Effect Of Corporate Social Responsibility On Financial Performance: The Case Of Selected Commercial Banks In Ethiopia

Abstract

The main purpose of this study was to examine the effect of corporate social responsibility on financial performance of selected commercial banks in Ethiopia. To achieve the research objectives, the researcher employed both descriptive and explanatory research designs. The study used secondary data sources and as well a quantitative research approach. The data was collected from annual reports of the banks and non-probability sampling technique was employed to select these banks for data collection. Validity was checked by using pilot test and reliability were checked by Cronbach alpha test. The collected data were presented and analyzed using the SPSS statistical software package. Data collected were coded and analyzed using both descriptive statistics (percentage, mean and standard deviation) and inferential statistics (Multiple regression and Pearson correlation) with the help of the Statistical Package for Social Science (SPSS). The findings of the study suggests that, philanthropic donations and income diversification have a positive and statistically significant relationship with financial performance measured by return on asset and capital intensity and credit risk have a negative and statistically significant relationship with financial performance measured by return on asset. Commercial banks in Ethiopia should disclose and publish their CSR achievements every quarter/month to the public since the media coverage can influence the public awareness and change the customer’s perspective about the company and can affect the customer base expansion of the banks. This increase in the image of the company in the public can directly or indirectly affect financial performance of the banks. These increasing of banks deposit, customer base expanded by bulky recruitment and loan provided to different clients were directly affected the financial performance of banks. Generally, these increase of clients and loan provided could positively affect financial performance of to selected commercial banks in Ethiopia