due to the increase of global awareness of the role of companies in the
society.
Moreover, many empirical studies have focused on the variation in CSR practice across
developed countries (Smith, Adhikari Tondkar 2005; Gray and Bebbington 2007), only a

few have addressed this issue in developing countries (Haniffa and cooker, 2005; 2007;
Akintola 2010). This suggests that CSR is more relevant to corporations operating in the
developed nations due to community awareness and expectations of society responsible
behavior. Also societal awareness and expectations in the developing nations on CSR is
less important to the society.
Firm size, profitability, liquidity, leverage, dividend and firm growth are the most key
considered in determining firm CSR investment, disclosure and practice in previous
studies. Firm size is one of the determining factors of CSR disclosure in developed and
developing countries. This study extended as far as determining the extent to which firm
size contributes to CSR. Firm size measured in different ways by different authors such as
turnover, total assets, fixed assets, paid up capital, shareholders equity, capital employed,
number of employees and market value of the firm. This study measured firm size as total
assets of the firm which is in line with the work of Shehu and Faruk (2013); Abdu
Abubakar (2016); and Tazul-Islam(2010). It is expected that large firm would like to
practice and disclosure more information on CSR because of economic advantages.
Similarly, profitability has been measured by previous researches in so many ways such as
net profit to sales, earnings growth, dividend growth, return on assets and return on
investment. Here, the study measured profitability on the basis of return on investment in
line with Khaled, Mohammed, and Marwa, (2011). There are divergent opinions on
whether CSR practice and disclosure has relationship with profitability some results reveal
positive, negative while others have mixed results and even absence of relationship
between the concerned variables.

There are a reasonable number of literatures on liquidity as one of the determining factors
of CSR practice and disclosure in developed and developing economy. Liquidity is seen as
vital aspect in the life of a commercial bank and that the level of banks engagement in
CSR and other related activities is determined to a greater extent by the banks‟ liquidity
position Samad (2004). Firm with large liquidity has advantage to solve its financial
matters efficiently and effectively over the one that has lesser or even absence of it.
Gearing on the other hand explains the debt component of the capital structure of a firm.
Reasons were advanced by several researchers that firm with a high gearing would have
little resources to take care of some other objectives. However, firms‟ decision to engage
in CSR disclosure may also be influenced by gearing this is because of attracting more
investors to invest in their company which give stakeholders alarm that the firm has a good
future survival and growth.
It is however argued that firms‟ decision to engage in CSR disclosure may also be
influenced by dividend paid. Various researchers have advanced several reasons in the
literature regarding the association between firm CSR engagement and dividend paid,
which is mixed and inconsistent with some cases revealing positive, negative and even
absence of relationship. This study go beyond that as not only evaluate the relationship but
also examined the influence dividend paid has in driving firms to practice and disclose
CSR.
The association between firm growths as one of the expected determinants of CSR
disclosure of an organization has been established in different countries with divergent
views as to the impact it has on the CSR disclosure of a firm to variations of the

environments, methodologies and the periods in which the studies were conducted.
Moreover, notable researches like Waddock and Graves (1997) and Campbell (2007)
proposed that, since firms that are less profitable with relatively poor assets size and
unable to optimized their liquidity position would have fewer resources to spare for
socially responsible activities compare to those firms that are more profitable with large
assets size and operate at an appropriate liquidity level. This mean that firm recorded
consistent positive growth in many sensitive aspect of its operation will likely to
participate more on CSR activities.
Banking industry play a significant role towards the development of nation‟s economy,
their activities covers many angle of life and is expected to spend more toward
championing Corporate Social Responsibility. The increase pressure and awareness from
society on CSR disclosure has been the challenged facing almost every sector globally.
However, Deposit Money Banks in Nigeria being the most important sector in the
economy are not left out to the challenge.
1.2
Statement of the problem
Following the series of banking reforms undergone during the Soludo, Sanusi Lamido
Sanusi and the current reforms going on by Godwin Emefiele like introduction of cashless
policy, reduction of monetary policy rate, exchange rate stability and introduction of
Treasury Single Account (TSA), Nigerian deposit money banks (DMBs) have always been
at receiving end of these reforms, in terms of improving the quality of service delivery to
the customers rather than the interest of the bank.

However, DMBs of Nigeria have been facing challenge of liquidity since the
implementation of TSA policy in 2015. This may significantly affect the level of CSR in
DMBs of Nigeria, but there might be greater demand of DMBs to disclose more CSR
activities to meet up their demand. This therefore triggers the need for evaluating
empirically the factors influencing CRS disclosure of DMBs in Nigeria. Thus, do the
factors that have been previously documented to influence CSR disclosure in developed
and developing economics also influence CSR disclosure in Nigeria. The current study
seeks to provide answer.
In addition, there are reasonable literature that attempt to address the debate surrounding
CSR issue and its determining factors. Firm size, Profitability, Liquidity, Leverage,
Dividend and Firm growth are the key factors considered in determining Corporate Social
Responsibility (CSR) disclosure and practice in many previous studies which revealed
mixed results Abubakar Abdu (2016). Some studies such as Lin chih, Hsuan chih and Yin
chen (2010), Akintola (2010), Khaled, Mohamed and Marwa (2011) and Faruk and Shehu
(2013) have produced evidence in support of a positive impact of factors influencing CSR
activities while other works such as John and Shyan (2010) and Abu Sufian (2012)
reported no significant impact at all.
However, the inconsistency to identify which of the variables debated is most influential in
predicting and determining the CSR disclosure, Firm Size is among the variables in
determining the CSR disclosure of firms ( Rahman and Widyasari 2008 and Ebiringa et al.
2013) but the question remains as whether Firm Size influence the CSR of listed DMBs in
Nigeria more than the other variables.

