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ISSN: 2811-1737(Paper) ISSN: 2811-1745(Online)
Global Research Journal of Business Management Vol. 1, No. 1: 1-8, 2021
CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE OF
MANUFACTURING FIRM IN NIGERIA: A CASE OF LAFARGE AFRICA (WAPCO) PLC
Onifade, Temitayo Alice1 ; Adekunle, Adekola Rasheed2
Department of Business Administration, Bells University of Technology, Ogun State
Corresponding author email: onifadeng2@yahoo.com , +2348024416158
Abstract
Research Purpose: The study examined the impact of Corporate Social Responsibility (CSR) on financial performance of Sub-
Saharan Africa (WAPCO) Plc from 2010 to 2019.
Design/Methodology/Approach: While ex post facto research was adopted as the research design, secondary data from annual
reports and accounts of Sub-Saharan Africa (WAPCO) Plc was used in the analysis. Financial performance, which is the
dependent variable was measured using Return on Assets (ROA) and Returns on Equity (ROE). However, corporate social
responsibility, which is the independent variable was measured with the expenditure of the company on corporate social
responsibility. The study employed simple linear regression as data analytical technique to evaluate the magnitude of association
of the variables.
Findings: The findings indicated that CSR expenditure has a positive and significant relationship with return on assets of Sub-
Saharan Africa (WAPCO) Plc. Also, the study revealed a positive and significant relationship between CSR expenditure and
return on equity of Sub-Saharan Africa (WAPCO) Plc.
Implication: The study concluded that corporate social responsibility has a positive and significant impact on financial
performance.
Originality/Value Added: Thereby, it is recommended that Lafarge Africa (WAPCO) Plc and other companies operating in
Nigeria environment should give greater priority to CSR to further improve their financial performance
Key words: Corporate, Financial, Firm, Manufacturing, Performance, Responsibility, Social
Introduction
Globally, it is highly recognised that sustainable development and reduction of poverty are the key issues
that need to be addressed by the governments, in the developing world, Nigeria inclusive. However, the
government cannot meet this alone without the help of the private sector. Thereby, organisations are being
called upon to take responsibility for the ways their operations impact societies and the natural environment.
They are also being asked to demonstrate the inclusion of social and environmental concerns in business
operations and in interactions with stakeholders (Akinleye & Adedayo, 2017).
Corporate social responsibilty refers to the strategic decision that helps the firm to enhance its values and
gives back to the community (Soomro &Irfan, 2021). It incorporates various issues spinning around the
interaction of companies with the society in which the operates. The importance of the company’s social
responsibility is that it helps organisationsattract and retain not only customers but also motivated
employees, which in turn ensure long – term survival of the organization. According to Adekoya, Enyi,
Akintoye and Adegbie (2020), corporate social responsibility enables companies who practise it to gain
competitive advantage over peer organisations. Similarly, consumer, worker, and government attention to
the concept of CSR is predicated on the assumption that firms exist for more than just profitmaximisation. It
is also recognised as a fundamental part of corporate marketing strategies.
Financial Performance refers to the act of performing financial activity. That is, the extent to which financial
goals are being met or has been met in a larger sense. It is also the process of measuring the results of a
firm's policies and operations in monetary terms. Various measures of financial performance exitin the
literature, among which are Return on Assets (ROA), Return on Equity (ROE), Profit after Tax (PTA),
Earnings per Share (EPS).
Realising the benefits accrued to CSR practices, some companies in Nigeria had embarked on various
activities to give back to the host community. For instance, Sub-SaharanAfrica (WAPCO) Cement is one on
the companies that embrace social responsibility. However, the pertinent question to ask is that; “To what
Corporate Social Responsibility and Financial Performance.. … Onifade et al
extent the corporate social responsibility expenditure impact on their financial performance?” To answer the
question, the paper sought to examine the impact of corporate social responsibility on financial performance
of Sub-SaharanAfrica (WAPCO) cement Plc.
