CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND TO THE STUDY

In recent times, societal expectations from business organizations has gone beyond
maximizing profit and efficient resource allocation. Business organizations do not
operate in isolation but within a society, therefore, the interrelationship between business
organizations and their society has become interestingly important. Business
organizations now make efforts to be responsible to the society beyond regulatory and
legal requirements. These efforts made by business organizations to the society make
them socially responsible.

Corporate Social Responsibility also referred to as Corporate Citizenship or Corporate

Conscience or Responsible Business is an ethical principle that an enterprise is
responsible for its effects on social and environmental wellbeing (Wikipedia). According
to the European Commission, October 2011, it is seen as when enterprises take
responsibility for their impacts on the society. The World Business Council for
Sustainable Development (WBCSD) in its publication “Making Good Business Sense”
sees Corporate Social Responsibility as the continuing commitment by businesses to
contribute to economic development while improving the quality of life of the workforce
and their families as well as the community and society at large. In Simpler words, it is
the intelligent and objective concern for the welfare of society which restrains individuals
and corporate bodies from carrying out destructive activities no matter how profitable it
is.

Over the years, Corporate Social Responsibility strategies have helped companies to
ensure a positive impact on its customers, shareholders, employees, investors and other
stakeholders. Carroll (1991) indicated that Corporate Social Responsibility constitutes
four social responsibilities; Economic, Legal, Ethical and Philanthropic. This was
illustrated in a pyramid called Carroll’s Pyramid. The Economic responsibility is the
basic responsibility. Next is the responsibility to be ethical, the obligation to do what is
right and avoid harming stakeholders. The business is also expected to be a good
corporate citizen. This is embedded in the Philanthropic responsibility, where in
businesses are expected to contribute financial and human resources to the society and
improve the standard of living.

The Banking sector in Nigeria is a very important segment of the economy of the
Nation. The interrelationship and interdependency between banks and their environment

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is defined in such a way that the society benefits from the banks through good
neighborhood and employment opportunities and in return the bank gets a more stable
community to operate. Virtually, most banks in Nigeria strive to meet the demands of
charitable organizations, tertiary institutions, improve on employee motivation and try to
balance the shareholders’ interests with the interests of other stakeholders which have
multiplier effects on sustainable development. These acts of social responsiveness have
had impacts on their financial performance.

1.2 STATEMENT OF THE PROBLEM

Corporate Social Responsibility (CSR) is the foundation to understanding the

responsibilities of organizations towards the society where the organization executes their
activities. It shows the relationship between the corporation and its stakeholders such as
the customers, employees, investors, and the society at large. Competition among Banks
has made the need to be socially responsible interestingly important in the sector. The
concept of corporate social responsibility has prevailed since time immemorial and has
for a long time paved way for organizations to have moral, ethical, and philanthropic
responsibilities in addition to their responsibilities to earn a fair return for investors and
comply with the law. For a long time, corporate social responsibility has raised issues on
who actually benefits from the Corporate Social Responsibility (CSR) initiatives.
Business analysts have documented that Corporate Social Responsibility benefits the
organization by pushing the business to the next level while at the same time benefiting
the society. Corporate Social Responsibility (CSR) has been associated with financial
performance for organizations but this area has not been well researched.

Akindele (2011) found that about 90% of the respondents indicated the extent of
participation in corporate social responsibilities activities is high. The study further
revealed that a significant P-value of 0.417 which shows a non-significant relationship
was observed from the relationship between the type of the bank and CRS practices. It
also stressed that a significant P-value of 0.028 which ascertained a significant
relationship was observed between bank profitability and Corporate Social Responsibility
practices. Lastly, a significant relationship was observed from the P-value of 0.0317
between bank policies and CRS practices.

Empirical findings conducted by Bagh et al (2017) signified the robustness of

pooled model that documented a positive and significant impact of CSR on return on
assets, return on equity and earnings per share. This premise holds that CSR has positive
and significant impact on the financial performance of selected commercial banks of
Pakistan. Wan Fauziah and Muhammad (2016) discovered that most of the relationship

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between four CSR activities (environmental, community, marketplace and workplace)
with financial performance were positive. They concluded that Malaysian top 100
companies that actively involved in the four CSR activities are able to enhance their
financial performance.

Ashraf et al (2017) revealed that Corporate Social Responsibility (CSR) shows

positive and significant impact on financial performance of banks. This indicates that
banks are paying attention on Corporate Social Responsibility (CSR) and even bank’s
customers are playing similar role in bank’s practices. The study findings confirmed the
link of Corporate Social Responsibility (CSR) and financial performance of banks. They
concluded that banks pay for the CSR as strategic planning for increasing goodwill and
reducing promotional costs. The findings also support the contribution of Pakistan and
Bangladesh banks towards the welfare of society and better living standards through
promoting education and better health facility. The analysis of financial performance of
selected banks through different tools, shows that banks adopted different policies
regarding corporate social responsibility and recorded improvement in return on assets
(ROA), return on equity (ROE), earning per share (EPS), and price earnings ratio (PER)
and also this activity enhanced the wealth of shareholders. By following this CSR policy,
the banks are not only giving social benefit to society, but also building their great image
as social institutions and public place.

Raihan et al (2015) found that disaster management, education, health, sport, art
and culture, environment and other activities have negative correlation with Return on
Equity but positive correlation with Deposit per Employee (DPE). It was further found
that these factors have influenced to the extent of 35.3% variations in Return on Equity
and 1 1 .2% variation in Deposit per Employee. The study concludes that the bank
authority should invest more in CSR expenditures in order to improve the Deposit per
Employee of the bank. Kanwal et al (2013) opined that there is a considerable positive
relationship between the CSR and Financial performance of the firm, and firms spending
on Corporate Social Responsibility not only benefits from continuous long term
sustainable development but also enjoy enhanced financial performance.

Madugba and Okafor (2016)’s result showed that Earnings per share and Dividend
per share have negative significant relationship with Corporate Social Responsibility
while Return On Capital Employed has a positive significant relationship with Corporate
Social Responsibility.

In examining the Impact of CSR on firms’ financial performance, a number of

studies have indicated a strong positive relationship between CSR practices and

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profitability ratios such as Return on assets, Return on Equity and Return On Capital
Employed (Akindele 2011, Bagh et al 2017, Ashraf et al 2017, Kanwal et al 2013,
Madugba and Okafor 2016) while the study conducted by Raihan et al (2015) observed a
negative relationship between CSR Practices and Return On Equity and a positive
correlation with Deposit Per Employee (DPE). However, Wan Fauziah and Muhammad
(2016) came up with a positive relationship between CSR activities and banks’ financial
performance. In all of these studies, the emphasis have been relationships between CSR
practices/activities and the financial performance of firms’ in general. The authors have
therefore failed to note that CSR could be an essential growth element and financial
performance -boosting tool as well as attaining a sound financial management through
appropriate CSR practices. Furthermore, these studies have not really emphasized the
responsibilities to shareholders, employees, customers, etc. towards achieving sound CSR
practices; they have not also seen CSR activities as investments but rather as mere
expenditure, hence, banks are not favorably disposed towards embarking on rigorous and
sustainable CSR activities.

1.3 OBJECTIVES OF THE STUDY

i) To investigate whether Corporate Social Responsibility can be an essential growth

element and financial performance boosting tool for firms.

ii) To examine the extent to which banks can attain sound financial management by
engaging in Corporate Social Responsibility practices.

iii) To determine whether banks have responsibilities to shareholders, employees and

customers in attaining sound Corporate Social Responsibility practices.

iv) To assess whether investments in Corporate Social Responsibility activities would

amount to mere expenditure or will ultimately bring about bigger financial fortunes to the
banks.

1.4 RESEARCH QUESTIONS

i) Can CSR be an essential growth element and financial performance boosting tool for
firms?

ii) To what extent can banks attain sound financial management by engaging in
Corporate Social Responsibility practices?

iii) Do Banks have responsibilities to shareholders, employees, and customers in attaining

sound CSR practices?
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iv) Will Investments in CSR activities amount to mere expenditure or lead to bigger
financial fortunes to the Banks?

1.5 RESEARCH HYPOTHESES

i) H0: CSR will not be an essential growth element and financial performance boosting
tool for firms.

ii) H0: Banks will not attain appreciable financial management by engaging in Corporate
Social Responsibility practices.

iii) H0: Banks do not have responsibilities to shareholders, employees and customers in
attaining sound Corporate Social Responsibility practices.

iv) H0: Investments in CSR activities will not lead to bigger financial fortunes to the
banks.

1.6 SIGNIFICANCE OF THE STUDY

The following are the significance of this study;

i) Over the years, Nigerian firms have not realized the need to cater for the
environment in which they operate. Rather, they tend to improve their profit
base to the detriment of the society from which these profits are realized.
Consequently, Banks and other financial institutions also have the tendency to
disregard CSR activities, viewing it as a mere expenditure that will not do the
company any good. It is imperative that the issue of CSR practices is seen as a
necessary evil for the firms to enable them take advantage of everything within
their internal and external environment and at the same time be acceptable to
the community in which they are located.
ii) Upcoming researchers will find this study very relevant as it will help them in
developing their problem and building their literature review. It is also going to
be a useful literature to people researching in this area of study. It will also be
beneficial to Academia; Undergraduates; in developing their literature review
and also to Post graduates researching in this area of study.
iii) In this regard, the study is of the opinion that such expenditure should be seen
as a necessity and not optional. Asides this, the work will also contribute to the
body of literature in this area of study.

1.7 SCOPE OF THE STUDY

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 This study is expected to be conducted in Nigeria with the population for the study
being 25 Banks in all. Out of these 25 banks, only 18 will be relevant. This is because
the remaining 7 banks are virtually new and may not be participating in CSR for now.
It is difficult or almost impossible to visit all the branches of these 18 banks. Hence,
we divide Nigeria into 6 geo-political zones, picked South West as one of the zones,
picked Oyo State as one of the states in the zone, and then picked Oyo South
Senatorial District. All the banks in this senatorial district are qualified for the
investigation. However, only 5 of the 18 banks will be selected (3 International and 2
National). Some of these 5 banks spread across the length and breadth of Oyo South
Senatorial District will be the sample size. The findings generated from the survey of
these banks will be representative of the study population.

1.8 LIMITATIONS TO THE STUDY

The study will however be limited to the following factors;

Time constraint as the researcher will simultaneously engage in this study with
other academic work. This consequently will cut down on the time devoted to the
study. Another factor is inadequate funding as the cost of data collection
(administering questionnaires to respondents) is high. Also, Insufficient Literature in
the area of study has also posed a threat to the research work.

1.9 DEFINITION OF TERMS

1. Sustainable Development
 Sustainable development is development that meets the needs of the present
without compromising the ability of future generations to meet their own needs. It
is economic development that is conducted without depletion of natural resources.
The desirable end result is a state of society where living and conditions and
resource use continue to meet human needs without undermining the integrity and
stability of the natural systems.
2. Employee Motivation
Employee motivation is a reflection of the level of energy, commitment, and
creativity that a company’s workers bring to their jobs.
3. Multiplier Effects
The Multiplier Effect is the change in income to the permanent change in the
flow of expenditure that caused it. This is because an injection of extra income
leads to more spending, which creates more income, and so on.
4. Profit Maximization

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 This is the process that businesses and other enterprises undergo to determine
the best production output and price level that results in the greatest gain or profit.
5. Efficient Resource Allocation
This simply means allocating resources efficiently. This is arrived at when all
available resources whether financial resources, raw materials or human resources
are utilized with no or very minimal waste.
6. Stakeholders
This can simply be a person that has a stake in a business or enterprise.
Stakeholders are people who have interests in a company or business.
Stakeholders in a business include Shareholders and other investors, employees
and customers.

7. Social Responsiveness
This refers to the way that companies interact with societies’ pressure and
expectations regarding its social or environmental responsibilities.

CHAPTER TWO

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2.0 LITERATURE REVIEW AND THEORETICAL FRAMEWORK

2.1.0 CONCEPTUAL FRAMEWORK

2.1.1 CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility is concerned with treating the stakeholders of the

firm ethically or in a responsible manner. ‘Ethically or Social responsible’ means treating
stakeholders in a manner deemed acceptable in civilized societies. Social includes
economic responsibility. Stakeholders exist both within a firm and outside. The wider aim
of social responsibility is to create higher and higher standards of living, while preserving
the profitability of the corporation, for peoples both within and outside the corporation.
(Hopkins, 2003). Corporate social responsibility which is also known as corporate
citizenship, corporate conscience or responsible business (Wikipedia) is a corporation's
initiatives to assess and take responsibility for the company's effects on environmental
and social wellbeing. The term generally applies to efforts that go beyond what may be
required by regulators or environmental protection groups. (Investopedia).

World Business Council for Sustainable Development (WBCSD) (1999)

defined Corporate Social Responsibility is business’ commitment to contribute to
sustainable economic development working with employees, their families, the local
community, and society at large to improve their quality of life. Corporate Social
Responsibility is the way in which a company manages and improves its social and
environmental impact to generate value for both its shareholders and its stakeholders by
innovating its strategy, organization and operations. (CSR Europe 2003)

Organization for Economic Co-operation and Development (OECD) (2003) saw

that Corporate Responsibility involves the ‘fit’ businesses develop with the societies in
which they operate. The function of business in society is to yield adequate returns to
owners of capital by identifying and developing promising investment opportunities and,
in the process, to provide jobs and to produce goods and services that consumers want to
buy. However, corporate responsibility goes beyond this core function. Businesses are
expected to obey the various laws which are applicable to them and often have to respond
to societal expectations that are not written down as formal law.

Jones (1980) defined corporate social responsibility as the notion that corporations
have an obligation to constituent groups in society other than stockholders and beyond
that prescribed by law and union contract. Corporate social responsibility is about how
companies manage the business processes to produce an overall positive impact on
society. (Baker 2003).

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 Corporate social responsibility is seen from the aspect of a company being a
corporate citizen of the society in which it operates. As a corporate citizen of the society,
it owes the same sort of responsibilities to society at large that other citizens should owe.
There is a social contract between a company and the society in which it operates. As the
owner or user of large amounts of property and other resources, companies are corporate
citizens. McWilliams and Siegel (2001) saw corporate social responsibility as an action
that appears to further some social good, beyond the interest of the firm and that which is
required by law. Corporate social responsibility is definitional construct, aims at
describing the relationship between business and the larger society surrounding it, and at
redefining the role and obligations of private business within that society, if deemed
necessary. (Keinert 2008).

The basic idea of corporate social responsibility is that business and society are
interrelated rather than separate entities. Evidence of corporate giving, variously referred
to as charitable donations, philanthropic contributions, can be traced back to centuries
ago. However, formal writing on corporate social responsibility is largely a twentieth
century work (Carroll, 1999), but it was in the 1960s that the corporate social
responsibility construct became ubiquitous. For example, corporate social responsibility
have been viewed in different dimensions as corporate citizenship, corporate social
performance and corporate social responsiveness. These constructs suggest corporate
social responsibility is a dynamic phenomenon, sometimes with imprecise definitions,
and used by authors interchangeably.

The main question in the corporate social responsibility concept is ‘who is to be satisfied
or who should the business organization focus on when making decisions?’ Is it to satisfy
shareholders’ interest alone or multiple interests of stakeholders? In examining these,
Carroll (1979) defined corporate social responsibility as: “...encompassing the economic,
legal, ethical and discretionary responsibilities and expectations that society has of
organizations at a given point in time”. Archie Carroll’s conceptualization of corporate
social responsibility was expressed in a four-part definition first, that companies are
expected to meet their main responsibility of making profits and ensuring a return on
investments. Thus, this is their economic responsibility. Second, companies are expected
to obey the countries’ rules, laws and regulations. This forms the legal responsibility of
business organizations. Third, companies are expected to do the right thing that are
morally correct and abstain from engaging in activities that might harm the society.
Fourth, by discretionary responsibility, it means companies are supposed to invest in
areas not required by law or mandatory on them, such as investing in society, employee
training, quality product and philanthropy. All these four components can be summarized

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as Economic responsibilities, Legal Responsibilities, Ethical Responsibilities and
Philanthropic Responsibilities of Businesses.

