Role of Corporate Social Responsibility on the Survival of Business Organization

Role of Corporate Social Responsibility on the Survival of Business Organization

 

ABSTRACT

This study will examine the influence of corporate social responsibility on listed consumer and industrial goods companies in Nigeria economy. The ex-post facto (causal comparative study) methodology will be employed, and the study will focus on listed companies on Nigerian Stock Exchange (NSE). The study will adopt standardized simple and multiple linear regressions (Ordinary Least Square-OLS) to analyse primary data via SPSS version 23. The study involved time series and cross-sectional data (observational pooled data or panel data). The researcher intends to employ the non-probability sampling technique and will cover the business bottom line for the period of seven years, that is, 2012 to 2018, panel data (secondary data) will be extracted from the audited annual reports and accounts of the consumer and industrial goods companies. Therefore, the research will employ standardized linear regression model for analyzing the data collected via audited financial statements for the period concerned.

 

CHAPTER ONE

INTRODUCTION

The author will clarify in this chapter why the subject has been selected and how corporate social responsibility affects or influences the bottom line of companies. The author will give context and overview of the suggested studies.

 

1.1 Background to the study

Challenges facing businesses in Nigeria within today’s complex and competitive environment are products of economic and non-economic related forces. Thus, in order to survive and prosper within the business environment, corporations must plan their operations in a manner that will balance the demand among the legal, economic, philanthropic, social and ethical aspects. Interested parties believe that corporations are responsible to them in one way or the other. As such, they try to assess how well enterprises have performed these perceived responsibilities. For instance, stockholders concentrate on the extent to which their expectation is met by referring to different financial indices such as performance of companies, , return on investment, earnings per share and market prices of shares. While the community focuses on socially responsible activities through certain measures e.g. environment restoration, provision of social amenities, the government monitors firms’ compliance with relevant legislations (Rabi’u, Asma’u, & Musa 2016).

From the global perspective, the financial scandals and unethical practices of top corporations such as Enron, WorldCom Parmalat and Nike along with climates change provide alternative dimension to CSR as the most imperative challenge among the divergent millennium challenges. CSR is linked with civil society and modern political theory and it involves taking action which reduce the extent of eternalized cost or avoid distributional conflicts. According to (Muhammad, Ejaz, Javeria, & Mumhza, 2014)“CSR is defined as achieving commercial success in ways that honor ethical value and respect people, communities and the natural environment or as a concept whereby company integrate social and environmental concerns in their business operation and in their interaction with their shareholders on voluntary basis” The virtue matrix framework was developed by Roger in 2002, this represents how business corporations socially are responsible for their behaviours and business practices. This framework indicates that CSR has become centre awareness (Rogers, 2002 in Muhammad, Ejaz, Javeria, & Mumhza, 2014). The motive of companies is not only to cover the financial outcome but they have also focused on broader set of societal expectation. The world study indicates that 76 percent of managing executives believe that CSR contributes favourably to the value of long-term shareholders, and 55 percent agree that sustainability helps create solid reputation for their businesses. (McKinsey, 2022 ; Prahalad & Hamel, 1994 as quoted in Muhammad, Ejaz, Javeria, & Mumhza, 2014) stated that the basic objective of CSR is to maintain company activities in order to generate shared value for company and society. Corporate social responsibility has thus become one of our time’s major company procedures. CSR is also a company method that adds to sustainable development by presenting all stakeholders with financial, environmental and social advantages (Bushra & Rabia, 2017).

An underlying premise in the theory of finance is the maximization of the resources of shareholders on their behalf by managers and executives. But CSR is a phenomenon that incorporates corporate or business enterprises ‘ ethical, environmental, and social duties. Organizations play a key role in engaging with CSR. The notion of corporate social responsibility has progressed exponentially in recent decades. CSR is not a fresh thing of interest for the business world. But corporate social responsibility is important because its influence all facets of organizational operations. CSR is multi-dimensional concepts with many practices so the notion of corporate social responsibility is linked to a business model that adds to sustainable development by providing economic, social and environmental advantages to all stakeholders (Rabia & Bushra, 2017)

CSR activities are one of the foreseeable parts of the organization now-a-days. Most of the prominent organization carries out CSR operations for society’s sake or as part of their responsibility and accountability. Most organizations have embraced corporate social responsibility without substantial increase in industries performance or government rebate inform of tax reduction (tax savings) (Samira, Noor, & Masudul 2018). Hence, the study sought to find out the effect of CSR on organisational bottom line.

