Deposit money banks in Nigeria have evolved over the years. Commencing in 1892, the pioneer banking company in Nigeria namely the Africa Banking Corporation was absorbed by the British Bank of West Africa (BBWA) in 1894 enjoyed virtual monopoly of banking business. This period up to 1952 was characterized by the absence of banking legislation in Nigeria and also said that anybody could set up a banking company provided he/she is registered under the companies‘ ordinance. The dominant banking institutions were foreign commercial banks operating mainly to serve the trade financing requirement of their country‘s industrial sector. Being foreign based, it was believed that indigenes were discriminated against in respect of banking credit facilities. The belief, coupled with ―free-for-all‖ operation environment and ease with which bank were incorporated-―cases of easy come– easy go‖ was experienced in Nigerian Banking Sector. In this era banks failed in social responsibility. This problem faced led to the agreement between government officials and representative of banks that there was need for legislations and establishment of control measures for banking operation. The period 1958-1969 witness an era of banking regulations consolidation. It gave birth to the establishment of and commencement of the Central Bank of Nigeria. Today the Nigerian Banking Industry is made up of twenty four commercial banks with First Bank of Nigeria Plc recognized by the CBN as one of the leading banks in the country.
DMBs ensure that there is adequate flow of money in circulation to service the needs of the economy and facilitate the transfer of money between economic units (Ogege & Shiro, 2013). The system also helps to mobilize the collection and storage of savings (Nzotta, 2014). The non-provision of finance can retard economic growth and development. Thus, DMBs play a very significant role in economic growth, development and social mobilization. In Nigeria, the bank failures of the 1990s and their resultant consequences on other sectors of the economy brought hardship and business failures which in turn brought to the fore the strategic relevance of DMBs. It should be noted also that DMBs play very important roles in the transmission of monetary policies. This is made possible by the fact that the assets and liabilities of DMBs form a good part of the money supply though the money multiplier process. Nigeria has 21 DMBs of which 15 are listed on the floor of the Nigerian Stock Exchange. They are Access Bank, Diamond Bank, Ecobank, First City Monument Bank, Fidelity Bank, First Bank of Nigeria, Guaranty Trust Bank, Skye Bank, Stanbic IBTC Bank, Sterling Bank, Union Bank of Nigeria, United Bank for Africa, Unity bank, Wema Bank and Zenith Bank.
1.2 Statement of the Research Problem
In Nigeria, deposit money banks are at the heart of several socially responsible activities, such as donations to tertiary institutions, health institutions, promoting friendly and clean environment and developing human capital. Whether these activities contribute to bank profitability, there are limited interests by scholars and policy makers to examine this question. There is also additional demand on the part of society for deposit money banks to continue to do more in the areas of social causes.
It is desirable to state that the nexus between corporate social responsibility (CSR) and profitability has come a long way (Dodd, 1932; Jarrell & Peltzman, 1985; Hoffer et al., 1988; Preston & O‘Bannon, 1997; Waddock & Graves, 1997; Griffin & Mahon, 1997; McWilliams & Siegel, 2000 and Simpson & Kohers, 2002). The empirical studies on CSR and profitability link have never been in agreement, as some studies find negative correlation, some find positive correlation, while others find no correlation at all.
The viewpoint for positive correlation between CSP and CP suggests that as a bank‘s explicit costs are opposite of the hidden costs of stakeholders, therefore, this viewpoint is proposed from the perspectives of avoiding cost to major stakeholders and considering their satisfaction (Cornell & Shapiro, 1987). In addition, this theory further infers that commitment to CSR would result in increased costs to competitiveness and decrease the hidden costs of stakeholders. This argument is meaningful and reasonable, as good relationships with employees, suppliers, and customers are necessary for the survival of a bank. Bowman and Haire (2005) point out that some shareholders regard CSR as a symbolic management skill, namely, CSR is a symbol of reputation, and the bank reputation will be improved by actions to support the community, resulting in positive influence on sales. Therefore, when a bank increases its costs by improving CSR in order to increase competitive advantages, such CSR expenditure can enhance bank reputation, thus, in the long run, profitability can be improved, though short run profits are sacrificed.
The viewpoint for negative correlation between CSR and profitability suggests that the fulfillment of CSR will bring competitive disadvantages to the bank (Aupperle et al., 2005) methods or need to bear other costs. When carrying out CSR activities, increased costs will result in little gain if measured in economic interests. When neglecting some stakeholders, such as employees or the environment, result in a lower CSR for the enterprise, the profitability may be improved in the short run. Hence, Waddock and Graves (2007) indicate that this theory was based on the assumption of negative correlation between CSR and profitability. Some other studies suggest that CSR is not related to profitability at all. Ullmann (2015) points out that there is no reason to anticipate the existence of any relationship between CSR and profitability, as there are many variables in between the two. On the other hand, the issue of CSR measurement may also cover the link between CSR and profitability (Waddock & Graves, 2007). McWilliams and Siegel (2000) also suggest that the relationship between CSR and profitability would disappear with introduction of more accurate variables, such as the research and development strength, into the economic models.