Therefore, after considering the above views on corporate social responsibility, for the
purpose of this study, corporate social responsibility will be defined as “the
responsibilities that involve the voluntary provision or donation of a company’s resources
beyond their economic and legal responsibilities, these contributions being aimed at
satisfying the various internal and external stakeholders. The Internal stakeholders being
the Shareholders, the Employees and the Management while the External stakeholders
include the Customers, suppliers, creditors, Government, the shareholders and the
society.

2.1.2 FINANCIAL PERFORMANCE

According to Kennedy and Mcmullen (1986), Financial performance is scientific

evaluation of profitability and financial strength of any business concern”. Financial
statement analysis attempt to unveil the meaning and significance of the items composed
in profit and loss account and balance sheet. The assists are the management in the
formation of sound operating and financial policies.

Weber (2009) in his study reported that “financial performance” is a blend of

financial state of affairs along with a firm’s ability to meet its policy business
compulsions and commitment. A company’s financial performance is its financial
viability, or the extent to which a company achieves its economic goals (Price and
Mueller 1986; Venkatraman and Ramanujam 1986). It is the financial ratio analysis as
an assessment of performance (Gray, 2010).

According to Marshall (1920), financial performance, in the broader sense relates to

the degree to which financial or monetary objectives been realized by an entity.
Furthermore, financial performance is the process of gauging the monetary achievements
of the business affairs by implementing polices and strategies in specific point in time. In
this regard he also reported there are number of accounting and market based measures of
financial performance including return on assets (ROA), return on equity (ROE),
earnings per share (EPS), net profit, operating profit, gross profit, return on capital
employed, Price earnings ratio are employed to estimate the monetary health and the
firm’s efficiency in utilizing available monetary resources.

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 According to the accounting point of view, financial statements are prepared by a
business enterprise at the end of every financial year. Financial statements are end
products of financial accounting. They are capsulated periodical reports of financial and
operating data accumulated by a firm in its books of accounts- the General Ledger.

One of the most fundamental facts about businesses is that the operating performance
of the firm shapes its financial structure. It is also true that the financial situation of the
firm can also determine its operating performance. The financial statements are therefore
important diagnostic tools for the informed manager.

It is also important to know that the financial performance of a firm is measured by

Profitability Ratios.

2.2.0 LITERATURE REVIEW

2.2.1 CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL

PERFORMANCE

Fasanya and Onakoya (2013) revealed that corporate social responsibility 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 society welfare in considerations by the
firm. Most of the studies conducted on evaluating the effect of corporate social
responsibility on firm’s financial performance show the positive relationship in between
them.

Mujahid and Abdullah (2014) studied the dependency of corporate social

responsibility on firm’s financial performance as well as on shareholders’ wealth in
Pakistan. They had selected 10 firms which are highly rated as corporate social
responsibility firms and 10 non-corporate social responsibility firms to see the differences
in their financial performances and shareholders wealth as well. They selected the return
on equity (ROE) and return on assets (ROA) ratios (profitability ratio) as financial
performance indicators and stock price & earnings per share (EPS) for representing
shareholders’ wealth. They concluded that there was a significant positive relationship
between corporate social responsibility and financial performance and shareholders’
wealth as well.

Mocan et al (2015) studied the corporate social responsibility practices in the banking
sector in romania that how corporate social responsibility will provide to value creation
in this banking industry. They concluded that corporate social responsibility was an

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actual instrument in the banking industry to develop their economic situation. They
pointed out that corporate social responsibility had a number of benefits such as
economic efficiency, improve company reputation, employee loyalty, communication
between banking industry and society, attractive new opportunities and increase
organizational commitment.

According to Waddock and Graves (1997) the relationship between corporate

financial performance and corporate social performance can be divided into three
categories, negative, neutral and positive. The negative one can be explained with the
help of neoclassical economics: the cost of the corporate social responsibility is seen to
exceed the profit it creates as the costs are more easily measurable and quantifiable than
the profit. The company will also suffer from competitive disadvantage if the other firm’s
corporate social performance is less than them. The neutral relationship is a consequence
of the difficulties of measuring corporate social performance (Ullman, 1985) because all
can be seen to be dependent on the variables that the researcher decides to apply. By the
relationship being so unsecure, Ullman states that there is no clear relationship to be seen
between these two.

The firm’s value increases when the firm becomes more effective in satisfying its
corporate social responsibility. The firm’s value also increases when it effectively
satisfies its corporate social responsibility to the specific stakeholders, based on the
stakeholder theory. (Jenner 2013).

Yadav and Gupta (2015) aimed at see the influence of corporate social
responsibility activities on financial performance of 5 private companies in India such as
Tata Steel, RIL, Mahindra & Mahindra, Infosys and Larsen & Toubro for the year 2010-
14. They have taken return on net worth, profit before tax and EPS as the financial
performance indicators. They pointed out that corporate social responsibility has an
insignificant relationship with return on net worth but it was a positive relationship with
EPS of these companies.

Palmer (2012) asserted that corporate social responsibility positively

impacts financial performance in the long-run because it helps increase the value of
intangible assets like reputation and brand value. However, the measurement of such
intangible assets which will be beneficial to assess how corporate social responsibility
investments increase the value of the assets and ultimately financial performance is
dependent on the availability of reliable data to measure such intangible assets.

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 Despite corporate social responsibility improving firm reputation and image, the
cost attached to it lead to reduced profits, high product pricing and competitive
disadvantage (Handy, 2002). Bragdon & Merlin (1985), Vance (1975) suggested a
negative relation between social responsibility and financial performance arguing that
high responsibility results in additional costs that put a firm at an economic disadvantage
compared to other, less socially responsible firms. These added costs may result from
actions like making extensive charitable contributions, promoting community
development plans, maintaining plants in economically depressed locations, and
establishing environmental protection procedures.

2.2.2 CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL

MANAGEMENT

According to Kytle and Ruggie (2005), corporate social responsibility, particularly for
a global company, is related to corporate risk management through two means: by
providing intelligence about what those risks are, and by offering an effective means to
respond to them. They stressed that the linkage of corporate social responsibility to core
business processes can improve a company’s overall approach to risk management by
improving strategic intelligence and knowledge of social issues/groups. This allows a
company to not only design better risk management for current issues but also help
anticipate those coming down the pike.

Wisser (2007) opined that, with reference to corporate social responsibility, risk
management needs to be understood as strategy, policy and processes, whose goal is to
address potential ethical, social and environmental factors. These factors, by influencing
stakeholders, are to organization’s disadvantage. In such context, corporate social
responsibility is one of the main means of managing risk of social factors and their
influence on financial aspect of an organization.

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 Shenggang et al (2016) in their Journal ‘How Does Corporate Social Responsibility
Change Capital Structure?’ found that firms with corporate social responsibility have
larger leverage than firms without corporate social responsibility. They stressed that
corporate social responsibility reduces the adjustment speed of capital structure, and
above-leverage firms tend to slower speed than below-leverage firms. They also observed
that corporate social responsibility provides long-term prediction to creditors, so that
firms with corporate social responsibility can keep larger long-term leverage than firms
without corporate social responsibility.
Jacquelyn et al (2012) investigated whether firms’ corporate social performance
ratings impact their performance (cost of capital) and risk. They found that there is no
significant difference in the risk-adjusted performance of portfolios with high and low
corporate social performance. Corporate social performance does not seem to impact
aggregate unsystematic risk. There is a positive relation between corporate social
performance and firm size.

Ghoul et al (2011) seek to advance the understanding of the corporate social

responsibility-financial performance relationship by examining whether corporate social
responsibility performance affects firms’ costs of equity capital for a large sample of US
firms. They opined that low corporate social responsibility firms tend to have smaller
investor base due to investor preferences and information asymmetry. Investors perceive
socially irresponsible firms as having a higher level of risk which cannot be easily
diversified away in an investor’s portfolio. They revealed that firms with better corporate
social responsibility scores exhibit cheaper equity financing. Investment in improving
responsible employee relations, environmental policies, and product strategies contributes
substantially to reducing firms’ cost of equity. Participation in the two industries—
tobacco and nuclear power, increases firms’ cost of equity. Finally, firms with socially
responsible practices have lower risk and higher valuation.

Iqbal et al (2012) examined the connectivity of corporate social responsibility with

financial performance, market value of share and financial leverage of 156 listed
companies on Karachi Stock Exchange for the entire period of 2010-11. This study
showed a mixed result, i.e., corporate social responsibility negatively affected the market
value of those companies, corporate social responsibility did not have any influence on
those companies and there was no relationship between corporate social responsibility
and financial leverage. A study conducted by Uwaloma & Egbide (2012) found a
negative relationship between organizations’ financial leverage and the level of corporate
social responsibilities exposures.

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 Scholtens (2008) investigated the relationship between corporate social responsibility
and financial performance of a sample of 289 firms from the US for the period of 1991-
2004 by using OLS and Granger Causation method. The author concluded that corporate
social responsibility and financial performance were correlated to each other and
financial performance (both risk and return) in general terms precedes social performance
(both strengths and concerns). But some components of corporate social responsibility
like community involvement, employee relations, diversity, environment and product
may not have the positive relationship with financial performance in respect of return and
risk.

With reference to corporate social responsibility, risk management needs to be

understood as strategy, policy and processes, whose goal is to address potential ethical,
social and environmental factors. These factors, by influencing stakeholders, are to
organization’s disadvantage (Wisser 2007). In such context, corporate social
responsibility is one of the main means of managing risk of social factors and their
influence on financial aspect of an organization. Low levels of social responsibility may
increase a firm's financial risk. Investors may consider less socially responsible firms to
be riskier investments because they see management skills at the firm as low (Alexander
& Bucholtz, 1978; Spicer, 1978).

McGuire et al (1988) also pointed that investors and other constituencies

may also anticipate an increase in firm costs owing to lack of social responsibility. For
example, the government may levy fines, and law suits, such as those recently filed
against pharmaceutical, chemical, and asbestos firms, that may threaten a firm's very
existence. Perceptions of low social responsibility may also decrease a firm's ability to
obtain capital at consistent rates. He also identified that a high degree of corporate social
responsibility may permit a firm to have relatively low financial risk as the result of more
stable relations with the government and the financial community. In addition, to the
degree that a firm has high social responsibility, it may also have a low percentage of
total debt to total assets.

2.2.3 CORPORATE SOCIAL RESPONSIBILITY AND STAKEHOLDERS

Stakeholders include ‘groups or individuals who benefit from or are harmed by

corporate action’ (Melé, 2008). They consist of individuals or groups that affect an
organization or are affected by it. In other words, they have interests in the organization.

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 Carroll (1991) expressed that there is a natural fit between the idea of corporate
social responsibility and an organization’s stakeholders. The concept of stakeholder
personalizes social or societal responsibilities by delineating the specific groups or
persons business should consider in its corporate social responsibility orientation.

Many companies are only concerned with their economic responsibilities

[increasing their owners’ (shareholders’) wealth], therefore, the stakeholder approach
recognizes the legitimate claim of shareholders, but challenges the idea that shareholders
should be either the only claimants or the privileged ones over the interests of other
legitimate claimants (Hummels, 1998; Emiliani, 2001). Clarkson (1995) claims that
organizations which do not include their primary stakeholders’ concerns or welfare
within their plans and strategy threaten their long-term survival. Organizations must then
try to achieve their own objectives (profitability) while at the same time satisfying in a
fair way the legitimate claims of their stakeholders.

Bigger corporates have the wherewithal to invest in the local communities they are
engaged in and hence, can initiate and support the development of these communities
who are increasingly being recognized as stakeholders in the corporates activities. (Russo
& Perrini 2010). The Small and Medium Enterprise sector (SME) however, have a more
direct connection with the local community. The accessibility of SMEs to the local
community possibly makes it difficult for them to violate ethical expectations. They
benefit from being recognized as an enroot part of the community in which they do
business, and therefore they have to work to improve their reputation, trust, legitimacy,
and consensus within and among citizens (Vyakarnam et al., 1997). The accountability
for the SMEs appears to be ensured by the immediate stake holder and community. It is
in case of the big corporate that corporate social responsibility can provide a beautiful
curtain to cover business ethics, or its absence.

Socially responsible activities may also improve a firm's standing with such
important constituencies as bankers, investors, and government officials. Improved
relationships with these constituencies may bring economic benefits. (Moussavi & Evans,
1986).

Corporate social responsibility typically comes along with the stakeholder theory.
The stakeholder theory states that the firm is not isolated or entirely separate from
society. Instead, the firm is part of society. As a result, the theory argues that the firm has
certain duties and responsibilities to the stakeholders, or the parties impacted by the
firm’s business. In fact, it is difficult to satisfy corporate social responsibility without
considering the stakeholders of the organization. (Jenner 2013).

16
 Barnett and Salomon (2012) opined that engaging in socially responsible
behaviors forms part of the mechanisms through which firm builds and maintain trusting
stakeholder influence. They argued that the better a firm manages its relationships with
its stakeholders, the more successful it will be over time. Perez (2015) agrees that overall
reputational impact of corporate social responsibility is likely to be jointly contingent
upon which corporate social responsibility dimension is under consideration. For
example, a strong record of environmental performance may influence corporate
reputation differently depending on whether the corporate activities fit with stakeholders’
environmental concerns.

Mishra and Suar (2010) observed that firms that establish relationship with their
stakeholders beyond market transactions gain competitive advantage. Effective
management of key stakeholders acts as a value driver by leveraging performance and
reducing stakeholder-inflicted costs. For instance, lower employee turnover reduces
hiring and training costs, loyal suppliers reduce quality certification costs and supportive
communities reduce legal and public relations overheads.

According to Polonsky & Jevons (2009), effective corporate social responsibility

requires extensive and careful investment on the part of the organization. Organizations
not only need to undertake activities in a responsible way, but also need to understand
how their activities are viewed by stakeholders. They agreed that there must be a long-
term commitment to corporate social responsibility activities which must be supported at
senior management level, taking into consideration the issues that are salient to
stakeholder groups in various markets. There also must be resources to support actions
and measure performance. These resources are also required for the development of
effective monitoring of corporate activities, changes in stakeholder groups expectations
and changes in the underlying corporate social responsibility issues. All of this must then
be effectively communicated, whether it be in advertising, annual reports or ongoing
stakeholder dialogue.

Unerman (2008) perceived that a key aspect of corporate reputation is stakeholder

groups’ perceptions of organization’s corporate social responsibility, or more precisely,
their perceptions of how well the organization’s corporate social responsibility initiatives
and outcomes meet stakeholders’ social and environmental values and expectations. In
this context, corporate social responsibility has the power to influence these perceptions,
thereby contributing towards maximizing the earning potential of corporate reputation.

Aguilera et al (2007) revealed that corporate social responsibility forces the firms
to work under the concept of socially responsible firm wherever they operate their

17
business, legitimately fulfill the needs and take extra care of the concerns of all the
stakeholders. All the interested parties of the firm’s actions and performance that
determine their future growth are called stakeholders of the firm.

2.2.4 INVESTMENTS IN CORPORATE SOCIAL RESPONSIBILITY AND

FIRM'S FINANCIAL FORTUNES

Bolanle (2012) concluded that Corporate Social Responsibility spending in long

run provides the better return. Banks in Nigeria should make some investment on
corporate social responsibility. It reveals that there is a positive relationship between
corporate social responsibility expenditure and banks’ profitability. So, there is causal
relationship between corporate social responsibility and profitability of the banks. It is
due to the fact that cost/expenditure on corporate social responsibility will further reduce
tax paid by banks. It makes business environment more friendly .Government should
monitor organizations investment in social responsibility to avoid misleading in
statements to reduce tax burden.

Lys et al (2015) examined the relationship between corporate social responsibility

expenditures and firm performance. They postulated that a firm may undertake a
corporate social responsibility initiative because the firm expects strong future financial
performance, rejecting the underlying assumption that corporate social responsibility
expenditures lead to improvements in a firm's performance in the previous studies. They
found that corporate social responsibility expenditures are not a form of corporate charity
nor do they improve future financial performance. They also stressed that firms undertake
corporate social responsibility expenditures in the current period when they anticipate
stronger future financial performance. The Implication of this is that the positive
association between corporate social responsibility expenditures and future firm
performance differs from what is claimed in the vast majority of the literature and that
corporate accountability reporting is another channel through which outsiders may infer
insiders’ private information about firms’ future financial prospects.

