CHAPTER ONE
INTRODUCTION
1.1 Background to the study
In developed economies the concept of
business has focused not only on profit making activities but also social
welfare activities where businesses are not only responsible to its
shareholders but also to all of its stakeholders. Empirical works revealed that
there has been a growing global public awareness of the role of corporations in
society. Many companies which have been credited with contributing to economic
and technology progress have been criticized for creating social problems.
Issues such as pollution, waste, resources depletion, product quality and
safety, the rights and status of workers and the power of large corporations
have become the focus of increasing attention and concern. (Islam, 2012).
Corporate Social Responsibility (CSR) is the process of communicating the
social and environmental effects of organizations‟ economic actions to
particular interest groups within society and to society at large. As such, it
involves extending the accountability of organizations (particularly)
companies; beyond the traditional role of providing a financial benefit to the
owners of capital, particularly shareholders but also to the community. Such
extension is predicated upon the assumption that companies do have wider
responsibilities than simply to make money for their shareholders (Rizk, Dixon,
and Woodhead, 2008). Similarly, Nigeria Deposit Money Banks (DMBs) despite
being profit making and service oriented firms also participate in CSR.
Most of the quoted deposit money banks
in Nigeria have recently realized that in order for them to survive and
continue business as a going 2 concern, they must adopt a system that bridges
the gap between financial performance and the social system within which they
operate. In addition, CRS in Nigeria can be traced back to the practices in the
oil and gas multinationals. The CSR activities in this sector are majorly
centered on the local communities. The companies provide pipe-borne water,
hospitals and schools among others. These initiatives are special and not
always sustained (Amaeshi, Adi, Ogbechie, and Amao, 2006). The main influencing
factors driving the CSR practice in Nigeria have been foreign; multinational companies
operating in Nigeria together with foreign governments and international Non
Governmental Organizations (NGOs) have been the primary drivers (Helg, 2007).
The concept has been a growing field of interest by sociologists, economist and
accountants since 70s. The accounting struggle was to ensure that all social
costs are adequately identified, measured and disclosed in the corporate
periodic financial reports. Stakeholders are challenging firms to account for
the level of their involvement in CSR (Tsoutsoura, 2004). CSR issue has
therefore maintained its momentum continuously not only in developed economies
but also in underdeveloped and developing countries particularly in Nigeria.
Because, companies disclose information on CSR as a result of pressure from
stakeholders such as customer, communities, investors, employees and creditors
also due to the increase of global awareness of the role of companies in the
society. Moreover, many empirical studies have focused on the variation in CSR
practice across developed countries (Smith, Adhikari Tondkar 2005; Gray and
Bebbington 2007), only a 3 few have addressed this issue in developing
countries (Haniffa and cooker, 2005; 2007; Akintola 2010). This suggests that
CSR is more relevant to corporations operating in the developed nations due to
community awareness and expectations of society responsible behavior. Also
societal awareness and expectations in the developing nations on CSR is less
important to the society. Firm size, profitability, liquidity, leverage,
dividend and firm growth are the most key considered in determining firm CSR
investment, disclosure and practice in previous studies. Firm size is one of
the determining factors of CSR disclosure in developed and developing
countries. This study extended as far as determining the extent to which firm
size contributes to CSR. Firm size measured in different ways by different
authors such as turnover, total assets, fixed assets, paid up capital,
shareholders equity, capital employed, number of employees and market value of
the firm. This study measured firm size as total assets of the firm which is in
line with the work of Shehu and Faruk (2013); Abdu Abubakar (2016); and
Tazul-Islam(2010). It is expected that large firm would like to practice and
disclosure more information on CSR because of economic advantages. Similarly,
profitability has been measured by previous researches in so many ways such as
net profit to sales, earnings growth, dividend growth, return on assets and
return on investment. Here, the study measured profitability on the basis of
return on investment in line with Khaled, Mohammed, and Marwa, (2011).
1.2 Statement of the problem
Following the series of banking reforms
undergone during the Soludo, Sanusi Lamido Sanusi and the current reforms going
on by Godwin Emefiele like introduction of cashless policy, reduction of
monetary policy rate, exchange rate stability and introduction of Treasury
Single Account (TSA), Nigerian deposit money banks (DMBs) have always been at
receiving end of these reforms, in terms of improving the quality of service
delivery to the customers rather than the interest of the bank. 6 However, DMBs
of Nigeria have been facing challenge of liquidity since the implementation of
TSA policy in 2015. This may significantly affect the level of CSR in DMBs of
Nigeria, but there might be greater demand of DMBs to disclose more CSR activities
to meet up their demand. This therefore triggers the need for evaluating
empirically the factors influencing CRS disclosure of DMBs in Nigeria. Thus, do
the factors that have been previously documented to influence CSR disclosure in
developed and developing economics also influence CSR disclosure in Nigeria.
The current study seeks to provide
answer. In addition, there are reasonable literature that attempt to address
the debate surrounding CSR issue and its determining factors. Firm size,
Profitability, Liquidity, Leverage, Dividend and Firm growth are the key
factors considered in determining Corporate Social Responsibility (CSR)
disclosure and practice in many previous studies which revealed mixed results
Abubakar Abdu (2016). Some studies such as Lin chih, Hsuan chih and Yin chen
(2010), Akintola (2010), Khaled, Mohamed and Marwa (2011) and Faruk and Shehu
(2013) have produced evidence in support of a positive impact of factors
influencing CSR activities while other works such as John and Shyan (2010) and
Abu Sufian (2012) reported no significant impact at all. However, the
inconsistency to identify which of the variables debated is most influential in
predicting and determining the CSR disclosure, Firm Size is among the variables
in determining the CSR disclosure of firms ( Rahman and Widyasari 2008 and
Ebiringa et al. 2013) but the question remains as whether Firm Size influence
the CSR of listed DMBs in Nigeria more than the other variables.
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