Effects of Corporate Social Responsibility (CSR) on the Financial Performance of Telecommunication Companies in Nigeria
Chapter One
Objectives of the Study
The main objective of this study is to assess the effect of CSR on the financial productivity of Telecommunication Companies in Nigeria. The specific objectives of the study are:
To examine the effect of Environmental management on the financial productivity of Telecommunication Companies in Nigeria.
To examine the effect of Community development on the financial productivity of Telecommunication Companies in Nigeria.
To determine the effect of Employee relation on the financial productivity of Telecommunication Companies in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
Conceptual Framework
In order to give a guide for proper understanding of the various concepts of the study,different perceptions, opinions and views of authors and scholars regarding the concepts used in this study are discussed.
Financial productivity
Corporate financial productivity is a vital concept that relates to the way and manner with which the financial resources at the disposal of the organization are judiciously put into usage to achieve the corporate objectives of such organization (Kajola, 2008). According to Sakunasingha (2006), performance measures are the life blood of economic units, since without them no decisions can be made. Investors are interested in the returns for their investment. Well performing businesses can bring higher returns to their investors.
Mirza and Javed (2013) opine that financial productivity of a company will increase the income of its employees, bring quality products to its customers and become friendlier to its operating environment. A company that has good performance can generate more profits which can lead to future investment that can provide employment opportunities and increase the income of people. Barbosa and Louri (2005) view firm‟s performance as the outcome of a firm‟s strategy or an assessment of how well a firm accomplished its business goals. In the words of Mirza and Javed (2013), firms‟ performance is the ability of a firm to achieve its objectives using its available resources. Company‟s financial productivity refers to the measurement of the results of a firm‟s strategies, policies and operations in monetary terms.
financial productivity provides a deductive measure of how well a company can use assets from business operations to generate revenue. financial productivity measurements are used as the indicators to evaluate the success of economic units in achieving stated strategies, objectives and critical success factors Lahtinen (2009). The main objective of financial productivity measuring is to determine the operating and financial characteristics and the efficiency and performance of economic unity in terms of resource management, as reflected in the financial records and reports (Amalendu, 2010).
The financial productivity of an organization would disclose to the various stakeholders of the organization the continuous ability for such organization to remain in business. The performance indicators to corporate financial productivity are seen from corporation‟s earnings per share, which has a strong significant relationship with a corporations share price and patronage of such shares at the stock market (Hartone, 2004).
Measurement of financial productivity
Measuring of firms‟ financial productivity is one of the management strategic functions aimed at satisfying the interest of shareholders and other stakeholders in a company. Firm‟s performance appraisal is an evaluation which is done periodically and systematically in determining the achievements of the company‟s objectives (Amelia, 2002). Although measuring financial productivity is considered a simple task, it also has its specific complications and there is little consensus about which measurement instrument to apply (Tsoutsoura, 2004). Some are of the view of using backward-looking firm profitability, that is, accounting based returns rather than forward-looking market value or stock returns..A performance measure need to be value relevant in order to be useful ( Aliabadi , Dorestani & Balsara, 2013).
The most popularly used performance measurement is the accounting based measurement. Returns On Assets (ROA), was widely used as was found in the following studies: Bello (2012),DiGiuli& Kostovetsky (2013), El Mosaid and Boutti (2012), Olayinka & Fagbemi (2012), Uadiale&Fagbemi (2011), Usman &Amran(2015). Returns on assets represent the profitability of the firm with respect to the total assets under the firms control (Hull & Rothenberg, 2008). Return on Equity (ROE) is another accounting measure used in measuring firms „financial productivity in previous studies such as the work of El Mosaid & Boutti (2012),Meijer &Schuyt (2005), Tsoutsoura (2004), and Uadiale & Fagbemi (2011),. Tobin‟s Q is another accounting measure of firms‟ financial productivity. It has ability to measure long-term investment and it is calculated by the sum of a firm‟s equity values and its total debt divided by the firm‟s total assets.
CHAPTER THREE
RESEARCH METHODOLOGY
Research Design
This study employed correlation research design to examine the effect of CSR activities on the financial productivity of Globacom.. Correlational research design is chosen in this study because of its consistency with the research objectives, as the aim of the design is to investigate the relationships between variables and to estimate the impact of the independent variable on the dependent variable, so as to establish a causal relationship or otherwise among the variables.
Population of the study
The population of this study is the management and employees of Globacom, Oyo state.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
Descriptive Statistics
The descriptive statistics of the data for the study are presented and analyzed in this section, as presented in Table 4.1;
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
Summary
In this study, the emphasis was given to the assessment of the “impact of corporate social responsibility practices on the financial productivity of Telecommunication Companies in Nigeria”, using environmental management, community development, and return on asset as proxies for CSR practices and financial productivity respectively. Globacom was used as a case study. The data was analysed using descriptive statistics and inferential statistics, that is, panel regression technique. The test of the formulated hypotheses of this study and the analysis of the data, led to the following major findings:
There is a strong negative and significant relationship between environmental managementand financial productivity (return on asset) of Telecommunication Companies in Nigeria. The relationship between community development and financial productivity (return on asset) of Telecommunication Companies in Nigeria is also positive and significant.
The results also show that there is a negative and significant relationship between employee relations and the financial productivity (return on asset) of Telecommunication Companies in Nigeria. The product quality and customer service a strong positive and significant relationship with the financial productivity (return on asset) of Telecommunication Companies in Nigeria.
Conclusions
The following conclusions are drawn from the findings of the study:
The environmental management negatively and significantly influences the financial productivity (return on asset) of Telecommunication Companies in Nigeria, the Telcos that engage in high environmental management are likely to have low financial productivity while those that engage in low environmental management are likely to have higher financial productivity.
Community development has positive relationship with return on asset but insignificantly affects the financial productivity of Telecommunication Companies in Nigeria. Signifying that the return on assets of Globacom is insignificantly affected by CSR practices directed at community development. CSR practices directed at communities in form of developmental projects have no ripple effect on the triple bottom line.
The financial productivity of the Telecommunication Companies in Nigeria is negatively and significantly influenced by CSR activities to employee, implying that not all investment on employees yields better financial productivity.
Recommendations
In line with the conclusions of the study and for a continuous attainment of high financial productivity through CSR practices of Telecommunication Companies in Nigeria, the following recommendations are proffered:
- The management of the companies should prudently explore the use of debt financing to be invested in viable projects that would boost the share value of the companies in the stock
- The result which indicates that the financial productivity of the Telecommunication Companies is insignificantly affected by community development could be attributed to the inability of some of Globacom to disclose more of its engagement to community regularly during the period under consideration. Therefore, management of the Telecommunication Companies in Nigeria should ensure a regular disclosure of their activities directed at community
- The study reveals that employee relation does not have any effect on the financial productivity of the company. We therefore, recommend that management of Globacom should be concerned with the expectations of their employees, be socially responsible as well as engaging in more proactive employee relations through more training, better working conditions, motivational packages, better health and safety policies and compliance to ISO26000, which will bring about efficiency and effectiveness in achieving both their personal and corporate
- The Telecommunication Companies in Nigeria should improve on their product quality and customers service through providing qualitative and environmental friendly products, ensuring improve and organized customers‟ service which will build better and bigger brand names and improving their brand equity. Since product and customer CSR have a positive and significant effect on their financial productivity.
REFERENCES
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