Palmer (2012) referred to the study carried out by Lopez et al (2007) which
pointed that it may be useful to consider the year in which the corporate social
responsibility programs were implemented when analyzing corporate social responsibility
data, since previous research has found that the effect of corporate social responsibility
financial performance is negative during the first years of implementation. This purports
that corporate social responsibility initiatives require large investments in the short-run,
but produce long-term returns. The benefits of investing in corporate social responsibility
are reaped after the years of investments.

18
 Katamba (2008) cites that although corporate social responsibility may not directly
contribute to profit increase, it creates an environment for growth of profits of a
company. Marcela of the West Bohemia University, Czech Republic, identifies attraction
by investors, good reputation and strong market position, decreasing expenses on risk
management, distinguishing from rivals and attraction for quality and talented potential
employees.

The benefits of social responsibilities like employee motivation, customer

goodwill may carry over into later periods. To the degree that a firm with relatively high
social responsibility can implement implicit contracts, its financial performance may
improve and variability in market- and accounting-based performance measures may
decline. (McGuire et al, 1988).

Banks and other institutional investors have reported social considerations to be a

factor in their investment decisions (Spicer, 1978). High corporate social responsibility
may therefore improve a firm's access to sources of capital. (McGuire et al, 1988).

2.3 THEORETICAL FRAMEWORK

2.3.1 THE SHAREHOLDER OR STOCKHOLDER THEORY

The shareholder value theory a perspective denoted by the Nobel Laureate Milton
Friedman (1970) offers several arguments for his stockholder theory of corporate moral
responsibility, according to which a corporation's only moral responsibility is to promote
the financial well-being of its stockholders. Friedman describes social responsibility as a
“fundamentally subversive doctrine” in a free society. He said that in such a society,
“there is one and only one social responsibility of business–to use it resources and engage
in activities designed to increase its profits so long as it stays within the rules of the
game, which is to say, engages in open and free competition without deception or fraud.”
In the article “The Social Responsibility of Business is to Increase its Profits”, Milton
Friedman describe that he does not agree that business should take social responsibilities,
in terms of responsible in desirable “social” interests. Believing in free-enterprise system,
Friedman supports that the business should be concerned to its shareholders’ interest. He
believes, only in socialist environment, business takes social responsibilities as its
priority. (Mocan et al, 2015).

The management of a business is an employee of the owners of the business (the

shareholders). They are directly responsible to them. Their responsibility is to act in

19
accordance with the desires of the owners (which is mainly to generate as much profit as
possible) with the constraint of conforming to the rules embodied in the laws and customs
of the society; although the owners might have a different objective. (Waddock and
Graves, 1997).

Of course, the manager is also an individual who in his own rights has beliefs,
conscience, his family, society and country to whom he voluntarily assumes he feels
responsible to. In these respects, he is acting as a principal, not an agent of the owners of
the business; spending his own money, time and energy, not the money of his employers
or the time and energy he has contracted to devote to their objectives. If these are social
responsibilities, they are social responsibilities of individuals not businesses (Hill and
Jones, 1992).

Friedman indicated that expecting businesses to be socially responsible means that

they should ‘act in some way that is not in the interest of their shareholders’. For
Example, those businesses should refrain from increasing the price of a product in order
to fulfil the social objective of preventing inflation, even though the increase in prices
would be better off for the business (Perrini, 2010). Another example is to make
expenditures to reduce pollution beyond the amount that is in the best interests of the
business or that is required by law in order to contribute to the social objective of
improving environment amongst other examples. In each of these instances, the
management will be spending the owners’ monies for the general social interest. In
accounting terms, their actions in accord with ‘social responsibility’ reduce the returns to
shareholders.

Friedman also distinctly identified that if the management engages in social

responsibility practices, they spend the shareholders’ monies, if they increase prices, they
spend the customers’ money and if their actions lower the wages of some employees,
they are spending the employees’ money. He therefore opined that the shareholders, the
customers and the employees should themselves decide how much and to whom they
would like to make donations.

CRITICS OF THE MILTON FRIEDMAN’S SHAREHOLDER THEORY

1) Naomi Klein’s The Shock Doctrine: The Rise of Disaster Capitalism (2007).
Naomi Klein is a left-wing social activist who wrote the book ‘The Shock Doctrine’.
She criticized Friedman’s theory, saying that the theory ‘has everywhere produced an
impoverishment of the lower and middle classes while a small corporate elite grows
obscenely wealthy’. She identified that, for Friedman’s ideas to be implemented, a

20
nation’s existing economy and civic society must first be reduced to a state of ‘tabula
rasa’ (a state of absence of predetermined goals or blankness) before being rebuilt
according to the Chicago School Model of Friedman. She stated that the best time to
transform a nation is when its population can still resist such sweeping economic
changes.

2.3.2 STAKEHOLDER THEORY

The Stakeholder theory is one of the most important and frequently cited theories in
the literature. It is upon this theory that this present study hinges. Stakeholder theory
suggests that organizational survival and success is contingent on satisfying both its
economic (e.g., profit maximization) and non-economic (e.g., corporate social
performance) objectives by meeting the needs of the company's various stakeholders
(Pirsch et al, 2007). The Stakeholder theory which was originally put forward by Ian
Mitroff was developed by R. Edward Freeman, an American Philosopher and Professor
of Business Administration of the Darden School of the University of Virginia. The
Stakeholder theory was originally detailed as a theory of organizational management that
deals with morals, values and business ethics in an organization.

In his award-winning book, Strategic Management: A Stakeholder Approach in 1984,

the basic idea is that businesses and the executives who manage them, actually do and
should create value for customers, suppliers, employees, communities and financiers
(shareholders). His work, as against the Shareholder Theory considers all the groups of
stakeholders.

At the time when he wrote this book, the dominant ideology, upheld by figures like
Friedman is that companies aim to accumulate returns for shareholders. Ed Freeman
argues that Friedman’s theory only focuses on shareholders and not on other
stakeholders, whereas the other groups of stakeholders such as customers, employees and
suppliers also impacted on the companies’ activities. He even posit that Competitors are
also regarded as stakeholders, sometimes. Their status being derived from their capacity
to affect the firm and its stakeholders.

Freeman although has been cited in many articles and journals as the “father of the
stakeholder theory” has himself given credit to bodies of literature in the development of
his theory including corporate planning, strategic management, corporate social
responsibility, organization theory, etc. (Wikipedia).

The satisfaction of various stakeholder groups is instrumental for organizational

financial performance (Donaldson and Preston 1995; Jones 1995). Stakeholder-agency

21
theory argues that the implicit and explicit negotiation and contracting processes entailed
by reciprocal, bilateral stakeholder–management relationships serve as monitoring and
enforcement mechanisms that prevent managers from diverting attention from broad
organizational financial goals (Hill and Jones 1992; Jones 1995). Furthermore, by
addressing and balancing the claims of multiple stakeholders, managers can increase the
efficiency of their organization’s adaptation to external demands.

Stakeholder theory of the firm proposes that the nature of an organization's

stakeholders, their values, their relative influence on decisions and the nature of the
situation are all relevant information for predicting organizational behavior and outcomes
(Brenner and Cochran, 1991). 

Robert Allen Phillips (1997) distinguishes between normatively legitimate

stakeholders (those to whom an organization holds a moral obligation) and derivatively
legitimate stakeholders (those whose stakeholder status is derived from their ability to
affect the organization or its normatively legitimate stakeholders).

Freeman is pragmatic. From a philosophical perspective, Freeman considers that there

must be no absolute decision principles. The company must accept to challenge each of
its opinions, in order to really take its stakeholders' needs into account. Of course, it is not
expected to give up all its principles, but at least, it will have questioned their relevance.

Freeman believes that an agreement is always possible. If there are conflicting

interests between stakeholders, the company must not choose one over the other but
must find a compromise, a third way which will satisfy both interests. Therefore,
Freeman maintains that corporate social responsibility encourages innovation because it
opens the door to a world of possibilities.

Donaldson and Preston (1995) in their article ‘The Stakeholder theory of the
Corporation: Concepts, Evidence, and Implications' provided Contrasting models of a
corporation, one of which is the stakeholder model in Figure 1.

22
Figure 1: Contrasting Models of the Corporation: The Stakeholder Model by
Donaldson and Preston (1995)

Using this model, they identified that Stakeholder analysts argue that all persons or
groups with legitimate interests participating in an enterprise do so to obtain benefits and
that there is no prima facie priority of one set of interests and benefits over another.
Hence, the arrows between the firm and its stakeholder constituents run in both
directions. All stakeholder relationships are depicted in the same size and shape and are
equidistant from the "black box" of the firm in the center.

2.3.3 CARROLL'S PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

One of the most used and quoted model is Carroll´s (1991) Pyramid of Corporate
Social Responsibility (Figure 2). It indicates that corporate social responsibility
constitutes of four kinds of social responsibilities; economic, legal, ethical and
philanthropic.

Carroll considers corporate social responsibility to be framed in such a way that the
entire range of business responsibilities are embraced. carroll suggests that corporate
social responsibility consists of four social responsibilities; economic, legal, ethical and
philanthropic. These four responsibilities can be illustrated as a pyramid. The economic
component is about the responsibility to profit and this responsibility serves as the base
for the other components of the pyramid. With regard to the legal aspect, society expects
organizations to comply with the laws and regulations. Ethical responsibilities are about
how society expects organizations to embrace values and norms even if the values and
norms might constitute a higher standard of performance than required by law.
23
Philanthropic responsibilities are those actions that society expect for a company to be a
good corporate citizen.

Figure 2: The pyramid of Corporate Social Responsibility (Carroll, 1991with

modification)

The pyramid illustrates the four components of corporate social responsibility;

a) Economic Responsibilities

Corporations should provide goods and services that society wants at reasonable
prices so as to satisfy economic responsibilities towards society. In addition, corporations
have an economic responsibility towards themselves, that is, making profits to be able to
continue providing goods and services that society needs and wants at reasonable prices.
They also need to pay their employees, increase value for their shareholders, and take
care of the interests of other stakeholders (Carroll, 1979). According to Ferrell (2004), the

24
economy is influenced by the ways in which the corporation relates to its stakeholders.
Economic responsibility lies in maximizing not only shareholders' interests but also other
stakeholders' interests as well.

b) Legal Responsibilities

In carrying out their economic responsibilities, corporations are expected to work

within the framework of laws and regulations as a partial fulfillment of the "social
contract" between corporations and society. Carroll (1991) stated that it is important for
legal responsibility to be performed in a manner that is consistent with the expectations of
governments and laws, complying with the various federal, state and local regulations. A
successful corporation should be recognized as one that fulfils its legal obligations
(Conchius, 2006).

c) Ethical responsibilities

These embody those standards and expectations that reflect a concern for what
consumers, employees, shareholders, and the community regard as fair, just, or in
keeping with the respect or protection of stakeholders' moral rights (Creyer & Ross,
1997). According to Carroll (1991), business performance can be determined by the
corporation's consistency in promoting moral and ethical standards. If a corporation
practices good corporate citizenship, the activities of the corporation are trusted. Ethical
responsibility also recognizes that corporate integrity and ethical behavior should go
beyond the requirements of laws and regulations. Balancing economic, legal and ethical
responsibilities is important. If the corporation does something that is appropriately
economic and legal, it must also be appropriately ethical.

d) Philanthropic responsibilities

These refer to corporate actions that are in response to society's expectations of good
corporate citizens. Corporate philanthropy is likely to enhance the image of corporations
especially those that have high public visibility (Ferrell, 2004). Corporate philanthropy
should also increase employee loyalty and improve customer ties. Philanthropic activities
include business contributions in terms of financial resources or executive time, such as
contributions to the arts, education, or communities.

Both the shareholder and stakeholder theories are normative theories of corporate

social responsibility, dictating what a corporation’s role ought to be. By extension, they
can also be seen as normative theories of business ethics, since executives and managers

25
of a corporation should make decisions according to the “right” theory. Unfortunately,
the two theories are very much at odds regarding what is “right.”

Shareholder theory asserts that shareholders advance capital to a company’s

managers, who are supposed to spend corporate funds only in ways that have been
authorized by the shareholders. As Milton Friedman wrote, “There is one and only one
social responsibility of business — to use its resources and engage in activities designed
to increase its profits so long as it engages in open and free competition, without
deception or fraud.”

On the other hand, stakeholder theory asserts that managers have a duty to both the
corporation’s shareholders and “individuals and constituencies that contribute, either
voluntarily or involuntarily, to [a company’s] wealth-creating capacity and activities, and
who are therefore its potential beneficiaries and/or risk bearers.” Although there is some
debate regarding which stakeholders deserve consideration, a widely accepted
interpretation refers to shareholders, customers, employees, suppliers and the local
community. According to the stakeholder theory, managers are agents of all stakeholders
and have two responsibilities: to ensure that the ethical rights of no stakeholder are
violated and to balance the legitimate interests of the stakeholders when making
decisions. The objective is to balance profit maximization with the long-term ability of
the corporation to remain a going concern.

The fundamental distinction is that the stakeholder theory demands that interests
of all stakeholders be considered even if it reduces company profitability. In other words,
under the shareholder theory, non-shareholders can be viewed as “means” to the “ends”
of profitability; under the stakeholder theory, the interests of many non-shareholders are
also viewed as “ends.”

The Carroll’s pyramid is only connected to the other two theories as it stipulates
the various categories of responsibilities that firms owe their shareholders and other
stakeholders.

26
 Out of these three theories, the most relevant is the stakeholder theory. This is
because the maltreatment or even the slightest dissatisfaction of any stakeholder group
can potentially affect the economic performance and even compromise a company’s
future (Clarkson, 1995). Corporate social responsibility is like a prerequisite for
protecting the bottom line (Epstein & Rejc-Buhovac, 2014). If corporate social
responsibility managed properly, it will not only improve the satisfaction of these
stakeholders but also lead to improved financial performance (Aver & Cadez, 2009). For
example, satisfied investors invest more or even attract more investors, satisfied
employees will be more motivated to perform effectively, satisfied customers will be
more willing to make repeat purchases and recommend the products to others and
satisfied suppliers will provide discounts.

2.4 NIGERIAN BANKING SECTOR

2.4.1 BRIEF HISTORY

Banking operations in Nigeria could be traced back to the period 1892 to 1894 when
Nigeria's first bank, the African Banking Corporation, was established. No banking
legislation existed until 1952, at which point Nigeria had three foreign banks (the Bank of
British West Africa, Barclays Bank, and the British and French Bank) and two
indigenous banks (the National Bank of Nigeria and the African Continental Bank). They
had a collective total of forty branches. A 1952 ordinance set standards, required reserve
funds, established bank examinations, and provided for assistance to indigenous banks.
Yet for decades after 1952, the growth of demand deposits was slowed by the Nigerian
propensity to prefer cash and to distrust checks for debt settlements.

There was no doubt that along the line of history, the Colonial Banks established
their presence in Nigeria and affected financial activities in Nigeria. British colonial
officials established the West African Currency Board in 1912 to help finance the export
trade of foreign firms in West Africa and to issue a West African currency convertible to
British pounds sterling. But colonial policies barred local investment of reserves,
discouraged deposit expansion, precluded discretion for monetary management, and did
nothing to train Africans in developing indigenous financial institutions. In 1952 several
Nigerian members of the federal House of Assembly called for the establishment of a
central bank to facilitate economic development. Although the motion was defeated, the
colonial administration appointed a Bank of England official to study the issue. He
advised against a central bank, questioning such a bank's effectiveness in an undeveloped
capital market. In 1957 the Colonial Office sponsored another study that resulted in the
establishment of a Nigerian central bank and the introduction of a Nigerian currency. The

27
Nigerian pound, on a par with the pound sterling until the British currency's devaluation
in 1967, was converted in 1973 to a decimal currency, the naira (N), equivalent to two
old Nigerian pounds. The smallest unit of the new currency was the kobo, 100 of which
equaled 1 naira. The naira, which exchanged for US$1.52 in January 1973 and again in
March 1982 (or N0.67 = US$1), despite the floating exchange rate, depreciated relative to
the United States dollar in the 1980s. The average exchange rate in 1990 was N8.004 =
US$1. Depreciation accelerated after the creation of a second-tier foreign exchange
market under World Bank structural adjustment in September 1986.