Statement of the Research Problem
Despite the various scholars attempts to establish the relationship between corporate social responsibility
and financial performance, there is no consensus among their results. For instance, one group claims that
CSR has a positive impact on financial performance (Fasanya & Onakoya, 2013; Mubeen & Arooj, 2014;
Maqbool & Zameer, 2018; Awaysheh, Heron & Perry, 2020; Muralceetran, et.al, 2020; Shao, Yang, Ding
and Zhang, 2020; Adekoya, et.al., 2020). The second group opposes CSR and shows that CSR has a
negative impact on financial performance and only adds to expenses (Akinleye & Adedayo, 2017; Elif,
2019). Besides the vagueness on the empirical findings, literature review also indicated a lack of consensus
theoretically. Neoclassical theory suggests that the relationship between social corporate responsibility and
financial performance is negative because the expenditure on corporate social responsibility activities
increases the costs for firms (Bird, Hall, Momente & Reggiani, 2007). Contrarily, stakeholder theory
suggests a positive relationship between CSR and financial performance because increasing CSR activities
help firms develop new internal resources and generating benefits through corporate reputation (Branco,
Rodrigues, 2006).
Thereby, the inconclusiveness of theoretical findings and the diverse opinion ofprevious scholars necessitate
a call to re-examine the relationship between corporate social responsibility and financial performance in
this globalisation era and highly competitive business environment.
Objectives of the Study
The main objectives of the study are to examine the impact of corporate social responsibility and financial
performance of Sub-Saharan Africa (WAPCO) Plc. The specific objectives are;
i. To determine the impact of Lafarge Africa (WAPCO) Plc expenditure on social responsibility on its
annual return on assets.
ii. To examine the impact of Sub-Saharan Africa (WAPCO) Plc expenditure on social responsibility on
its returns on equity.
Literature Review
Conceptual Review
Corporate social responsibility involves a business identifying its stakeholder groups and incorporating their
needs and values within the strategic and day-to-day decision-making process, thus a means of analysing the
inter-dependent relationships that exist between businesses, the economic systems and the communities
within which they are operating. CSR is a manner of debating the scope of a company's responsibilities to its
immediate society, as well as presenting policy proposals for fulfilling those responsibilities. It is also a
technique for identifying the benefits to a company from meeting such responsibilities.
Types of Corporate Social Responsibility
Corporate Social Responsibility is traditionally broken into four categories: environmental, philanthropic,
ethical, and economic responsibility.
1. Environmental Responsibility
Environmental responsibility refers to the belief that organizations should behave in as environmentally
friendly a way as possible. It’s one of the most common forms of corporate social responsibility. Some
companies use the term “environmental stewardship” to refer to such initiatives. Companies that seek to
embrace environmental responsibility can do so in several ways like offsetting negative environmental
impact; Planting trees, financing research, and donating to connected charities are just a few examples.
2. Ethical Responsibility
ISSN: 2811-1737(Paper) ISSN: 2811-1745(Online)
Global Research Journal of Business Management Vol. 1, No. 1: 1-8, 2021
Ethical responsibility is concerned with ensuring an organisation is operating in a fair and ethical manner.
Organisations that embrace ethical responsibility aim to achieve fair treatment of all stakeholders, including
leadership, investors, employees, suppliers, and customers. Firms can embrace ethical responsibility in
different ways. For example, a business sets its own higher minimum wage if the one mandated by the state
or federal government doesn’t constitute a “live able wage”.
3. Philanthropic Responsibility: The goal of philanthropic responsibility is for a company to actively
improve the world and society. Charitable organizations frequently donate a percentage of their profits in
addition to operating as morally and environmentally friendly as feasible. While many corporations donate
to charities and organisations that align with their basic principles, others donate to excellent causes
unrelated to their industry. Others go so far as to create their own charitable trust or organisation to give
back.
4. Economic Responsibility: Economic responsibility is the practice of a firm backing all of its financial
decisions in its commitment to do good in the areas listed above. The goal is to have a beneficial impact on
the environment, people, and society, rather than only maximise profits.
Benefits of Corporate Social Responsibility
Most businesses are compelled to engage in corporate social responsibility because of moral convictions,
and doing so can result in many advantages.
1. Corporate Social Responsibility initiatives can, for example, be a powerful marketing tool, helping a
company position itself favourably in the eyes of consumers, investors, and regulators.
2. Corporate Social Responsibility initiatives can also improve employee engagement and satisfaction—key
measures that drive retention. Such initiatives can even attract potential employees who carry strong
personal convictions that match those of the organisation.
3. Finally, by their very nature, CSR activities compel corporate executives to assess procedures such as
hiring and managing workers, sourcing products or components and providing value to consumers.
Financial Performance
Financial performance is a subjective indicator of a company's ability to create revenue by utilising assets
from its primary business. The term is also used as a general measure of a firm's overall financial health over
a given period.
Financial performance tells investors about the general well-being of a firm. It's a snapshot of its
economic health and the job its management is doing.
