Implications of Corporate Social Responsibility for the Performance of Nigerian Firms

Although a fairly large body of literature generally exists on the subject of Corporate Social Responsibility (CSR), there is observably scant empirical evidence emanating from countries in sub-Saharan Africa, like Nigeria, that have become most vulnerable to ecological degradation problems as a result of increased environment-related business activities. This study seeks to contribute to closure of this gap with its examination of the effect of corporate social responsibility activities on the financial performance of firms operating in some of the industries that have the greatest impact on the environment in Nigeria. Using an inferential research design, a cross-sectional study was carried out to test the effect of CSR, represented by the cost of Corporate Social Performance variables of waste management, pollution abatement, social action and fines and penalties on the financial performance of firms, measured by Return on Capital Employed. It was found that waste management and pollution abatement are both significantly and positively associated with firm performance, while social action and fines and penalties are strongly, but negatively related. Based on these mixed results, we recommend that firms should actively invest in proper waste management and pollution abatement, while social action should be approached with caution, and effective disclosure policies and practices put in place in order to avoid or eliminate liabilities of fines and penalties for environmental infractions. The study indicates scope for a wider coverage of firms and use of longitudinal data for measuring the CSR effects over an extended period of time.