The Central Bank of Nigeria, which was statutorily independent of the federal
government until 1968, began operations on July 1, 1959. Following a decade of struggle
over the relationship between the government and the Central Bank, a 1968 military
decree granted authority over banking and monetary policy to the Federal Executive
Council. The role of the Central Bank, similar to that of central banks in North America
and Western Europe, was to establish the Nigerian currency, control and regulate the
banking system, serve as banker to other banks in Nigeria, and carry out the government's
economic policy in the monetary field. This policy included control of bank credit
growth, credit distribution by sector, cash reserve requirements for commercial banks,
discount rates--interest rates the Central Bank charged commercial and merchant banks--
and the ratio of banks' long-term assets to deposits. Changes in Central Bank restrictions
on credit and monetary expansion affected total demand and income. For example, in
1988, as inflation accelerated, the Central Bank tried to restrain monetary growth. 

The three largest commercial banks held about one-third of total bank deposits. In
1973 the federal government undertook to acquire a 40-percent equity ownership of the
three largest foreign banks. In 1976, under the second Nigerian Enterprises Promotion
Decree requiring 60-percent indigenous holdings, the federal government acquired an
additional 20-percent holding in the three largest foreign banks and 60-percent ownership
in the other foreign banks. Yet indigenization did not change the management, control,
and lending orientation toward international trade, particularly of foreign companies and
their Nigerian subsidiaries of foreign banks.
Towards the end of 1988, the banking system consisted of the Central Bank of
Nigeria, forty-two commercial banks, and twenty-four merchant banks, a substantial
increase since 1986. Merchant banks were allowed to open checking accounts for
corporations only and could not accept deposits below N50, 000. Commercial and
merchant banks together had 1,500 branches in 1988, up from 1,000 in 1984. In 1988
commercial banks had assets of N52.2 billion compared to N12.6 billion for merchant
banks in early 1988. In FY 1990 the government put N503 million into establishing

28
community banks to encourage community development associations, cooperative
societies, farmers' groups, patriotic unions, trade groups, and other local organizations,
especially in rural areas. 

Other financial institutions included government-owned specialized development

banks: the Nigerian Industrial Development Bank, the Nigerian Bank for Commerce and
Industry, and the Nigerian Agricultural Bank, as well as the Federal Savings Banks and
the Federal Mortgage Bank. Also active in Nigeria were numerous insurance companies,
pension funds, and finance and leasing companies. Nigeria also had a stock exchange
(established in Lagos in 1961) and a number of stockbrokerage firms. The Securities and
Exchange Commission (SEC) Decree of 1988 gave the Nigerian SEC powers to regulate
and supervise the capital market. These powers included the right to revoke stockbroker
registrations and approve or disapprove any new stock exchange. Established in 1988, the
Nigerian Deposit Insurance Corporation increased confidence in the banks by protecting
depositors against bank failures in licensed banks up to N50, 000 in return for an annual
bank premium of nearly 1 percent of total deposit liabilities.

2.4.2 REGULATORY BODIES

The Nigerian Banking sector is primarily regulated by two bodies. The first is the
Central Bank of Nigeria, (CBN) which has the superior regulatory power, and then, the
Nigerian Deposit Insurance Company (NDIC), and external auditors (EA).These bodies,
are used by the government to regulate and supervise the Banking sector. They are set up
through an Act of Parliament to regulate and control financial activities and monitor
actors within the Nigerian banking system. The CBN’s core supervisory role is feasible in
the area of policies formulation, establishment of specific administrative or bureaucratic
procedures that must be adhered to by all banks and financial institutions in Nigeria.
Thus, CBN is seen as lender of last resort to all banks in the nation. On the other hand,
NDIC is known also as a government’s agency, which is responsible for insuring
financial institutions, paying and controlling deposits in accordance with the in the event
of failure of an insured financial institution. The NDIC also has a supervisory role, which
it performs by protecting the depositors and their deposits in banks, ensures monetary and
transfer stability, supports, and encourages an efficacious payment system, making sure
that dodgy, unsafe and unsound banking practices does not occur, and where it occurs, it
must be checked for prevention of future reoccurrence. The NDIC has three ways in
which it supervises the banking system; transaction-based supervision, risk-based
supervisions and consolidated supervisions. There are also external auditors, often from
29
private companies, providing periodic audits of the financial books and records of the
banks. Their judgments are empirical in nature, using accounting and arithmetic
calculations to measure banking development or decline. Even though these auditors are
in most cases appointed by the banks, they are approved by the NDIC or respective
regulators to provide requested services.

2.4.3 ESTABLISHMENT OF THE CBN

An enquiry under the leadership of G.D Paton was established in 1948 by the then
colonial administration to investigate banking practices in Nigeria. Prior to the enquiry,
the banking industry was largely uncontrolled. The G. D. Paton Report which emanated
from the enquiry was the basis for the first Banking Ordinance of 1952.  The ordinance
was designed to prevention viable banks from mushrooming, and to ensure orderly
commercial banking. The banking ordinance triggered a rapid growth in the industry and
with growth also came disappointment. By 1958, a few numbers of banks had failed. In
1958, a bill for the establishment of Central Bank of Nigeria was presented to the House
of Representatives of Nigeria. The 1958 Act was fully implemented on July 1, 1959, that
was when the Central Bank of Nigeria commenced operations.

2.4.4 CENTRAL BANK ACT, 1958

This Act (as amended) and the Banking Decree 1969 (as amended) constituted the
legal framework within which the CBN operates and regulates banks. The wide range of
economic liberalization and deregulation measures following the adoption, in 1986, of a
Structural Adjustment Programme (SAP) resulted in the emergence of more banks and
other financial intermediaries. Decree 24 and 25 of 1991 were, therefore, enacted to
strengthen and extend the powers of CBN to cover the new institutions in order to
enhance the effectiveness of monetary policy, regulation and supervision of banks as well
as non-banking financial institutions. Unfortunately in 1997, the Federal Government of
Nigeria enacted the CBN (Amendment Decree No. 3 and Banks and other Financial
Institutions [BOFI (Amended)] Decree No. 4 in 1997 to remove completely the limited
autonomy which the Bank enjoyed since 1991. The 1997 amendments puts the CBN
under the Ministry of Finance.
The current legal framework within which the CBN operates is the CBN (Amendment)
Decree No. 37 of 1998 which repealed the CBN (Amended) Decree No. 3 of 1997. The
Decree provides a measure of operational autonomy for the CBN to carry out its
traditional functions and enhances its versatility.

30
2.4.5 BANKS AND OTHER FINANCIAL INSTITUTIONS (AMENDMENT)
DECREE AND ACT.

The regulatory powers of the CBN were strengthened by the Banks and other
Financial Institutions (Amendment) Decree No. 38 of 1998 which repealed BOFI
(Amendments) Decree No. 4 of 1997. Through the amendments, the CBN may vary or
revoke any condition subject to which a license was granted or may impose fresh or
additional condition to the granting of a license to transact banking business in the
country. 

The powers of the CBN (by the decree) on banks, specifically those relating to
withdrawal of licenses of distressed banks and appointment of liquidators of these banks,
including the NDIC was restored. The CBN has also taken responsibility for nurturing the
money and capital markets. In furtherance of this, the CBN introduced treasury bills in
1960, treasury certificate in 1968, and facilitated the establishment of Lagos Stock
Exchange in 1961 and the capital issue committee now known as the Securities &
Exchange Committee in the early 1970s. The Banks and other Financial Institutions
(Amendment) Decree was later changed to Banks and other Financial Institutions Act in
1991. In 2002, Banks and other Financial Institutions (Amendment) Act, 2002 [Act NO.
10], an Act to further amend the Banks And Other Financial Institutions Act 1991, as
amended, and for matters connected therewith was enacted.

Presently, there are 25 commercial banks in Nigeria. 10 banks with International

Authorization, 13 banks with National Authorization and 2 Banks with Regional
Authorization by the CBN.

2.5 SAMPLE OF SELECTED BANKS IN NIGERIA

The Nigerian banking sector comprises 25 banks divided into 3 tiers. The first tier,
the International banks are 10 in number while the second tier, the National banks are 13
and the third tier, Regional banks are just 2. Out of these 25 banks, only 18 are qualified
for this study. This is because these 18 bank are virtually old banks while the remaining 7
are relatively new. All the 10 banks in the first tier are qualified while only 8 from the
second tier are also qualified. However, only 5 of these 18 banks will be selected as the
sample size and the banks so selected are; First Bank, Access bank, Zenith bank,
Ecobank and Stanbic IBTC bank.

31
2.5.1 FIRST BANK OF NIGERIA

HISTORY

First Bank is one of the oldest financial institutions in Nigeria and was the first bank
to be established in West Africa and was founded by Sir Alfred Jones, a shipping
magnate from Liverpool, England. With its head office originally in Liverpool, the Bank
commenced business on a modest scale in Lagos, Nigeria under the name, Bank of
British West Africa (BBWA). The bank was incorporated as a limited liability company
in March 1894 and was listed on The Nigerian Stock Exchange in March 1971.
Following the Central Bank of Nigeria’s (“CBN”), induced industry-wide consolidation
in 2005, the bank acquired its merchant banking subsidiary, FBN (Merchant Bankers)
Limited and MBC International Bank Plc. The bank offers a wide array of financial
services to a diverse customer base through its local and offshore offices, including 790
branch offices as at 2012 and 532 ATM’s. In addition to growing organically through
new products and branch development, other viable domestic acquisitions are being
explored. The intention is to extend the branch network to 600 by the end of 2008.

In 1912, the Bank acquired its first competitor, the Bank of Nigeria (previously called
Anglo-African Bank) which was established in 1899 by the Royal Niger Company. In
1957, the Bank changed its name from Bank of British West Africa (BBWA) to Bank of
West Africa (BWA). In 1966, following its merger with Standard Bank, UK, the Bank
adopted the name Standard Bank of West Africa Limited and in 1969 it was incorporated
locally as the Standard Bank of Nigeria Limited in line with the Companies Decree of
1968.

Changes in the name of the Bank also occurred in 1979 and 1991 to First Bank of
Nigeria Limited and First Bank of Nigeria Plc, respectively. In 2012, the Bank changed
its name again to First Bank of Nigeria Limited as part of a restructuring resulting in FBN
Holdings Plc (“FBN Holdings”), having detached its commercial business from other
businesses in the First Bank Group, in compliance with new regulation by the Central
Bank of Nigeria (CBN). First Bank had 1.3 million shareholders globally, was quoted on
The Nigerian Stock Exchange (NSE), where it was one of the most capitalized companies
and also had an unlisted Global Depository Receipt (GDR) Programme, all of which were
transferred to its Holding Company, FBN Holdings, in December 2012.

Building on of its solid foundation, the Bank has consistently broken new ground in
the domestic financial sector for over a century and two decades. First Bank is present in
the United Kingdom and France through its subsidiary, FBN Bank (UK) Limited with

32
branches in London and Paris; and in Johannesburg, Beijing and Abu Dhabi with its
Representative Offices there. In October 2011, the Bank acquired a new subsidiary,
Banque International de Credit (BIC), one of the leading banks in the Democratic
Republic of Congo. In November 2013, First Bank acquired ICB in The Gambia, Sierra-
Leone, Ghana and Guinea, and in 2014, the Bank acquired ICB in Senegal. These were
major landmarks in its plan for growing its sub-Saharan African footprint and all the
African subsidiaries now bear the FBN Bank brand.

As the global operating environment evolves, First Bank has kept pace, responding to
the dynamic needs of its customers, investors, regulators, host communities, employees
and other stakeholders. Through a balanced approach to plan execution, First Bank has
consolidated its industry leadership by maintaining trans-generational appeal. Thus, the
Bank has continuously boosted its customer-base, which cuts across all segments in terms
of size, structure and sectors.

Leveraging experience spanning over a century of dependable services, First Bank has
continued to build relationships and alliances with key sectors of the economy that have
served as strategic building blocks for the wellbeing, growth and development of the
country. With its huge asset base and expansive branch network, as well as continuous re-
invention, FirstBank is Nigeria’s strongest banking franchise, maintaining market
leadership on all fronts in the nation’s financial services industry.

RECENT INITIATIVES

• First Bank currently awaits final approval from the National Insurance Commission
(“NAICOM”), for its proposed life assurance subsidiary. First Bank would own at least a
51% stake, partnering with an international insurance company for both technical
expertise and equity partnership.

• First Bank will be opening a Representative Office in China; with approval from the
China Banking Regulatory Commission the only outstanding issue.

• First Bank recently obtained an operating license for FBN Microfinance Bank Limited
from the CBN. The company will operate as a micro finance bank, with its head office in
Lagos.

• The bank launched a savings promotion in June 2008 to improve its market share of
industry savings deposits.

33
OWNERSHIP

First Bank’s shares are widely held by Nigerian citizens and associations, with no
single shareholder holding more than 5% of the Bank’s equity. The largest shareholder as
at 31 March 2008 was First Dependants Nigeria Limited (3.35%), the managers of the
banks’ staff pension fund. Directors collectively held about 3.5% of the issued share
capital.

OPERATING ENVIRONMENT

Economic Nigeria’s economy continues to benefit from a relatively stable political

environment, following the democratic election in 2007. This consequently boosted
foreign investor confidence in the economy. The fiscal policy in 2007 was aimed at
accelerating the full attainment of the goals of the National Economic Empowerment and
Development Strategy (“NEEDS”), launched in 2004. GDP growth improved slightly to
6.2% compared with 6% in the previous year, despite lagging behind the 10% projection.
The value of the Naira was relatively stable during the year due to further liberalization of
the foreign exchange market. Inflationary pressure also moderated as the headline year-
on-year inflation rate fell to 6.6% from 8.5%, reflecting largely the stabilization in the
supply of petroleum products and effective macroeconomic management. However,
inflation has increased to 10% in 1H08, while the unrest in the Niger Delta region and the
unabated energy crisis, together with the high rate of unemployment, constitute serious
challenges.

COMPETITIVE POSITION

As one of the seven tier 1 banks in Nigeria, comparative figures from the latest available
audited financial statements are shown in table 2 below, although the different year ends
distort the analysis. The bank has grown its market share and compares well with its
peers across most indicators. The bank remains one of the most profitable in the sector in
terms of return on assets, benefiting from a low cost retail deposit base. Capitalization
levels were the highest in the industry at March 2008. Furthermore, as one of the old
generation banks, First Bank enjoys strong brand recognition.

34
2.5.2 ACCESS BANK

HISTORY

Access bank was incorporated on 8th February, 1989 as a privately owned commercial

bank.  It obtained a banking license in December 1988 and commenced business on
11th May, 1989.  The bank was converted to a public limited liability company on
24th March 1998 and was listed on the Nigerian Stock Exchange on 18thNovember,
1998.  In December 2001, Access Bank was successfully recapitalized and the bank’s
board of directors appointed the current executive management team with a clear
mandate to reposition the bank as one of Nigeria’s top five (5) banks by the year 2007.
Over the past 26 years, Access Bank Plc. has evolved from an obscure Nigerian Bank
into a world-class African financial institution. Today, it is one of the five largest banks
in Nigeria in terms of assets, loans, deposits and branch network; a feat which has been
achieved through a robust long-term approach to client solutions – providing committed
and innovative advice.

Access Bank has built its strength and success in corporate banking and is now
applying that expertise to the personal and business banking platforms it acquired from
Nigeria’s International Commercial bank in 2012. The next two years were spent
integrating the business, investing in infrastructure and strengthening the product offer.

As part of its continued growth strategy, Access Bank is focused on

mainstreaming sustainable business practices into its operations. The Bank strives to
deliver sustainable economic growth that is profitable, environmentally responsible, and
socially relevant. It has a commercial banking license with International authorization.

Products and Services

At Access Bank, there is an extensive range of products and services tailored provide
a value added banking solutions ranging from day – day transactional banking and
complex financing structures, to help customers achieve all the products and services
they need in obtaining liquidity, strong finding reduced capital costs and stronger balance
sheets.

