Firm Attributes, Board Characteristics And Corporate Social Responsibility Of Listed Deposit Money Banks In Nigeria

 1.1 Background of Study

Corporate Social Responsibility (CSR) has been one of the contemporary issues that are gathering momentum in both developed and emerging countries around the world. Empirical works revealed that CSR has received considerable attention and undergone a remarkable growth particularly in developed nations. In recent time the global competitive business environment has created additional challenges for businesses due to growing global public awareness concerning the role of corporations in society. As the global economy becomes more integrated, firms are increasingly facing more and more public pressure, and demanding increased participation in CSR activities. CSR has therefore become recognized by business organizations globally as a key to business success and a weapon to survive in the global competitive business environment.

Empirical evidence shows that, over the years, firms have identified the economic relevance of CSR practice and made it part of their corporate agenda due to the enormous and sustainable benefits it entailed and advantages it accrued to them. Their experience was in line with global empirical evidence; that CSR has significant positive impact on a firm?s performance. CSR has suggested the social, ethical and legal inclusion of stakeholders in corporate decision making and their treatment in a more ethically, socially and responsible ways. CSR issue has received more of global business and academic attention compared to other contemporary issues. Hence, it has become a growing body of knowledge in recent time.

CSR simply means a construct that suggested the formal extension of company?s responsibilities to diverse stakeholders? groups, their formal inclusion in the corporate decision making process, and their treatment in a more ethical and social ways, in addition to the conventional economic responsibilities owed to its primary stakeholders (shareholders).

The concept has been a growing field of interest by sociologies, economists and accountants since the 70s. The accounting struggle was to ensure that all social costs are adequately identified, measured and disclosed in the corporate periodic financial reports. Stakeholders are challenging firms to account for the level of their involvement in CSR (Tsoutsoura 2004). CSR issue has therefore maintained its momentum continuously not only in developed economies but also in developing and underdeveloped ones.

Firm attributes and board characteristics such as Profitability, Size, Liquidity, Independent Directors and Female Directors of a firm are often considered as key characteristics that influence firm CSR investment, disclosure and practice in many previous studies. Generally speaking, for firms? decisions to conveniently respond to any internal or external investments, they must commence with their ability to make profits either huge or low. Therefore, it is rational to consider the level of profitability as one of the most important attributes that may influence firms? CSR decisions. All other things being equal, a firm with relatively higher profits figure may tend to invest out a significant portion of its profits in CSR.

Similarly, the size of the reporting firm should have either a significant positive or negative impact on the extent to which it engages CSR practice and disclosure. Thus, it is expected that a large firm management would like to practice and disclose more of its CSR issue because it correlates with their internal and external activities and is a source of good news and a wellspring of innovation, competitive advantage, value creation and superior economic performance. Based on this, Abu Sufian (2012) stated in his work that, over the past few decades, there has been quantum of arguments, controversies and debates in the literature as to whether any increase or decrease in a firm?s total assets can directly translate into its CSR involvement.

Liquidity on the other hand explains the strength of a firm to meet its financial obligations in a timely and effective manner. Samad (2004) posited that liquidity is seen as blood or breath in the life of a commercial bank and that the level of banks engagement in CSR and other related activities is determined to a greater extent by the banks? liquidity position. Firm financial stability is usually influenced by its profitability-liquidity nexus. This means that decrease in liquidity is associated with an increase in profitability and any increase in profitability leads to an increase in CSR (Mabwe & Robert, 2010). Since low liquidity means larger investment in assets and total deposit are tied to loans, then under normal circumstances banks and other organizations? CSR involvement will depend heavily on their liquidity position.

Reasons were advanced by several researchers that corporate board members particularly the independent directors used to show much concern that focused more on social actions as remedial response to external environment shock Kassinis & Vafeas, 2002. This enabled directors on corporate board to play an important role in developing appropriate economic and social strategic measures that are helpful to the organization they govern and use such measures in formulating public policy which leads the organization in gaining favorable reputation among its stakeholders (Keim & Baysinger, 1988). Thus, decisions taken by most firms to embark on CSR activities must have direct bearing with their independent director objectivity. Therefore, firms that operate with reasonable proportion of independent directors? representation may find it less cumbersome to respond to various economic and social matters affecting their operations.