Financial statements used in evaluating overall financial performance include the balance sheet,
income statement, and the statement of cash flows.
Financial performance indicators are quantifiable metrics used to measure how well a company is
doing.
Financial Statements
No single measure should be used to define the financial performance of a firm. Its purpose is to provide
stakeholders with accurate and reliable data and information that provide an overview of the company's
financial health.
1. Balance Sheet
The balance sheet is a snapshot of the finances of an organisation as of a particular date. It provides an
overview of how well the company manages its assets and liabilities. Analysts can find information about
long-term vs. short-term debt on the balance sheet. They can also find information about what assets the
company owns and what percentage of assets are financed with liabilities vs. stockholders' equity.
Corporate Social Responsibility and Financial Performance.. … Onifade et al
2. Income Statement
The income statement provides a summary of operations for the entire year. The income statement starts
with sales or revenues and ends with net income. The income statement, known as the profit and loss
statement, displays the gross profit margin, cost of goods sold, operational profit margin, and net profit
margin. It also provides an overview of the number of shares outstanding, as well as a comparison against
the performance of the prior year.
3. Cash Flow Statement
The cash flow statement is a combination of both the income statement and the balance sheet. For some
analysts, the cash flow statement is the most important financial statement because it provides a
reconciliation between net income and cash flow. The cash flow statement is where analysts see how much
the company spent on stock repurchases, dividends, and capital expenditures. It also provides the source and
uses of cash flow from operations, investing, and financing.
Theoretical Framework
The theory underpinning the study are Neoclassical theory and Stakeholder theory. Both theories viewed
firms and corporate social responsibility from different perspectives.
Neoclassical Theory
Alfred Marshall (1842–1924) was referred to as the father of neoclassicism and Milton Friedman is a
follower who contributed to the theory. Neoclassical theory explained that the concern of business
organization is to achieve profits and nothing more. Most neoclassic theorists have traditionally supported
that corporate social responsibility (CSR) is discordant with the classic principle of profit maximisation as
the main objective for firms (Hinson & Ndholvu, 2011). This view of neoclassic theorists discourages
corporate social responsibility and this implies that organisation should engage in the activities that will only
minimize cost and maximize the organization profit because CSR is a cost to the organisation and should not
be seen as constraints. As Friedman said (1970), there were only two restrictions to achieve that objective:
law and ethics.
Stakeholder Theory
Another theory underpinning the study is Stakeholder theory, described by and the theory Dr. F. Edward
Freeman in the early 20th century. The theory argued that the firm will perform better by being concerned
with the interests of the stakeholders. Stakeholders are anybody interested in operations of a firm or affected
by the operations of such firm. The stakeholders include; creditors, government, customers, suppliers,
communities and employees (Donaldson and Preston, 1995). The view of the stakeholder theorist is contrary
to the stand of Neoclassical theorists on corporate social responsibility. Stakeholder theory recognised
external stakeholder, which is the host community and emphasised that firm should give back to them.
Empirical Review
A study by Maqbool and Zameer (2018) examined the impact of corporate social responsibility on financial
performance in Indian Commercial Banks. With secondary data and pane regression analysis, the findings
indicated that CSR has a positive impact on financial performance in the area.
Similarly, Elif (2019) employed the instrumental variable technique to examine the link between corporate
social responsibility and financial performance in Turkey. The outcome of the study revealed that a negative
relationship exists between CSR and financial performance.
Anwaysheh, Heron and Perry(2018) in their study focused on the relationship between corporate social
responsibility and financial performance. Adopting the market valuation (Tobin’s Q), the study established
that significant relationship exists between performance and CSR.
ISSN: 2811-1737(Paper) ISSN: 2811-1745(Online)
Global Research Journal of Business Management Vol. 1, No. 1: 1-8, 2021
Also, Muralceetharam (2020) used correlation and regression analysis to examine the effect of corporate
social responsibility on profitability with focus on Bank, Finance and Insurance corporate organisation in Sri
Lanka. The findings revealed that CSR has a significant effect on the profitability of the companies.
Shau, Yang, Ding and Zhang (2020) used regression model to examine the impact of CSR and financial
distress on financial performance. Their findings indicated that CSR has a positive and significant impact on
financial performance.
Adekoya, Enyi, Akinoye and Adegbie (2020) examined corporate social responsibility practices and
reputation of listed firms in Nigeria. Using a structural equation modelling approach, the study revealed that
CSR had a positive and significant effect on business reputation.