Other services includes:

Cash management

This is carried out through;

Access Bank collection services

35
Access Bank Payment Solution

Access bank in liquidity management solutions

Access bank in correspondent banking services

Access bank information solutions

Electronic banking

Access Bank provides the customers with an easy and component ways to carry out
their banking at the comfort of their homes and offices.

BUSINESS

Access bank is engaged in the provision of universal services to corporate,

commercial and individual customers.  Within the first year of its five year
transformation program, the bank recorded over N1 billion in pre-tax profits for the
2002/2003 financial year exceeding the total cumulative profits made by the bank since
inception.  It is for this reasons amongst others that Access bank shares were the most
actively traded stocks on the Nigerian stock exchange in year 2003 and the bank was
nominated as “Bank of the year 2003” by This Day News Paper.

The bank maintained this outstanding performance in its 2003/2004 financial years
and was ranked 5th in terms of total assets from a lowly 65th in 2001.  in recognition of
its strong operating performance, the bank was conferred with an “A” rating by the
Global Credit Rating Company (GCR).

II)        Technology

Success in the highly competitive financial services sector often depends on the speed
with which an organization reacts to opportunities and market changes as at and when
due. In October 1999, Access Bank became the first Nigerian bank to deploy the
FLEXCUBE Banking Application to Support its banking operations.  FLEXCUBE is an
end-to-end, integrated product suite for universal banking.  Flexcube has evolved over the
years in response to changes in global financial world.  The most recent version is
Flexcube 6.2 “a state of the art universal banking solution”.

36
 Consistent with the bank’s desire to bring world class banking to customers and after
an extensive due diligence review by KPMG international, the bank took a bold decision
to upgrade its existing Flexcube application to the latest version 6.2, a browser enabled
version.  This ground-breaking upgrade positions access bank as the first bank in Africa
to implement the latest version of Flexcube and the second most advanced Flexcube user
in the world after one of India’s biggest banks – Syndicate Bank.  In recognition this the
bank recently received the Hewlett Packard for the best implementation of a core banking
infrastructure in West Africa.

Corporate Governance

INTRODUCTION

Access Bank Plc (‘the Bank’) recognizes that good corporate governance is
fundamental to earning and retaining the confidence and trust of its stakeholders. It
provides the structure through which the objectives of the Bank are set and the means to
attaining those objectives.

The Codes of Corporate Governance for Banks in Nigeria Post Consolidation issued by
the Central Bank of Nigeria, the Securities and Exchange Commission’s Code of Best
Practice and Access Bank’s Principles of Corporate Governance collectively provide the
basis for promoting sound corporate governance in the Bank. The Bank’s subsidiary
entities are guided by these principles in their governance frameworks and also meet the
requirements of their respective jurisdictions to ensure local compliance. The Group’s
governance framework helps the Board to discharge its role of providing oversight and
strategic counsel in balance with its responsibility to ensure conformance with regulatory
requirements and acceptable risk.

Compliance with all applicable legislation, regulations, standards and codes is an

essential characteristic of the Bank’s culture. The Board monitors compliance with these
by means of management reports, which include information on any significant
interaction with key stakeholders.

GOVERNANCE STRUCTURE

Shareholders’ Meeting: Shareholders meetings are duly convened and held in line with
the Bank’s Articles of Association and existing statutory and regulatory regimes in an
open manner, for the purpose of deliberating on issues affecting the Bank’s strategic
direction.

37
This occurs through a fair and transparent process and also serves as a medium for
fostering interaction between the Board, Management and Shareholders. Attendance at
the Annual General Meeting is open to shareholders or their proxies while proceedings at
such meetings are usually monitored by members of the press, representatives of the
Nigerian Stock Exchange, Central Bank of Nigeria and Securities and Exchange
Commission. The Board ensures that shareholders are provided with adequate notice of
the Meeting. An Extraordinary General Meeting may also be convened at the request of
the Board or Shareholders holding not less than 10% of the Bank’s paid- up capital.

2.5.3 ZENITH BANK PLC

HISTORY

Established in May 1990, the bank started operations in July of the same year as a
commercial bank. It became a public limited company on June 17, 2004 and was listed
on the Nigeria Stock Exchange on October 21, 2004 following a highly successful Initial
Public Offering (IPO). The bank currently has a shareholder base of over one million and
is the bank with the highest shareholders’ funds – $2.46bn – Q3 2011 – in Nigeria.

Headquartered in Lagos, Nigeria, Zenith Bank has over 500 branches and business
offices nationwide, with a presence in all the state capitals, Federal Capital Territory
(FCT), major towns and metropolitan centres in the country. In April 2007, Zenith
became the first Nigerian bank in 25 years to be licensed by the UK Financial Services
Authority (FSA), giving rise to Zenith Bank (UK) Limited. Zenith Bank also has a
presence in: Ghana, Zenith Bank (Ghana) Limited; Sierra Leone, Zenith Bank (Sierra
Leone) Limited; Gambia, Zenith Bank (Gambia) Limited and a representative office in
Johannesburg, South Africa. Another representative office is being opened in Beijing,
China this year.

Zenith Bank’s management team is made up of seasoned professionals headed by

Godwin Emefiele, the Group Managing Director and CEO, who is a pioneering staff
member and has been on the board for more than a decade. He took over the reins from
the founding CEO, Jim Ovia, in August 2010. The bank’s exceptional performance stems
from its experienced leadership, professionalism and vision of the management and staff.

The operating results of the bank, since it went public in 2004, indicate an
impressive performance in all of its parameters. Total assets grew from $1.25bn in 2004
to $14.19bn in Q3 2011, representing a growth of 1,039 percent. Within the same period,
total deposits went up by 1,079 percent from $845m to $9.97bn, as at September 2011.

Zenith’s strong growth

38
 Zenith Bank has built a brand as a reputable, international, financial institution,
recognised for innovation, superior customer service and performance while creating
premium value for all stakeholders. Today, the bank is easily associated with the
following attributes: Innovation, solid financial performance, stable and dedicated
management, highly-skilled personnel, leadership in the use of ICT, strategic distribution
channels and good asset quality. The key strategies used over the past 12 months to drive
the robust growth are as follows:
– Always delivering superior service experience to all customers;
– Developing deeper and broader relationship with all clients and  striving to understand
their individual and industry peculiarities with a view to formulating specific solutions
for each segment of the customer base;
– Optimally expanding the bank’s operations by adding new distribution channels and
entering into new markets where opportunities exist;
– Maintaining the bank’s position as a leading service provider in Nigeria, while
expanding its operations internationally in West Africa and the financial capitals of the
world;
– Striving to be a leading service provider in Nigeria by continuing to build on
longstanding relationships, capabilities and the strength of the Zenith brand and
reputation;
– Continually enhancing the bank’s processes and systems to deliver new capabilities and
improve operational efficiencies and achieve economies of scale.

Robust liquidity methods

Zenith Bank’s liquidity profile remains very strong (being a consistent net placer
of funds in the interbank market) and its risk management practices give assurance that
this profile will be maintained. The bank has a sound and robust liquidity risk
management framework that ensures it maintains sufficient liquidity, including a cushion
of unencumbered, high-quality liquid assets at all times. Zenith Bank’s compliance with
liquidity and funding requirements includes the following processes: projecting cash
flows and considering the level of liquid assets necessary in relation to needs; monitoring
balance sheet liquidity ratios against internal and regulatory requirements; maintaining a
diverse range of funding sources with adequate back-up facilities; managing the
concentration and profile of debt maturities; monitoring depositor concentration in order
to avoid undue reliance on large individual depositors; and ensuring a satisfactory overall
funding mix, while maintaining liquidity and funding contingency plans.

In 2009, the Central Bank of Nigeria (CBN) conducted a special audit to ascertain
the stability of the banking sector in the country. Zenith Bank was one of the 14 banks
that passed the audit. The result of the audit led to the quasi-nationalisation of 10 banks
representing about 50 percent of system assets.

Corporate social responsibility

39
 Corporate Social Responsibility (CSR) remains a key component of Zenith Bank’s
strategic drive for the overall development of the society in which it operates. The bank’s
commitment and efforts in corporate social responsibility have not only won several
awards and accolades within Nigeria, but it has also done so internationally. Zenith
Bank’s efforts cover a broad range of human needs and have impacted positively on the
quality of life of a large number of individuals, interest groups and communities.

These efforts cover areas such as education, health, community development,

sports, youth and women empowerment, arts and culture, disaster relief, security,
government agencies and non-governmental organisations’ activities among others. As a
responsible corporate citizen, the bank endeavours to make contributions that make a
meaningful impact on the well-being of the beneficiaries and the society at large.

Ratings and corporate governance

Zenith Bank has consistently recorded good ratings from both the international
(Fitch Ratings, Standard & Poor’s) and local (Agusto & Co.) rating agencies. The ratings
on Zenith Bank Plc are supported by its leading market position in all key performance
indices.

Zenith Bank has consistently put in place a robust system of corporate governance,
bearing in mind the key elements of honesty, trust, integrity, openness and accountability
as well as commitment to the organisation’s goals. To uphold strong corporate
governance and transparency, the bank adopts a robust public disclosure policy. This is to
forestall incidences of abuse, such as insider trading.

All financial information, as well as exceptional and extraordinary events capable

of influencing the public decision concerning the bank, are approved for dissemination by
the board and then related through authorised means to the public at the same time. The
release of such information is done speedily and as often as stipulated by the regulatory
bodies.

2.5.4 ECOBANK (THE PAN-AFRICAN BANK)

HISTORY

Ecobank Transnational Incorporated (ETI), a public limited liability company, was

established as a bank holding company in 1985 under a private sector initiative
spearheaded by the Federation of West African Chambers of Commerce and Industry
with the support of the Economic Community of West African States (ECOWAS). In the
early 1980’s foreign and state-owned banks dominated the banking industry in West
Africa. Commercial banks in West Africa owned and managed by the African private
sector were a rarity. Its founders created ETI with the objective of filling this vacuum.

40
The Federation of West African Chambers of Commerce promoted and initiated a project
to create a private, regional banking institution in West Africa. In 1984, Ecopromotions
S.A. was incorporated. Its founding shareholders raised seed capital for feasibility studies
and the promotional activities leading to the creation of ETI.

In October 1985, ETI was incorporated with authorized capital of US$100 million.

The initial paid up capital of US$32 million was raised from over 1,500 individuals and
institutions from West African countries. The largest shareholder was the ECOWAS
Fund for Cooperation, Compensation and Development (ECOWAS Fund), the
development finance arm of ECOWAS.

Ecobank signed a Headquarters’ Agreement with the Government of Togo in 1985,

which granted it the status of an international organization. This status came with the
rights and privileges necessary for ETI to operate as a regional institution, including the
status of a non-resident financial institution. ETI commenced operations with its first
subsidiary in Togo in March 1988.

 The Group Today;

Today, Ecobank is the leading pan-African bank with operations in 36 countries
across the continent. It has a larger African footprint than any other bank in the world.
Ecobank currently operates in countries in West, Central, East and Southern Africa,
namely Angola, Benin, Burkina Faso, Burundi, Cape Verde, Cameroon, Central African
Republic, Chad, Congo Brazzaville, Democratic Republic of Congo, Côte d'Ivoire,
Equatorial Guinea, Ethiopia, Gabon, Ghana, The Gambia, Guinea, Guinea Bissau, Kenya,
Liberia, Malawi, Mali, Mozambique, Niger, Nigeria, Rwanda, Sao Tome & Principe,
Senegal, Sierra Leone, South Africa, South Sudan, Tanzania, Togo, Uganda, Zambia and
Zimbabwe. The Group also has a licensed operation in Paris and representative offices in
Beijing, Dubai, Johannesburg, London and Luanda.

 Business Segments;
The Ecobank Group is a full-service bank focused on Middle Africa. It provides
wholesale, retail, investment and transactional banking services to governments, financial
institutions, multinationals, local companies, small and medium-sized enterprises (SMEs)
and individuals. Ecobank delivers its services through three customer-focused business
divisions: Consumer Banking, Commercial Banking and Corporate and Investment
Banking. An Integrated information technology platform operated by eProcess, the
group’s Accra-based technology subsidiary, supports the three business divisions.

41
  Corporate and Investment Banking;
Corporate and Investment Banking is constantly aligned to market and growth
opportunities. The focus is on transaction banking offering relevant financial solutions to
global and regional corporates, public corporates, financial institutions and international
organizations. Corporate and Investment Banking also leverages technology to provide
strong outcomes for customers. Its offer includes the following services: Transaction
Banking; Fixed Income Currencies and Commodities (FICC); Investment Banking;
Security, Wealth and Asset Management; Cards, Loans and Liquidity. The bank’s
Treasury and Research department supports Corporate and Investment Banking.

Commercial banking serves local medium corporates and SMEs, the public sector sharing
the products of Transaction Banking, Fixed Income Currencies and Commodities, Loans
and Liquidity.

 Consumer Banking;
The Consumer Banking division encompasses Personal Banking and Microfinance,
providing convenient, accessible and reliable financial products and services to individual
customers, leveraging an extensive branch and Automated Teller Machine (ATM)
network and Points of Sale (POS), dipsora services as well as mobile, internet and
remittances banking platforms.

 Brand;
Three key pan-African elements underpin the Ecobank brand:

a) The largest banking platform in Africa

b) A diverse talent pool
c) Quality customer service
While Ecobank’s 20,331 employees make the group the largest employer of labour in the
financial sector in Middle Africa, the bank operates as “One Bank” with common
branding, standards, policies, and processes. This makes for consistent and reliable
service to over 10 million customers across this unique network of 1,265 branches, 2,690
ATMs, and 13,800 POS machines. The bank runs an integrated information technology
platform, with all of its operations successfully migrated onto a single core banking
application: Oracle FLEXCUBE.

 Sustainability;

42
 Sustainability lies at the core of the bank’s mission to build a world-class pan-African
bank that contributes to the integration and socio-economic development of the continent.
Ecobank’s long-term success is intertwined with the sustainable development of the
economies, societies and environment in which it operates.

In 2012, the group adopted an integrated and comprehensive approach to sustainability

and created a common framework. This framework depicts sustainability in the context
of the operational model of the organisation ensuring effective, efficient and sustainable
utilisation of economic, social, human and natural capital. This framework reflects the
bank’s commitment to drive economic transformation in Africa while protecting the
environment and being a socially responsible financial institution with a world-class
professional perspective.

2.5.5 STANBIC IBTC BANK PLC

HISTORY

Stanbic IBTC Bank PLC is a Nigeria-based financial institution with a commercial

banking license with National Authorization engaged in the provision of corporate,
investment, business and personal banking products and solutions. The Bank is active
within the three business segments: Individual Banking, which covers transactional
banking, savings and investing, wealth management, borrowing, banc assurance and self-
service banking, such as automated teller machine (ATM), Internet banking and fraud
awareness; Business Banking segment focuses on institutional sized enterprises, and
Corporate Banking offers, among others, trade finance, custodial services, specialized
finance, global markets, and foreign exchange purchases and sale. The Bank offers its
services through a network of more than 60 branches located across Nigeria. The Bank
operates several subsidiaries include, among others, IBTC Asset Management Limited.
Stanbic IBTC Bank PLC is a member of the Standard Bank Group.

The Standard Bank Group (SBG) merged its Nigerian operations, Stanbic Bank
Nigeria with that of IBTC Chartered Bank PLC (IBTC) on 24 September 2007. The
merger, by way of the first ever tender offer in Nigeria and $525 million in foreign direct
investment, was the largest in Nigerian financial history. The Standard Bank Group,
which has a controlling stake of 52.8% in Stanbic IBTC, has been in business for 150
years and is Africa's largest banking group ranked by assets and earnings.

Stanbic Bank Nigeria was created in 1992 when SBG acquired ANZ Grindlays'
operations in Botswana, Ghana, Kenya, Nigeria, Uganda, Zaire, Zambia and Zimbabwe.
Stanbic Bank Nigeria offered merchant banking services, while Investment Banking and

43
Trust Company (IBTC) was established 23 years ago to offer investment banking and
investment management services. IBTC merged with Chartered Bank and Regent Bank in
2005 and was thereafter known as IBTC Chartered Bank PLC - a universal bank. At the
time of the merger with Stanbic Bank Nigeria, IBTC Chartered Bank PLC was the
leading investment bank in Nigeria.