It is however argued that firms? decision to engage in corporate social responsibility practices may also be influenced by female directors? representation in the corporate governing board. Various scholars have advanced several reasons in the literature regarding the association between  board  gender  equality,  firm  CSR  engagement  and  female  directors?  social  activities interest in conglomeration of the functions or roles they play in the board. Therefore, it is expected that firms having large proportion of women directors on their board will tend to spend much in CSR more particularly in the aspect of employee?s welfare, charitable gifts, donations to orphanages and the overall community developmental efforts due to their inherent and philanthropic attitudes.

Jastram (2007) and Baker (2008) conceive CSR to be part of corporate objectives of an organization because it may be seen as a key indicator to determine the true worth and value of modern organizations through their ability to give back to the society part of their income through mutually beneficial initiatives. But this can only be possible and effective when a firm is able to file a consistent positive growth in many sensitive aspects of its operation. Moreover, notable researchers like Waddock & Graves (1997) and Campbell (2007) proposed that, since firms that are less profitable with relatively poor assets size and unable to optimized their liquidity position would have fewer resources to spare for socially responsible activities compare to those firms that are more profitable with larger assets size and operate in an appropriate liquidity level, then many firms will be less likely to act in more socially responsible ways where they are unable to record consistent positive changes in their key attributes.

In Nigeria, the banking sector has been among the key leading sectors in the movement toward championing Corporate Social Responsibility (CSR). Banks have since attached a greater prominence to their social and environmental impact and they engage in establishing good partnership with local communities than they were used to in the past. This shift is being facilitated by among other things, the remarkable growth and development in corporate codes of conduct, the communities / environmental pressure and the need for effective social / environmental responsibility reporting (Amole, Adebiyi & Awolaja, 2012).

The debate surrounding the effective CSR initiatives has of recently been increasingly been questioned in almost every sector globally. However, there exists empirical evidence which show that banks being the key sector that control significant portion of the global economy are not left out to the challenge. They are equally facing more pressure from the multiple stakeholders demanding their increase participation in CSR and its integration into their strategic business plans.

1.2 Statement of the Problem

Several studies found in literature attempted to address the numerous contradictions and debates surrounding CSR issues, yet there are lots of disagreement, controversy and conflict of interests amongst the business theorists, corporate managers, academics and the general public. Firm Profitability, Firm Size, Firm Liquidity, Independent Directors and Female Directors of a firm, are often considered to be key firm attributes and board characteristics that influence firm corporate social responsibility investment, disclosure and practice in many previous studies. However, the studies revealed mixed results. Some studies such as Ponnu & Okoth (2009), Enny & Yulita (2010), Jurica & Lady (2012), and. Amole, Adebiyi & Awolaja, (2012), have produced evidence in support of a positive impact between firm attributes, board characteristics and CSR, while other works such as that of Abu Sufian (2012) reported no evidence of a significant relationship at all.

Summing the quantum of arguments, controversies, debates and various expectations in the literature, investigating the impact of firm attributes and board characteristics on CSR in Nigeria may be of an urgent value. This is because, majority of the researches that investigated the effect of firm attributes and board characteristics on CSR were conducted outside Nigeria. Whereas, majority of studies by Nigerians on CSR either related it to performance or failed to

take into consideration the influence of governance mechanisms to ascertain the role played by board members in management decisions to embark on CSR issues. Few studies such as Farouk & Shehu (2013), Akano, Jamiu, Olaniran & Timothy, (2013) among others, studied determinants of CSR but suffers the weakness of neglecting the influence of many important firm attributes and board characteristics such as firm liquidity, independent directors, foreign directors and female directors? representation. This was a considerable yawning gap the present research work was able to discover in the literature alongside the period gap of the previous studies.

However, to the best of the researcher?s knowledge, no study with similar combination of variables has been conducted in the Nigerian banking sector. Owing to their indispensable contributions to the economy it is paramount to fill in this gap. Therefore, as a result of the aforementioned scarcity, this study was out to add to the growing body of knowledge in CSR, using a set of Deposit Money Banks listed in the Nigerian Stock Exchange as a case study to empirically evaluate the likely impact of firm attributes and board characteristics (proxied by Firm profitability, Firm Size, Firm Liquidity, Independent Directors, and Female Directors) on CSR.