Soomro and Irfan (2021) focused on corporate social responsibility and financial performance linkage with
evidence from commercial banks of Pakistan. Adopting both the fixed effect and random effect, the study
did not find a significant impact of CSR on the financial performance of the selected commercial banks.
Methodology
Expo-facto research design was adopted and secondary data were used in the study. The information on the
study variables was collected from the annual reports and financial statement of Lafarge Africa (WAPCO)
Plc for a period of ten (10) years from 2010 to 2019. While Return on Assets (ROA) and Return on Equity
(ROE) measured financial performance (dependent variable), corporate social responsibility (independent
variable) was measured by the expenditure on CSR by the firm in focus.
Model Specification
The model for the study was adapted from the work of Soomro and Irfan (2021) and modified to suit the
objectives of the current study. The model from Soomro and Irfan (2021) is given as;
= (i)
Where;
FP = Financial Performance (ROA and ROE)
CRS = Corporate Social Responsibility
(ii)
(iii)
Where;
ROA = Return on Assets (Dependent variable)
ROE = Return on Equity (Dependent variable)
CSREXP = Corporate Social Responsibility Expenditure (Independent variable)
βo = Intercept (Autonomous variable)
β1 = Slope (Induced variable)
βo, β1 = Parameter of Estimate (> 0)
μ = Error term
Data Analysis Techniques
Simple linear regression was used to determine the magnitude of the relationship and the casual effect from
which conclusions were drawn. Simple linear regression is consistent with the past studies on the link
between CSR and financial performance.
Corporate Social Responsibility and Financial Performance.. … Onifade et al
Findings and Discussion
The results of the regression analysis are shown in Table 1 and Table 2, respectively.
Table 1: ROA and CSR
Coefficients
Std. Error
t – stat
Prob
C
4.031
1.197
3.359
0.0000
CSREXP
0.654
0.240
2.720
0.0001
R-Square
.734
Source: Researcher’s Computation (2021)
From Table 1, shows the result of the simple linear regression for the impact of corporate social
responsibility on financial performance of Lafarge Africa (WAPCO) Plc. The results indicatethat corporate
social responsibility has a positive and significant impact on the financial performance (measured by return
on asset) of the firm. This implies that an increase in the CSR expenditure leads to increase in financial
performance (ROA) by 0.654.
The R-squared, which measures the proportion of the change in financial performance because ofchanges in
corporate social responsibility explains about 73 percent changes in the financial performance of the firm
and the remaining 27 percent were factors explaining financial performance of the firm but not captured in
the model.
Table 2: ROE and CSR
Coefficients
Std. Error
t – stat
Prob
C
2.396
0.833
2.876
0.0000
CSREXP
3.964
1.201
3.278
0.0001
R-Square
.867
Source: Researcher’s Computation (2021)
Similarly, Table 2 shows the result of the simple linear regression for the impact of corporate social
responsibility on financial performance of Sub-Saharan Africa (WAPCO) Plc. The results indicate that
corporate social responsibility has a positive and significant impact on the financial performance (measured
by return on equity) of the firm. This implies that an increase in the CSR expenditure leads to increase in
financial performance (ROE) by 3.964.
The R-squared, which measures the proportion of the change in financial performance because of changes in
corporate social responsibility explains about 87 percent changes in the financial performance of the firm
and the remaining 13 percent were factors explaining financial performance of the firm but not considered in
the model.
Conclusion and Discussion
The study examined the impact of corporate social responsibility and financial performance of Lafarge
Africa (WAPCO) Plc. The findings revealed that corporate social responsibility has a positive and
significant impact on the financial performance (ROA) of the firm. With the increase in the expenditure of
the firm on CSR, the financial performance of the firm increased during the study period.
The study also revealed that corporate social responsibility has a positive and significant impact on the
financial performance (measured by ROE) of the firm. Thereby, increasing the expenditure on CSR leads to
ISSN: 2811-1737(Paper) ISSN: 2811-1745(Online)
Global Research Journal of Business Management Vol. 1, No. 1: 1-8, 2021
increase in the earning performance of the firm. Arising from the results, the study concluded that corporate
social responsibility has a positive and significant impact on the financial performance.
The conclusion supports the previous findings by Shao, Yang, Ding and Zhang (2020), Maqbool and
Zameer (2018) and Elif (2019). The study also upholds the postulation of stakeholder theory that corporate
social responsibility will enable firms to perform better.
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