Stanbic IBTC Bank PLC is a universal bank and has consolidated its position in
Nigeria as a diversified business with a proven track record. The group focuses on the
three key businesses - Corporate and Investment Banking, Personal and Business
Banking and Wealth Management that leverage the skills, economies of scale and
synergies that come from being part of an international group, and our excellent Nigerian
pedigree.

The running of Stanbic IBTC Holding is overseen by a 12-person board of

directors (9 non-executive and 3 executive) with Atedo N.A. Peterside as the Chairman.

CORPORATE SOCIAL RESPONSIBILITY

Social and environmental responsibility remains an important part of the group's

culture. The monitoring and reporting of sustainability issues is still an evolving
discipline within our organisation. 

As an African business, the group understands the challenges and benefits of

doing business in Africa, and owes its existence to the people and societies within which
it operates.

The group is committed therefore not only to the promotion of economic

development but also to the strengthening of civil society and human wellbeing.

The group is concentrating its social investment expenditure in defined focus areas
which currently include education in order to make the greatest impact. These areas of
focus will be subject to annual revision as the countries socio-economic needs change.

2.6.0 CORPORATE SOCIAL RESPONSIBILITY IN NIGERIA

2.6.1 EMERGENCE

44
 In line with the foregoing discourse on the rationale for corporate social responsibility
in developing countries, corporate social responsibility initiatives in Nigeria arise as a
result of the practices of multinational companies (MNCs) operations in the extraction
sectors of the Nigerian economy, especially in the oil sector (Amao & Amaeshi, 2008;
Adegbite & Nakajima, 2011). These activities of the MNCs are more prominent in the
Niger Delta region of Nigeria because of the huge oil deposit and presence of MNCs.
Their operations in communities resulted in corporate social responsibility breaches such
as oil spillages, gas flaring, militancy/community agitations arising from the dumping of
toxic waste materials in rivers. These activities destroyed the sources of income for the
communities which are mainly farming and fishing, leading to widespread poverty and
agitation from the communities.

Apart from the activities of MNCs, the failure by successive Nigerian governments to
fulfil their mandatory obligation of providing social amenities for communities has made
MNCs to become quasi-government with communities depending and targeting MNCs to
solve their economic problems (Oyefusi, 2007; Adegbite & Nakajima, 2011).
Government from all levels, have failed to offer solutions (such as building
infrastructures, roads, schools and hospitals. This is largely due to the following:
corruption, weak institutional framework, lack of transparency and accountability among
public officials and bad governance (Helg, 2007; Rwabizambuga, 2007).

According to Idemudia (2007), the community expectation of corporate social

responsibility programs from oil MNCs has been on the rise. These community
expectations are bound to affect both community decisions and perceptions of MNCs
operating in their communities (Idemudia, 2009; Rwabizambuga, 2007). Therefore,
Ehikioya (2009) noted that an understanding of what drives community expectations is
imperative to reduce problems in developing countries like Nigeria and help companies
in implementing corporate social responsibility policies and practices. The community
expects MNCs to provide more employments to their indigenes, provide poverty
reduction schemes such as hospitals, schools, pipe borne water, electricity, roads, bridges
and micro-credits scheme (Oyefusi, 2007).

Similar to South Africa’s Kings Report, the Nigerian Securities and Exchange
Commission (SEC) (2003 and revised in 2011) code on corporate governance
recommends that companies should report their social, economic, ethical and
environmental sustainability performances. In compliance, therefore, companies reports
their corporate social responsibility practices in company bulletin, annual reports and
websites. Generally, the Code of Corporate Governance has led to gradual improvement
aimed at self-regulation towards best practices among PLCs in Nigeria.
45
 The MNCs that operate in developing countries have been accused of
environmental degradation and pollution by the host communities and countries,
especially those with prominent oil operations. Indeed these issues have led to many
conflicts, as in the case of the Niger Delta region where the host communities have been
in near constant conflicts with the MNCs. For example, the Ijaws and the Ogonis
(communities from the Niger Delta) are in constant conflicts with the MNCs operating in
their region. The region remains poor, under-developed and environmentally degraded.
Recently, in January and February 2006, the face-off between the Federal Government of
Nigeria, the MNC and the host communities reached a boiling point. There were two
separate kidnappings of foreign oil workers by the Ijaw militants in the Niger Delta. The
militants asked the oil companies to leave their region and at the same time asked the
Federal Government of Nigeria to develop their communities.

In the corporate social responsibility studies on Nigeria, Wheeler et al (2002) explored

the challenging issues faced by companies in their stakeholder responses in the oil
industries using Shell Petroleum Development Company (SPDC) and Ogoni community
as case studies. Wheeler et al (2002) found that increasing stakeholder responses at the
strategic and corporate level of the companies is important in promoting a peaceful Ogoni
community. Another reminder of corporate social responsibility breaches (Wheeler et al,
2002) is the degradation of the Ogoni land by SPDC. Some environmentalists, such as
Ken Saro-Wiwa protested the activities of SPDC in their land. This led to the hanging of
the Ogoni writer, human rights activist and environmentalist, and eight (8) of his
colleagues in 1995. According to Wheeler et al (2002), the Ogoni land and SPDC
complicity are indications of the poor stakeholder welfare management by MNCs in
Nigeria. In 2009, Shell settled out-of-court with the family of Ken Saro-Wiwa for $15.5
million.

In addition, Ana, Sridar, and Bamgboye (2009) investigated corporate social

responsibility breaches in community in Nigeria. The authors found that environmental
degradation is higher in oil producing areas with a high incidence of pollution compared
with non-oil producing area. Also, health related diseases such as skin disorders,
respiratory problems and deformity are prevalent in oil producing areas compared with
non-oil producing areas.

Furthermore, on the nature of corporate social responsibility practices in Nigeria,

Amaeshi et al (2006) used unstructured questionnaires to explore the practices and
established that corporate social responsibility is localized and practiced by indigenous
companies as corporate philanthropy. Amaeshi et al (2006) argued that their findings

46
affirm corporate social responsibility practices to be socially embedded and culturally
rooted in the operations of indigenous companies.

2.6.2 PRACTICES

The corporate social responsibility initiatives of companies in Nigeria are wide-

ranging and cover critical infrastructure like beautification projects, roads, electricity,
markets, and civic centers, among others. For example, Fidelity Bank, a large commercial
bank in Nigeria, spends about USD1 million each year on corporate social responsibility
through diverse projects across including the renovation of schools, provision of water to
prisons, facilities for widows, computers for the blind, as well as equipment for hospitals
(Amaeshi et al, 2015). So far, there are expectations that companies offer certain benefits
to their employees and the communities where their facilities are located, but these
benefits are neither non-specific nor focused only on a specific enterprise. In addition to
being motivated by concrete needs, expectations reflect traditional views of a company’s
or an entrepreneur’s responsibilities toward employees and the community. In addition to
benefiting society, corporate social responsibility initiatives are often undertaken as a
way of promoting a company’s image. Corporate social responsibility in Nigeria is
philanthropic in nature and has culture of charity as companies and wealthy individuals
contribute to charitable causes and use these contributions to garner positive publicity.
However, companies in Nigeria are expected to promote transparency, even beyond what
is required by law. This is encouraged by the government, which has made it clear that it
has certain expectations, particularly of foreign enterprises. So far, however, there has
been little response from companies despite the high priority attached to this topic
because of Nigeria’s widespread corruption.

In the above discussion, it is clear that corporate social responsibility practices in

Nigeria are still largely characterized by donations, charities and community
developments. Therefore, some authors argue that corporate social responsibility
practices are unsustainable in Nigeria (Eweje, 2007). As a result, it is difficult to say that
the Public Liability Company (PLCs) is practicing strategic corporate social
responsibility as evidenced by developed countries.

The corporate social responsibility initiatives of companies in Nigeria are wide-

ranging and cover the following:

1. Education: Programmes cover infrastructure; scholarships for primary, post-

secondary and post-graduate education in institutions. For example, Total Plc. in Port
Harcourt runs programs such as the “Catch-them-Young”. Also, most MNCs (Shell,

47
 Mobil and Chevron) have been involved in either school renovation projects or
building of school blocks for communities in Nigeria.
2. Health: Companies develop infrastructure by building health care centers or offer free
health programmes such as HIV/AIDS awareness campaigns, malaria prevention
campaigns, and the donation of drugs.
3. Water supply: Most companies provide bole-hole water to communities. Examples
include the NNPC/TEPNG joint venture that supplies potable water to 17
communities across 16 locations with 300,000 gal capacity in strict observance of
WHO standards.
4. Capacity Building- Skills Acquisition: Most companies in Nigeria engage in
capacity building through providing skills in form of training and internship. This is
perhaps one of the most important programmes that have positively affected the
youths of the communities. For instance, Total Plc in partnership with United Nations
Institute for Training and Research, UNITAR, has trained a total of 3812 youths from
Rivers, Akwa Ibom, and Delta states for the acquisition of skills in welding and
fabrication, hairdressing, fashion and designing, plumbing, carpentry, building, and
masonry. In that every year, 700 youths undergo these programmes and are provided
with business starter packs on completion of apprenticeship.
5. Employment: Under specific Memoranda of Understanding (MOU) provisions,
qualified youths from the communities are not only given employment opportunities,
they are also integrated into the company’s on-going projects.
6. Agriculture: Microcredit schemes are provided to farmers’ co-operative societies and
the farmers are encouraged with know-how and equipment in the areas of fish
farming, poultry, and so on.
2.7.0 PROFITABILITY RATIOS

Profitability Ratios are ratios that are calculated to analyze profits in relation to
revenue from operations or funds (or assets) employed in business. In businesses, the
profitability or financial performance is mainly summarized in the Income Statement.
Profitability ratios are calculated to analyze the earning capacity of the business which is
the outcome of utilization of resources employed in the business. There is a close
relationship between the profit and the efficiency with which the resources employed in
the business are utilized.

Profitability ratios can also be referred to as ratios that analyze financial performance.
The ability of a business to generate profit assesses its financial performance. Ratios of
financial efficiency in this respect focus on the relationships between profit and sales and
profits and assets employed. It also focuses on the value of shares of businesses to their

48
investors. Ratios which are commonly used to analyze the profitability of the business
are:

i) Gross profit margin

ii) Net profit margin
iii) Return on net worth
iv) Return on Shareholders’ Equity
v) Return on assets
vi) Return on capital employed
For the purpose of this study, Gross profit margin, net profit margin, return on
shareholders’ equity, return on assets and return on capital employed only will be
considered.

2.7.1 GROSS PROFIT MARGIN

Gross profit margin indicates gross margin on products sold. It also indicates the
margin available to cover operating expenses, non-operating expenses, etc. Change in
gross profit margin may be due to change in selling price or cost of revenue from
operations or a combination of both. A low margin may indicate unfavorable purchase
and sales policy. Higher gross profit margin is always a good sign. Gross profit margin is
computed as follows;
Gross profit
Gross profit margin = × 100
Sales

2.7.2 NET PROFIT MARGIN

Net profit margin is based on all inclusive concept of profit. It relates revenue from
operations to net profit after operational as well as non-operational expenses and
incomes. It is a measure of net profit in relation to revenue from operations. Besides
revealing profitability, it is the main variable in computation of Return on Investment. It
reflects the overall efficiency of the business, assumes great significance from the point
of view of investors. Net profit margin is calculated thus;
Net profit before tax
Net profit margin = × 100
Sales

2.7.3 RETURN ON SHAREHOLDERS’ EQUITY

49
 Return on shareholders’ equity measures the return which accrues to the shareholders
after interest payments to creditors and taxes are deducted. It does not measure the
efficiency with which available resources are used, but rather the residual return to the
owners on their investment in the business. This ratio is very important from
shareholders’ point of view in assessing whether their investment in the firm generates a
reasonable return or not. It should be higher than the return on investment otherwise it
would imply that company’s funds have not been employed profitably. Return on
shareholders’ equity is computed as follows;

Profit (after interest ∧tax)

Return on shareholders’ equity =
shareholders' equity

2.7.4 RETURN ON ASSETS

Return on assets indicates the efficiency with which management used the resources
to earn profit. Return on assets is computed as follows;
Net profit after tax
Return on assets = x 100
Total assets

2.7.5 RETURN ON CAPITAL EMPLOYED

Return on capital employed explains the overall utilization of funds by a business

enterprise. Capital employed means the long-term funds employed in the business and
includes shareholders’ funds, debentures and long-term loans. Alternatively, capital
employed may be taken as the total of non-current assets and working capital. Profit
refers to the Profit before Interest and Tax (PBIT) for computation of this ratio. Return on
capital employed is calculated as follows;

Profit before Interest ∧Tax(PBIT )

Return on capital employed = x 100
Capital employed

50
 CHAPTER THREE

3.0 METHODOLOGY

3.1 INTRODUCTION

This chapter covers the source of data as well as how to go about the method of
collecting the data needed for the study.

3.2 SOURCE OF DATA

The source of data for this research work is primary in nature. The researcher
intends to collect raw data as against existing and documented data. The preference for
primary data is that it will bring about originality in data collection and the researcher
will be able to spread his tentacles to the areas of his need for the study.

3.3 RESEARCH DESIGN

The research design for this study will attempt to specify the type of information
to be collected, its source and procedure. It will include how data is collected, what
instruments will be used and the intended means for analyzing data collected.

The study, therefore, is a survey research work and it is making use of primary
data. Questionnaire will be administered to elicit responses from a number of selected
respondents. This questionnaire will be well-structured and cover the entire objectives of
this study. The essence of adopting survey research method is to collect data from the
selected respondents, present the data and analyze them such that the findings will be
truly representative of the study population.

3.4 STUDY POPULATION AND CHARACTERISTICS

The population for this study is the entire banking sector in Nigeria which
comprises 25 banks, 7 of them are new and are not considered good enough for the study.
Hence, only 18 banks have been selected as the ideal population for the study. Because
this population is considered too large, it will be necessary to scale down this large
population and create a sample size for the study. In attempting to scale down the
population, the nation is divided into 6 geo-political zones and only one of them is
selected and this is South West. This region has six states and only one of these states,
Oyo state is selected. This state has three Senatorial districts and only one, Oyo South
Senatorial District is selected. Notably, all the 5 selected banks for this study in this
Senatorial District are qualified for selection. However, the total number of the branches

51
of these banks will be too large for the study, hence, the need for the sample size to be
created.

3.5 SAMPLE SIZE AND PROCEDURE

The sample size is 200 and it is spread across the five selected banks. Each of the
banks will be expected to have 40 respondents and 4 branches each will be selected from
each bank for the study. The study will adopt random, stratified and purposive sampling
techniques. The respondents from each of the banks selected will be picked randomly.
They will also be stratified into managerial, senior officers and junior officers
respectively. Because people at the managerial level are usually few, only 2 respondents
will be chosen from this level while from the senior and junior officers, 4 respondents
each will be chosen.

3.6 ADMINISTRATION OF THE INSTRUMENT

The method adopted in the study for the administration of the instrument (the
questionnaire) is the hand delivery method. The instrument was administered to the
managerial, senior and junior officers of the selected banks in Oyo South Senatorial
District. The hand delivery method is adopted because it is the most effective method as
confidence is built with respondents and it results in a high response rate.

3.7 VALIDITY AND RELIABILITY OF THE INSTRUMENT

The study population is the entire banking sector in Nigeria, and a sample size of
200 was carefully selected, after narrowing down the scope of the study to the Oyo South
Senatorial District, where branches of five selected banks were used for the study. The
findings from the study therefore will truly represent the entire study population. There
are three major categories of reliability for most instruments; test retest, equivalent form
and internal consistency; the researcher adopted a test-retest approach where the well-
structured questionnaire are administered on one branch of each of the five selected
banks, with almost the same population. The outcome of this test is subjected to the
opinion of the experts who in turn restructured or modified the questionnaire to ensure a
higher reliability. By so doing, and in order to maximize the reliability of the instrument,
the researcher, with the help of experts, ensured that the questions in the instrument are
not ambiguously presented to the respondents in the four branches selected in each of the
five banks.

52
3.8 METHOD OF DATA PRESENTATION AND ANALYSIS

The data collected through the instrument is presented using frequency distribution
table and is analyzed using Chi-square, ANOVA and Regression analysis.