In view of the challenges and significance of CSR in the Nigerian consumer and industrial goods companies which has resulted to substantial amount in CRS expenditures in the last decades, it is imperative to establish the influence of CSR on corporation’s bottom line. “What effect does CSR costs have on organizational bottom line in Nigeria” Also, “what influence does CSR expenditure have on business tax-income ratio in Nigeria”

 

1.2 Statement of the Research Problem

Despite the existence of some literature on the effect of corporate social responsibility on environmental, social and economic dimensions, there is an important gap in how corporate social responsibility improves bottom line in the consumer and industrial products industries in regards to tax-income ratio; owing to the absence of documented proof of the advantages research focus was therefore to investigate CSR’s influence on firms’ bottom line based on selected consumer and industrial goods companies as we investigate whether firms realize any benefits from government rebate. It also aims to figure out government’s policies on Corporate Social Responsibility operations since CSR has been used by corporations as allowable expenses to reduce tax liability. This study aims to answer the following questions, what influence does CSR implementation had on organizational bottom line in Nigeria? This question is important because it has theoretical and pragmatic significance in CSR application in modern business practices and literature.

1.3 Research Questions

The broad research questions are; “What is the influence of CSR on consumer and industrial goods survival of business organization? Conversely, this study intends to adopt simple and multiple linear regression models (ordinary least square-OLS) in carrying out this research and thus specific research questions are;

 

1. To what extent does socio-economic welfare cost affect tax-income of listed consumer and industrial goods companies in the Nigeria?
2. To what extent does educational and health donation cost affect gross-profit margin of listed consumer and industrial goods companies in the Nigeria?
3. To what extent do CSR surrogates affect return on investment (ROI) of listed consumer and industrial goods companies in the Nigeria?
4. To what extent is the difference in respondents’ mean/median perceptions of CSR surrogates influence on listed consumer and industrial goods companies in Nigeria.

1.4 Research Objectives

The main objective of this study is to determine the influence of CSR on consumer and industrial goods survival of business organization. The specific objectives include:

1. To determine the effect of socio-economic welfare cost on tax-income of listed consumer and industrial goods companies in the Nigeria.
2. To ascertain educational and health donation cost effect on gross-profit margin of listed consumer and industrial goods companies in the Nigeria.
3. To evaluate CSR surrogates effect on return on investment (ROI) of listed consumer and industrial goods companies in the Nigeria.
4. To determine the extent in the difference in respondents’ mean/median perceptions of CSR surrogates influence on listed consumer and industrial goods companies in Nigeria.

 

1.5 Research Hypotheses

Hypothesis-1

H₀: The effect of socio-economic welfare cost on tax-income of listed consumer and industrial goods companies in the Nigeria is not significant.

H₁: The effect of socio-economic welfare cost on tax-income of listed consumer and industrial goods companies in the Nigeria is significant.

 

Hypothesis-2

H₀: Educational and health donation cost does not significantly affect gross-profit margin of listed consumer and industrial goods companies in the Nigeria.

H₁: Educational and health donation cost does significantly affect gross-profit margin of listed consumer and industrial goods companies in the Nigeria.

Hypothesis-3

H₀: The effect of CSR surrogates on return on investment (ROI) of listed consumer and industrial goods companies in the Nigeria is not significant.

H₁: The effect of CSR surrogates on return on asset (ROI) of listed consumer and industrial goods companies in the Nigeria is significant.

 

1.6 Significance of the Study

This research work will serve as a guide for stakeholders to have detailed overview of CSR of

Consumer and Industrial goods companies in Nigeria as how it affects their profitability.

In addition, they will understand the impact of Corporate Social Responsibility, its relevance in Nigeria and how the practice of CSR in Nigeria affects the bottom line of those consumer and industrial goods companies.

Finally, this study seeks to add immensely to existing literature and international journals in the international business discipline.

1.7 Scope of the study

The scope of study consists of 36 consumer and industrial goods companies listed on the

Nigerian Stock Exchange (NSE)

The area of the study is the 36 states and capital Nigeria and the time frame for this study is between October 2018 and August 2019.

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