Effect Of Corporate Social Responsibility On Profitability Of Listed Deposit Money Banks In Nigeria

2.3.10    Political Economy Theories
Broadly speaking, political economy theories of accounting, within which stakeholder and legitimacy theories also lie, consist of theories which derive from the social, political and organizational context within which accounting operates. However, political economy theories have two strands. Firstly, those that are constructed through the utilitarian lens of J. S Mill and which tend to focus on the interaction of competing groups within society, which itself is viewed as pluralistic. This is regarded as the bourgeois viewpoint, where the issues under examination are not regarded by Marxists as of significant importance where the important issues (for them) are largely ignored.
Fundamentally, this view ignores the very focus of the classical Marxian analysis, which sees inherent conflict within society and which challenges the inbuilt structural inequalities of power and influence (Cooper & Sherer, 1984, Gray, Owen & Maunders, 1987). These issues of structural inequality are also the focus of critical accounting researchers who see accounting as an essential part of the structure of capitalism which serves to maintain the unjust and structurally divisive status quo (Tinker, 1984, 1985, Hines, 1991, Hines, 1992, Tinker, 1991).
Critical accounting researchers are interested in a different ideology surrounding the possibilities and responsibilities accounting has in a societal context, which Marxian and critical theorists believe go far beyond those which inhabit the domain of the mainstream researcher. Indeed, insofar as the rudiments of ideology for Marx were founded firstly, on idealism (where it is contrasted with materialism), and secondly on the structural inequality of power and resources within society, so common ground is explored by critical researchers in accounting. It should also be acknowledged that social and environmental accounting researchers stand accused by those on the critical left of being part of a project which is, itself, bourgeois (Puxty, 1986, Tinker et al., 1991), despite their own criticisms of mainstream accounting research.
2.3.11    Rationality Theory of Corporate Social Responsibility
CSR is an important business strategy because, wherever possible, consumers want to buy products from companies they trust; suppliers want to form business partnerships with companies they can rely on; employees want to work for companies they respect; and NGOs, increasingly, want to work together with companies seeking feasible solutions and innovations in areas of common concern. Satisfying each of these stakeholder groups allows companies to maximize their commitment to another important stakeholder group—their investors, who benefit most when the needs of these other stakeholder groups are being met.
The businesses most likely to succeed in the globalized world will be those best able to combine the often conflicting interests of its multiple stakeholders, and incorporate a wider spectrum of opinions and values within the decision-making process and objectives of the organization. Lifestyle brand firms, in particular, need to live the ideals they convey to their consumers: The 21st century will be the century of the social sector organization. The more economy, money, and information become global, the more community will matter, Drucker (1999)
Given the aforementioned theories, this study will be guided by the good corporate citizen theory which maintains that companies, as business organizations, should take profit making as the corporate objectives. However, companies are also liable to offering help, i.e. companies shall have the obligation to help solve certain social problems. For instance, companies shall have the obligation of making donations to education or charity organizations.
2.4    Empirical Literature Review
A large volume of empirical studies have been conducted to establish the existence or otherwise of correlation between and or effect of CSR on profitability. For instance, Margolis and Walsh (2007) in a survey of 95 empirical studies conducted between 1972-2001 report that when treated as an independent variable, corporate social responsibility has a positive relationship with profitability in 57 studies, no relationship in 19 studies, a negative relationship in 4 studies and a mixed relationship in 15 studies.
2.4.1    Corporate Social Responsibility and Net Profit Margin
Carlsson and Akerstom (2008) use the sample of Ohrlings Pricewaterhouse Cooper for the period (2000-2007). The study uses cross-case analysis and uses net profit margin to proxy for profitability. The study finds a positive link between corporate social responsibility and profitability. Ojo (2010) uses data of 40 limited liabilities companies quoted on the Nigerian Stock Exchange. Data collected were analyzed using correlation analysis, regression analysis and Analysis of Variance (ANOVA). The results of the study reveal that there is a positive link between corporate social responsibility and profitability, which was measured by net profit margin and return on assets.
Also, Soana (2011) examines a correlation between social and profitability of banks. This study uses net profit margin to proxy for firm profitability. The analysis shows that Italian banks do not show any significant correlation between corporate social responsibility and profitability. Akindele (2011) uses a survey design to collect data from four banks in Nigeria and examines the extent of relationship between corporate social responsibility and profitability. In this study, profitability was measured by both net profit margin and return on assets. The study finds that there is a significant relationship between bank profitability and CSR.