3.9 RE-STATEMENT OF RESEARCH QUESTIONS AND HYPOTHESES

RESEARCH QUESTIONS

i) Can CSR be an essential growth element and financial performance boosting tool for
firms?

ii) To what extent can banks attain sound financial management by engaging in
Corporate Social Responsibility practices?

iii) Do Banks have responsibilities to shareholders, employees, and customers in attaining

sound CSR practices?

iv) Will Investments in CSR activities amount to mere expenditure or lead to bigger
financial fortunes to the Banks?

RESEARCH HYPOTHESES

i) H0: CSR will not be an essential growth element and financial performance boosting
tool for firms.

ii) H0: Banks will not attain appreciable financial management by engaging in Corporate
Social Responsibility practices.

iii) H0: Banks do not have responsibilities to shareholders, employees and customers in
attaining sound Corporate Social Responsibility practices.

iv) H0: Investments in CSR activities will not lead to bigger financial fortunes to the
banks.

53
 CHAPTER FOUR

4.0 DATA PRESENTATION AND ANALYSIS

4.1 PRESENTATION OF DATA
TABLE 4.1: DISTRIBUTION OF RESPONDENTS BY DEPARTMENT

Department Frequenc Percent Cumulative

y percent
General Banking 43 24.0 24.0
Retail Banking 20 11.2 35.2
Customer Services and 52 29.1 64.2
Technology
Credit 34 19.0 83.2
Treasury and Financial Services 14 7.8 91.1

Foreign Exchange 4 2.2 93.3

Administration 12 6.7 100
Total 179 100
Source: Field Survey, 2018
Table 4.1 above shows that 43 respondents which represent 24% of the total respondents
are working in general banking department, 20 respondents which represent 11.2% are
working in retail banking department, 52 respondents which represent 29.1% are working
in the customer services and technology department, 34 respondents which represent
19.0% are working in the credit department, 14 respondents which represent 7.8% are
working in treasury and financial services, 4 respondents which represent 2.2% are
working in the foreign exchange department while 12 respondents which represent 6.7%
of the total respondents are in administration department.

Table 4.2: Distribution of the Respondents by job status

Job Status Frequenc Percent Cumulative

y Percent
Junior Staff 106 59.2 59.2

54
Senior Staff 73 40.8 100
Total 179 100
Source: Field Survey, 2018

Table 4.2 shows that 106 respondents which represent 59.2% of the total respondents are
junior staff while 73 respondents which represent 40.8% are senior staff.
Table 4.3: Distribution of Respondents by Educational qualification

Educational Qualification Frequenc Percent Cumulative

y Percent
OND/HND 12 6.7 6.7
Bsc 83 46.4 53.1
Msc/MBA 44 24.6 77.7
Professional Qualification 40 22.3 100
Total 179 100
Source: Field Survey, 2018

Table 4.3 above shows that 12 respondents which represent 6.7% of the total respondents
are OND/HND holders, 83 respondents which represent 46.4% are Bsc holders while 44
respondents which represent 24.6% have professional qualification.

Table 4.4: Distribution of Respondents by Sex

Sex Frequenc Percent Cumulative
y Percent
Male 130 72.6 72.6
Female 49 27.4 100
Total 179 100
Source: Field Survey, 2018

Table 4.4 above shows that 130 respondents which represent 72.6% of the respondents
are male while 49 respondents which represent 27.4% of the total respondents are female.

Table 4.5: Distribution of Respondents by Marital Status

55
Marital Status Frequenc Percent Cumulative
y Percent
Married 127 70.9 70.9
Single 52 29.1 100
Total 179 100
Source: Field Survey, 2018

Table 4.5 above shows that 127 respondents which represent 70.9% of the respondents
are married while 52 respondents which represent 29.1% of the respondents are single.

Table 4.6: Distribution of Respondents by duration of time with the bank

Duration Frequenc Percent Cumulative
y percent
Less than 2 years 36 20.1 20.1
2 years – 5 years 81 45.3 65.4
5 years – 10 years 34 19.0 84.4
10 years – 15 years 28 15.6 100
Total 179 100
Source: Field Survey, 2018

Table 4.6 above shows that 36 respondents which represent 20.1% of the respondents has
been with the bank for less than 2 years, 81 respondents which represent 45.3 have been
with the bank for two years to five years, 34 respondents which represent 19% of the
respondents have been with the bank for five years to ten years while 28 respondents
which represent 15.6% of the respondents have been with the bank for ten years to fifteen
years.
Table 4.7: Distribution of Respondents by age

Age Frequenc Percent Cumulative

y percent

56
15- 25 years 30 16.8 16.8
26 – 35 years 21 11.7 28.5
36- 45 years 44 24.6 53.1
46 – 55 years 52 29.1 82.1
56 – 65 years 32 17.9 100
Total 179 100
Source: Field Survey, 2018
Table 4.7 above shows that 30 respondents which represent 16.8% are within age 15-25
years, 21 respondents which represent 11.7% of the respondents are within age 26 – 35
years, 44 respondents which represent 24.6% of the respondents are within age 36 – 45
years, 52 respondents which represent 29.1% of the respondent are within age 46 -55
years while 32 respondents which represent 17.9% are within age 56 – 65 years.
Table 4.8: Distribution of Respondents by work experience

Work Experience Frequenc Percent Cumulative

y percent
Below 5 years 43 24.0 24.0
5 – 10 years 44 24.6 48.6
10 – 15 years 51 28.5 77.1
Above 15 years 41 22.9 100
Total 179 100
Source: Field Survey, 2018
Table 4.8 above shows 43 respondents which represent 24% of the respondents have
below 5 years working experience, 44 respondents which represent 24.6% of the
respondents have 5 -10 years working experience, 51 respondents which represent 28.5%
of the respondents have 10 – 15 years working experience while 41 respondents which
represent 22.9% of the respondents have above 15 years’ experience.

57
4.2 ANALYSIS OF DATA

Table 4.9: Corporate Social Responsibility as an essential growth element and

financial performance boosting tool for firms
S/ STATEMENTS S A A NS D SD
N
Frq % Frq % frq % frq % frq %
1 Corporate Social 106 59.2 49 27.4 17 9.5 - - 7 3.9
Responsibility is
a basic tool for
the development
of a firm in
terms of profit
maximization
2 Corporate Social 121 67.6 46 25.7 2 1.1 10 5. - -
Responsibility is 6
a competitive
strategy which is
beneficial for
firms
3 Corporate Social 79 44.1 78 43.6 4 2.2 16 8. 2 1.1
Responsibility 9
has an effect on
the non-financial
and overall
performance of
firms
4 Corporate Social 96 53.6 51 28.5 17 9.5 15 8. - -
Responsibility 4
could be an
essential growth
element for
firms
5 Financial 113 63.1 32 17.9 24 13.4 8 4. 2 1.1
performance of 5
firms is affected
by Corporate
Social
Responsibility
activities
Source: Field Survey, 2018

58
Table 4.9 shows that 106 respondents which represent 59.2% strongly agreed that
Corporate Social Responsibility is a basic tool for the development of a firm in terms of
profit maximization, 49 respondents which represent 27.4% agreed with the statement, 17
respondents which represent 9.5% were not sure while 7 respondents which represent 3.9
of the respondents strongly disagreed that Corporate Social Responsibility is a basic tool
for the development of a firm in terms of profit maximization. The analysis in table 4.9
implies that Corporate Social Responsibility is a basic tool for the development of a firm
in terms of profit maximization.

The table also shows that 121 respondents that is 67.6% strongly agreed that Corporate
Social Responsibility is a competitive strategy which is beneficial for firms, 46 (25.7%)
of the respondents agreed with the statement, 2 (1.1%) of the respondents were not sure
while 10 (5.6%) of the respondents disagreed that Corporate Social Responsibility is a
competitive strategy which is beneficial for firms. This analysis indicates that Corporate
Social Responsibility is a competitive strategy which is beneficial for firms.

The table also shows that 79 (44.1%) of the respondents strongly agreed that Corporate
Social Responsibility has an effect on the non-financial and overall performance of firms,
78 (43.6%) agreed with the statement, 4 (2.2%) were not sure, 16 (8.9%) disagreed while
2 (1.1%) strongly disagreed that Corporate Social Responsibility has an effect on the non-
financial and overall performance of firms. This analysis shows that Corporate Social
Responsibility has an effect on the non-financial and overall performance of firms.
Likewise, the table shows that 96 (53.6%) of the respondents strongly agreed that
Corporate Social Responsibility could be an essential growth element for firms, 51
(28.5%) of the respondents agreed with the statement, 17 (9.5%) of the respondents were
not sure while 15 (8.4%) of the respondents disagreed that Corporate Social
Responsibility could be an essential growth element for firms. This analysis indicates that
Corporate Social Responsibility could be an essential growth element for firms.

59
Table 4.9 also shows that 113 (63.1%) of the respondents strongly agreed that Financial
performance of firms is affected by Corporate Social Responsibility activities, 32 (17.9)
of the respondents agreed with the statement, 24 (13.4%) of the respondents were not
sure, 8 (4.5%) of the respondents disagreed while 2 (1.1%) of the respondents strongly
disagreed that Financial performance of firms is affected by Corporate Social
Responsibility activities. This analysis indicates that financial performance of firms is
affected by Corporate Social Responsibility activities.
Table 4.10: Banks will attain sound financial management by engaging in Corporate
Social Responsibility practices

SA A NS D SD
S/N STATEMENTS Fq % Fq % FQ % Fq % Fq %
1 Corporate Social 67 37.4 64 35.8 38 21.2 6 3.4 4 2.2
Responsibility is one of the
main means of managing risk
of social factors and their
influence on the financial
aspect of a bank
2 Corporate Social 80 44.7 58 32.4 25 14 16 8.9 - -
Responsibility may be
connected to the market value
of shares and financial
leverage of banks
3 Banks that engage in 73 40.8 71 39.7 33 18.4 2 1.1 - -
Corporate Social
Responsibility activities have a
higher investors’ base due to
investor preferences
4 The profit base of a bank can 90 50.3 54 30.2 23 12.8 6 3.4 6 3.4
affect the level at which it can
go with Corporate Social
Responsibility
5 High social responsibility may 92 51.4 64 35.8 - - 19 10.6 4 2.2
improve a firm’s access to
sources of capital
Source: Field Survey, 2018

Table 4.10 shows that 67(37.4%) of the respondents strongly agreed that Corporate
Social Responsibility is one of the main means of managing risk of social factors and
their influence on the financial aspect of a bank, 64 (35.8%) of the respondents agreed

60
with this statement, 38 (21.2%) of the respondents were not sure, 6 (3.4%) of the
respondents disagreed with the statement while 4 (2.2%) of the respondents strongly
disagreed that Corporate Social Responsibility is one of the main means of managing risk
of social factors and their influence on the financial aspect of a bank. This analysis
indicates that Corporate Social Responsibility is one of the main means of managing risk
of social factors and their influence on the financial aspect of a bank.
The table also shows 80 (44.7%) of the respondents strongly agreed that Corporate Social
Responsibility may be connected to the market value of shares and financial leverage of
banks, 58 (32.4%) of the respondents agreed with the statement, 25 (14.0%) of the
respondents were not sure, while 16 (8.9%) of the respondents disagreed that Corporate
Social Responsibility may be connected to the market value of shares and financial
leverage of banks. This analysis indicates that Corporate Social Responsibility may be
connected to the market value of shares and financial leverage of banks.

Table 4.10 also shows that 73 (40.8%) of the respondents strongly agreed that Banks that
engage in Corporate Social Responsibility activities have a higher investors’ base due to
investor preferences, 71 (39.7%) of the respondents agreed with the statement, 33
(18.4%) of the respondents were not sure, while 2 (1.1%) of the respondents disagreed
that Banks that engage in Corporate Social Responsibility activities have a higher
investors’ base due to investor preferences. This analysis indicates that Banks that engage
in Corporate Social Responsibility activities have a higher investors’ base due to investor
preferences.

Table 4.10 also shows that 90 (50.3%) of the respondents strongly agreed that The profit
base of a bank can affect the level at which it can go with Corporate Social
Responsibility, 54 (30.2%) of the respondents agreed with the statement, 23 (12.8%) of
the respondents were not sure, 6 (3.4%) of the respondents disagreed with the statement
while 6 (3.4%) of the respondents strongly disagreed that The profit base of a bank can
affect the level at which it can go with Corporate Social Responsibility. This analysis

61
indicates that the profit base of a bank can affect the level at which it can go with
Corporate Social Responsibility.

Also the table shows that 92 (51.4%) of the respondents strongly agreed that High social
responsibility may improve a firm’s access to sources of capital, 64 (35.8%) of the
respondents agreed with the statement, 19 (10.6%) of the respondents disagreed with the
statement while 4 (2.2%) of the respondents strongly disagreed that High social
responsibility may improve a firm’s access to sources of capital. This analysis indicates
that High social responsibility may improve a firm’s access to sources of capital.

Table 4.11: Banks have responsibilities to stakeholders in attaining sound Corporate

Social Responsibility practices.
SD A NS D SD
S/ STATEMENTS Fq % F % Fq % F % Fq %

62
N q q
1 Stakeholders’ perceptions 10 55.9 50 27. 29 16. - - - -
of Corporate Social 0 9 2
Responsibility can
contribute to the
maximization of a bank’s
potential reputation
2 The fulfillment of the 55 30.7 70 39. 52 29. - - 2 1.1
concerns of the 1 1
stakeholders regarding
Corporate Social
Responsibility activities
determines the future
growth of banks
3 Banks that are socially 60 33.5 80 44. 35 19. 4 2. - -
responsible to their 7 6 2
stakeholders gain
competitive advantage over
others
4 Banks which do not include 82 45.8 68 38. 14 7.8 8 4. 7 3.9
their shareholders’ 0 5
concerns and welfare in
their plans and strategies
threaten their long term
survival
5 Banks that are responsible 10 59.2 48 26. 19 10. 6 3. - -
to their shareholders, 6 8 6 4
employees, and customers
attain sound Corporate
Social Responsibility
practices

Source: Field Survey, 2018

Table 4.11 shows that 100 (55.9%) of the respondents strongly agreed that Stakeholders’
perceptions of Corporate Social Responsibility can contribute to the maximization of a
bank’s potential reputation, 50 (27.9%) of the respondents agreed with the statement
while 29 (16.2%) of the respondents were not sure that Stakeholders’ perceptions of
Corporate Social Responsibility can contribute to the maximization of a bank’s potential
reputation. This analysis is a strong indication that Stakeholders’ perceptions of

63
Corporate Social Responsibility can contribute to the maximization of a bank’s potential
reputation.

Table 4.11 also shows that 55 (30.7%) of the respondents strongly agreed that The
fulfillment of the concerns of the stakeholders regarding Corporate Social Responsibility
activities determines the future growth of banks, 70 (39.1%) of the respondents agreed
with the statement, 52 (29.1%) of the respondents were not sure, while 2 (1.1%) of the
respondents strongly disagreed that The fulfillment of the concerns of the stakeholders
regarding Corporate Social Responsibility activities determines the future growth of
banks. This analysis indicates that the fulfillment of the concerns of the stakeholders
regarding Corporate Social Responsibility activities determines the future growth of
banks.

The table also shows that 60 (33.5%) of the respondents strongly agreed that Banks that
are socially responsible to their stakeholders gain competitive advantage over others, 80
(44.7%) of the respondents agreed with the statement, 35 (19.6%) of the respondents
were not sure, while 4 (2.2%) of the respondents disagreed that Banks that are socially
responsible to their stakeholders gain competitive advantage over others. This analysis
indicates that Banks that are socially responsible to their stakeholders gain competitive
advantage over others.

Table 4.11 also shows that 82 (45.5%) of the respondents strongly agreed that Banks
which do not include their shareholders’ concerns and welfare in their plans and
strategies threaten their long term survival, 68 (38.0%) of the respondents agreed with the
statement, 14 (7.8%) of the respondents were not sure, 8 (4.5%) of the respondents
disagreed with statement while 7 (3.9%) of the respondents strongly disagreed that Banks
which do not include their shareholders’ concerns and welfare in their plans and
strategies threaten their long term survival. This analysis indicates that Banks which do

64
not include their shareholders’ concerns and welfare in their plans and strategies threaten
their long term survival.

