Corporate social resposibility and profitability of Listed companies in Ghana

Abstract

With the increased concentration on the corporate social responsibility (CSR), companies are not only required to focus narrowly on generating profit for shareholders, but also asked to take responsibilities for firms’ other stakeholders, e.g. customers, employees, society etc., from social, environment and economic perspectives. Hence, nowadays, having both a decent CSR performance and adding profitability are the significant aspects for the company to achieve the sustainable success in the long term. In terms of that, this dissertation aims to explore the CSR-profitability relationship, namely to explore, how CSR influences the firm’s profitability. For this purpose, this study measured corporate social responsibility disclosure in terms of published CSR keywords on the annual reports of the 10 firms listed on the Ghana stock exchange over five years ranging from 2011 until 2015. The variables under consideration in the study include: return on assets, return on equity, corporate social responsibility, company size, leverage, inflation, and exchange rate. The study reveals that corporate social responsibility (CSR), company size (CS) had positive and statistically significant effect on return assets and return on equity in the domestic industrial sector of Ghana after controlling for leverage, inflation, and exchange rate. The result also concludes that there is positive relationship between Profitability and CSR practices together with Firm Size and Firm Revenue as control variable. As well as, this research will contribute to finance and accounting literature in identified investment in CSR will lead to firm financial performance or otherwise.