Corporate Social Responsibility and Profitability of Nigerian Listed Deposit Money Banks: A Panel Data Analysis (2005-2020)

Abstract

Nowadays, a lot of banks publish statistics on their CSR expenditures, indicating that they have included the discretionary type of CSR into their business operations. Still, a lot of them haven't figured out how this will affect their revenues. The purpose of this study is to ascertain whether or not CSR spending affects banks' profitability by examining the link between CSR expenditure and the profitability level of Nigerian listed banks. Based on secondary data analysis from fifteen listed banks' annual reports for the years 2005 through 2020, the study was conducted. Out of the thirty-three licensed deposit money banks (DMBs) in Nigeria as at 2020, all fifteen listed on the Nigerian Stock Exchange (NSE) were chosen using a purposive sampling technique. This study used panel data regression analysis to investigate the impact of CSR spending on the profitability of deposit money banks listed on the Nigerian Stock Exchange. The period of study covered 2005 to 2020, providing insights into the effectiveness of CSR initiatives on financial outcomes. The results show a significant correlation between the tested banks' profitability and their spending on corporate social responsibility (CSR). Specifically, each unit increase in CSR spending was accompanied by slightly above a percent rise in the banks' profit after taxes. The study comes to the conclusion that CSR spending has a major role in understanding why banks' profitability levels vary. Therefore, it is advised that banks strategically allocate the CSR funds they spend in order to boost their long-term profitability for survival and, as a result, optimize the advantages for sustainable development in society.