The table equally shows that 106 (59.2%) of the respondents strongly agreed that Banks
that are responsible to their shareholders, employees, and customers attain sound
Corporate Social Responsibility practices, 48 (26.8%) of the respondents agreed with the
statement, 19 (10.9%) of the respondents were not sure while 6 (3.4%) of the respondents
disagreed that Banks that are responsible to their shareholders, employees, and customers
attain sound Corporate Social Responsibility practices. This analysis indicates that Banks
that are responsible to their shareholders, employees, and customers attain sound
Corporate Social Responsibility practices.

Table 4.12
Investments in Corporate Social Responsibility and financial fortunes of banks.

SA A NS D SD
S/ STATEMENTS Fq % F % Fq % F % Fq %
N q q

65
1 Most banks do not engage 10 57. 57 31.8 12 6.7 8 4.5 - -
in Corporate Social 2 0
Responsibility because
they see it as mere
expenditure
2 Expenditure on Corporate 71 39. 69 38.5 31 17.3 - - 8 4.5
Social Responsibility in 7
the long run improves the
bank’s returns
3 The impact of Corporate 89 49. 57 31.8 27 15.1 - - 6 3.4
Social Responsibility on 7
the financial performance
of banks may prove
negative at the initial stage
of implementation
4 Corporate Social 55 30. 73 40.8 32 17.9 19 10. - -
Responsibility initiatives 7 6
require huge investments
in the short run but
produces considerable
returns in the long run
5 Corporate Social 10 59. 40 22.3 22 12.3 4 2.2 6 3.4
Responsibility expenditure 7 8
leads to future financial
fortunes
Source: Field Survey, 2018

Table 4.12 shows that 102 (57.0%) of the respondents strongly agreed that Most banks do
not engage in Corporate Social Responsibility because they see it as mere expenditure, 57
(31.8%) of the respondents agreed with the statement, 12 (6.7%) of the respondents were
not sure, while 8 (4.5%) of the respondents disagreed that Most banks do not engage in
Corporate Social Responsibility because they see it as mere expenditure. This analysis
indicates that most banks do not engage in Corporate Social Responsibility because they
see it as mere expenditure.

Table 4.12 also shows that 71 (39.7%) of the respondents strongly agreed that
Expenditure on Corporate Social Responsibility in the long run improves the bank’s
returns, 69 (38.5%) of the respondents agreed with the statement, 31 (17.3%) of the
66
respondents were not sure, while 8 (4.5%) of the respondents strongly disagreed that
Expenditure on Corporate Social Responsibility in the long run improves the bank’s
returns. This analysis indicates that Expenditure on Corporate Social Responsibility in the
long run improves the bank’s returns.

The table also shows that 89 (49.7%) of the respondents strongly agreed that The impact
of Corporate Social Responsibility on the financial performance of banks may prove
negative at the initial stage of implementation, 57 (31.8%) of the respondents agreed with
the statement, 27 (15.1%) of the respondents were not sure, while 6 (3.4%) of the
respondents strongly disagreed that The impact of Corporate Social Responsibility on the
financial performance of banks may prove negative at the initial stage of implementation.
This analysis indicates that the impact of Corporate Social Responsibility on the financial
performance of banks may prove negative at the initial stage of implementation.

Table 4.12 also shows that 55 (30.7%) of the respondents strongly agreed that Corporate
Social Responsibility initiatives require huge investments in the short run but produces
considerable returns in the long run, 73 (40.8%) of the respondents agreed with the
statement, 32 (17.9%) of the respondents were not sure, while 19 (10.6%) of the
respondents disagreed that Corporate Social Responsibility initiatives require huge
investments in the short run but produces considerable returns in the long run. This
analysis indicates that Corporate Social Responsibility initiatives require huge
investments in the short run but produces considerable returns in the long run.
Table 4.12 equally shows that 107 (59.8%) of the respondents strongly agreed that
Corporate Social Responsibility expenditure leads to future financial fortunes, 40 (22.3%)
of the respondents agreed with the statement, 22 (12.3%) of the respondents were not
sure, 4 (2.2%) of the respondents disagreed with the statement while 6 (3.4%) of the
respondents strongly disagreed that Corporate Social Responsibility expenditure leads to
future financial fortunes. This analysis indicates that Corporate Social Responsibility
expenditure leads to future financial fortunes.

67
4.3 TESTING OF HYPOTHESES
Hypothesis I
H01: CSR will not be an essential growth element and financial performance boosting tool
for firms.
H1: CSR will be an essential growth element and financial performance boosting tool for
firms.
Table 4.13
Test Statistics
Financial performance of firms is
affected by Corporate Social
Responsibility activities
Chi-Square 224.268a
Df 4
Asymp. Sig. .000
a. 0 cells (0.0%) have expected frequencies less than 5. The minimum
expected cell frequency is 35.8.
From table 4.13 above, X2 calculated is 224.268, while X2 tabulated is 9.49. the chi
square calculated is greater than chi square tabulated. Hence the null hypothesis is
rejected while the alternative hypothesis is accepted which states that CSR will be an
essential growth element and financial performance boosting tool for firms.

Hypothesis II:
H0: Banks will not attain appreciable financial management by engaging in Corporate
Social Responsibility practices.
H1: Banks will attain appreciable financial management by engaging in Corporate Social
Responsibility practices.
Significance Level
α = 0.05
Critical Value(s) and Rejection Region(s)
Reject the null hypothesis if p-value ≤ 0.05

68
Table 4.14 Regression Analysis
Model Summaryb
Mode R R Adjusted R Std. Error of Durbin-
l Square Square the Estimate Watson
a
1 .344 .118 .113 .898 1.711
a. Predictors: (Constant), Corporate Social Responsibility
b. Dependent Variable: Bank’s sound financial management

Table 4.15
Coefficientsa
Model Unstandardized Standardi t Sig. 95.0% Confidence
Coefficients zed Interval for B
Coefficie
nts
B Std. Beta Lower Upper
Error Bound Bound
2.972 .295 10.05 .000 2.389 3.555
(Constant)
9
1
Corporate Social .340 .070 .344 4.873 .000 .202 .477
Responsibility
a. Dependent Variable: Bank’s sound Financial management
T = 4.873, P- value = 0.000

Conclusion
Since p-value = 0.000 ≤ 0.05, we shall reject the null hypothesis.
At the = α = 0.05 level of significance, there exists enough evidence to conclude that the
slope of regression line is not zero and, hence, Banks will attain appreciable financial
management by engaging in Corporate Social Responsibility practices.

Hypothesis III
H03: Banks do not have responsibilities to shareholders, employees and customers in
attaining sound Corporate Social Responsibility practices.
H3: Banks have responsibilities to shareholders, employees and customers in attaining
sound Corporate Social Responsibility practices.

69
Table 4.16
ANOVA
Banks that are responsible to their shareholders, employees, and
customers attain sound Corporate Social Responsibility practices
Sum of Df Mean F Sig.
Squares Square
Between 8.899 3 2.966 4.777 .003
Groups
Within Groups 108.676 175 .621
Total 117.575 178

Table 4.16 shows that the significant P-value =0.003 is lesser than critical value 0.05.
Therefore, reject H03 and accept H3 which says Banks have responsibilities to
shareholders, employees and customers in attaining sound Corporate Social
Responsibility practices.

Hypothesis IV
H04: Investments in CSR activities will not lead to bigger financial fortunes to the banks.
H4: Investments in CSR activities will lead to bigger financial fortunes to the banks.

Table 4.17
Test Statistics
Corporate Social Responsibility
expenditure leads to future financial
fortunes
Chi-Square 200.469a
Df 4
Asymp. Sig. .000
a. 0 cells (0.0%) have expected frequencies less than 5. The
minimum expected cell frequency is 35.8.
From table 4.17 above, X2 calculated is 200.469, while X2 tabulated is 9.49. The chi
square calculated is greater than chi square tabulated. Hence the null hypothesis is

70
rejected while the alternative hypothesis is accepted which states that Investments in CSR
activities will lead to bigger financial fortunes to the bank.

CHAPTER FIVE
5.0 SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 SUMMARY

The study empirically assesses the impact of corporate social responsibility on

banks’ financial performance. The research project started with the introduction, where
the background to the study was discussed. The gaps in previous studies were identified
as the authors’ failure in noting that CSR could be an essential growth element and
financial performance -boosting tool as well as attaining a sound financial management
through appropriate CSR practices. Furthermore, previous studies have not really
emphasized the responsibilities to shareholders, employees, customers, etc. towards
achieving sound CSR practices; they have not also seen CSR activities as investments but
rather as mere expenditure, hence, firms are not favorably disposed towards embarking
on rigorous and sustainable CSR activities, while the objectives of the study include the

71
determination of the banks’ responsibilities to shareholders, employees and customers in
attaining sound Corporate Social Responsibility practices and the assessment of banks’
investments in Corporate Social Responsibility activities amounting amount to mere
expenditure or ultimately bringing about bigger financial fortunes to the banks.

The study was conceptualized using Corporate Social Responsibility and financial
performance. Previous studies in the area of CSR and Financial performance, CSR and
Financial management, CSR and Stakeholders and Investment in CSR activities and
bank’s financial fortunes were reviewed. The theoretical framework for the research work
included the Shareholders’ Theory, the Stakeholders Theory and the Carroll’s pyramid.
Of these three theories, the Stakeholders theory was adjudged the most relevant to the
study. The study also made use if primary data where survey research method through the
use of questionnaires was adopted. Up to 200 respondents were sampled and random
sampling, stratified sampling and purposive sampling were used.

Data collected through questionnaire were carefully presented and in arriving at the
findings for the study, four hypotheses were tested and these included banks not having
responsibilities to shareholders, employees and customers in attaining sound Corporate
Social Responsibility practices, Investments in CSR activities will not leading to bigger
financial fortunes to the banks.

5.2 CONCLUSION
The study has given an in-depth insight and clearer understanding of corporate social
responsibility and its impact on banks’ financial performance. Based on the findings of
the study, conclusions reached envisaged that Corporate Social Responsibility is an
essential growth element and financial performance boosting tool for firms and that banks
will attain sound financial management by engaging in Corporate Social Responsibility
practices. Furthermore, it was also concluded that banks have responsibilities to
shareholders, employees and customers in attaining sound Corporate Social

72
Responsibility. Lastly, the study revealed that investments in Corporate Social
Responsibility activities will ultimately bring about bigger financial fortunes to the banks.
In totality, it can be inferred that corporate social responsibility positively impacts the
financial performance of banks.

5.3 RECOMMENDATIONS
For banks to enjoy the benefits of CSR, the contribution to social and economic
progress should be promoted, despite its limitations and weaknesses. In this respect, the
study proffers the following recommendations:

• Creation of public awareness regarding CSR among the mass people, academics,
managers, and other stakeholders so that they view CSR objectively and get benefit from
it when the corporations practice it. CSR education can be spread at all level of our
educational system.

• Increasing community participation in CSR activities by promoting a CSR friendly

social dialogue. Companies should not only focus on consumers but active dialogue with
other stakeholders is crucial for the success of CSR.

• Developing clear cut guidelines regarding CSR rules, regulations, and policies.

• Adopting skill development initiatives for both the internal and external parties. Skills
and tools are important to allow stakeholders to play their role properly. For this, banks
can create appropriate institutional frameworks which permit stakeholders to meet and
discuss CSR matters.

• Fostering CSR among banks because it is crucial for the overall success of the banks.

• Ensuring transparency and building trust on the CSR activities of the companies.
Companies should make the stakeholders believe that they are really caring for them, for
society, and for broader environment as a whole.

73
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APPENDICES

AJAYI CROWTHER UNIVERSITY, OYO, OYO STATE.

QUESTIONNAIRE

Department of Accounting and Finance,

Ajayi Crowther University,

Oyo,

Oyo State.

81
Dear respondent,

REQUEST FOR FILLING OF QUESTIONNAIRE

I am a final year student of the above mentioned university. As part of the

requirements for the award of B.Sc. Degree in Accounting in the university, I am
carrying out a research project on the topic ‘The Impact of Corporate Social
Responsibility on firms’ financial performance (A case study of selected banks in
Nigeria)’. I hereby request you to please supply the information being sought for as stated
in the attached Questionnaire. Note that this research is just for academic purposes only
and any information collected will be used as such. Your response will be used
confidentially and solely for the study.

Thanks

Yours Faithfully,

Oyeleye Tofunmi J.

Researcher.

Instruction: Please answer the questions below by ticking in the appropriate box:

SECTION A (DEMOGRAPHIC INFORMATION)

1. Department: (a) General banking [ ] (b) Retail banking [ ] (c) Customer

services and technology [ ] (d) Credit [ ] (e) Treasury and Financial services [
] (f) Foreign Exchange [ ] (g) Administration [ ]
2. Job Status: (a) Junior staff [ ] (b) senior staff [ ] (c) Management [ ]
3. Educational Qualification: (a) OND/HND [ ] (b) BSc [ ] (c) MSc/MBA [ ]
(d) Professional Qualification [ ]
4. Sex: (a) Male [ ] (b) Female [ ]
5. Marital Status: (a) Married [ ] (b) Single [ ]
6. How long have you been with the bank?
Less than 2 years [ ]

82
 2years – 5years [ ]

5years – 10years [ ]

10years – 15years [ ]

7. Age: (a) 15-25 years [ ] (b) 26-35 years [ ] (c) 36-45 years [ ] (d) 46-55 years
[ ] (e) 56-65 years [ ]

8. Work Experience: (a) Below 5 years [ ] (b) 5-10 years [ ] (c) 10-15 years [ ]
(d) Above 10 years [ ]

KEY NOTE: Please tick appropriately.

Strongly Agree (SA)=5, Agree (A)=4, Not Sure (NS)=3, Disagree (D)=2, Strongly
Disagree (DS)=1.

SECTION B: Corporate Social Responsibility as an essential growth element and

financial performance boosting tool for firms

S/N STATEMENTS SA A N D SD
S
1 Corporate Social Responsibility is a basic tool for
the development of a firm in terms of profit
maximization
2 Corporate Social Responsibility is a competitive
strategy which is beneficial for firms
3 Corporate Social Responsibility has an effect on the
non-financial and overall performance of firms
4 Corporate Social Responsibility could be an
essential growth element for firms
5 Financial performance of firms is affected by
Corporate Social Responsibility activities

SECTION C

Banks will attain sound financial management by engaging in Corporate Social

Responsibility practices

83
S/N STATEMENTS S A N D SD
A S
1 Corporate Social Responsibility is one of the main
means of managing risk of social factors and their
influence on the financial aspect of a bank
2 Corporate Social Responsibility may be connected to
the market value of shares and financial leverage of
banks
3 Banks that engage in Corporate Social Responsibility
activities have a higher investors’ base due to investor
preferences
4 The profit base of a bank can affect the level at which it
can go with Corporate Social Responsibility
5 High social responsibility may improve a firm’s access
to sources of capital

SECTION D

Banks have responsibilities to stakeholders in attaining sound Corporate Social

Responsibility practices.

S/N STATEMENTS S A NS D SD
A
1 Stakeholders’ perceptions of Corporate Social
Responsibility can contribute to the maximization of a
bank’s potential reputation
2 The fulfillment of the concerns of the stakeholders
regarding Corporate Social Responsibility activities
determines the future growth of banks
3 Banks that are socially responsible to their
stakeholders gain competitive advantage over others
4 Banks which do not include their shareholders’
concerns and welfare in their plans and strategies
threaten their long term survival
5 Banks that are responsible to their shareholders,
employees, and customers attain sound Corporate
Social Responsibility practices

84
SECTION E

Investments in Corporate Social Responsibility and financial fortunes of banks.

S/N STATEMENTS S A NS D SD
A
1 Most banks do not engage in Corporate Social
Responsibility because they see it as mere expenditure
2 Expenditure on Corporate Social Responsibility in the
long run improves the bank’s returns
3 The impact of Corporate Social Responsibility on the
financial performance of banks may prove negative at
the initial stage of implementation
4 Corporate Social Responsibility initiatives require
huge investments in the short run but produces
considerable returns in the long run
5 Corporate Social Responsibility expenditure leads to
future financial fortunes

85