Furthermore with respect to Profitability, contradicting views have been put forward by
scholars (Abu-sufyan 2012, Hussainey, Elsayed and Abdulrazik 2011, Garmerschlag and
Verbeenteen 2011 and Ebiringa et al. 2013) some view it as significant determinant factor
of CSR disclosure of firms while others view it as not significant factor. The expectation
of this study is that Return Of Investment (ROI) would play a vital role in estimating the
CSR of listed DMBs in Nigeria.
The adequacy of liquidity for all successful functioning business firms is crucial. Liquidity
shortage no matter how small can cause great damage to a financial institution‟s operations
and customer relationship in particular. Moreover, different views have been expressed by
various studies (Maleya and Willy 2013 and Andrew and Osuji 2013) that Liquidity is the
most paramount in determinig CSR of firms. The debate remains whether firm with
enough liquidity can participate fully on CSR disclosure of listed DMBs in Nigeria.
Divergent views have been expressed with respect to gearing, some scholars indicate that
they are not important in predicting CSR of firms while others are of the opinion that they
are better determinant of CSR of firms than other variables (Faris et al. 2012, Shehu and
Farouk 2013 and Abdu 2016). Therefore , this study is set to find out whether gearing is
one of the drivers of CSR disclosure of listed DMBs in Nigeria. Several studies found in
literature attempted to address the numerous contradictions sounding the impact of
dividend on CSR disclosure, yet there is lots of inconsistency of the results. Some studies
such as Shehu and Farouk (2013), and Joonil and Yongbok (2015) have produced
evidence in support of a positive impact on dividend and CSR, while other works such as
that of Faris, et al. (2012) reported no evidence of a significant relationship at all. This
study goes beyond to evaluate the relationship of dividend paid and CSR of DMBs in

Nigeria but also examine the influence dividend paid has in driving DMBs to disclosure
CSR in Nigeria.
Further, among the unresolved issue that deserves attention include the identification of
the factor that drives firms into investment in CSR. Prior empirical studies (Shehu and
Farouk, 2013 and Fris et al., 2012) established association among firm growth and CSR
also they have the opinion that, firm growth is having more advantage over other variables
of the study in determining CSR of firms. Therefore this study anticipates that, firm
growth would be a vital factor in predicting the CSR disclosure in DMBs in Nigeria.
Despite the fact that many researchers have tried to solve these arguments, controversies,
and debates surrounding the CSR activities yet investigating the factors influencing the
CSR disclosure in Nigeria remains unsolved. However, prior empirical studies that
investigated the factors determining the CSR were conducted outside Nigeria (Reverte,
2009; Li and Zhang, 2010; Wang and Song, 2011), and the fact that few studies such as
Faruk and Shehu (2013), Akano, Jamiu, Olaniran and Oluwalgbon, (2013), Abdu (2016)
among others conducted research in Nigeria on determinants of CSR but neglected the
influence of other important factors such as ROI, Firm growth, Gearing and Dividend.
Hence, this study will seek to provide answers to these questions and contribute to the
existing emprical literatures in this area.
Methodological gaps will be filled in this study because most of the researches conducted
in this area either measured CSR based on the total amount invested on CSR (Abdu 2016
and Abdul‟azeez 2016) where as neglected the use of proper measurement or made use of
Chi-square techniques (Faris et al. 2012 and Ebiringa et al. 2013) which have deficiency in
terms of reflecting time variant and specific characteristic issues. Thus, this study will

employ the use of content analysis on measuring CSR and ordinary least square multiple
regression technique to take care of the deficiencies. Therefore, these are the gaps that
need to be filled by present research with period gap of the previous researches.
1.3
Research Questions
In light of the above, and with a view to filling these different gaps identified in the
literature. Thus, this study intends to provide answers to the under listed questions:

What effect does firm size has on CSR disclosure of quoted deposit money
banks in Nigeria?
How ROI does affects CSR disclosure of quoted deposit money banks in
Nigeria?
What effect does liquidity has on CSR disclosure of quoted deposit money
banks in Nigeria?
How does gearing affects CSR disclosure of quoted deposit money banks in
Nigeria?
What is the effect of dividend on CSR disclosure of quoted deposit money
banks in Nigeria?
How firm growth affect CSR disclosure of quoted deposit money banks in
Nigeria?