Research Article: 2023 Vol: 15 Issue: 3
Adebanjo Joseph Falaye, Landmark University
Temiloluwa Obidapo, Landmark University
Titilayo Ogunjimi, Landmark University
Blessing Obo-ifeanyi, Landmark University
Godswill Nwokoro, Landmark University
Charity Aremu, Landmark University
Citation Information: Falaye, A.J (2023). A classroom assessment of corporate social responsibilities’ impact on Nigeria’s agroallied firms' performance. Business Studies Journal, 15(3), 1-9.
This study set out to investigate the performance of selected impact that corporate social responsibilities have on the profitability of agro-allied firms. Secondary data used was extracted from the financial statements of five agro-allied firms that listed on the Nigerian Stock Exchange (NSE) for 2010–2020 (eleven years). Quantitative research design was used. The data collected were analyzed using simple linear regression method. Profitability was measured using gross profits and profits after tax; while corporate social responsibility was measured using the actual sums of money expended on corporate social responsibility activities of firms under study. Based on the results of the study, profitability proxied by gross profits and profits after tax and corporate social responsibility activities of the firms are positively related. The result shows that corporate social responsibilities constitute an essential factor in business and consequently add to business profitability. Hence proper expenses on corporate social responsibilities help solve the agency theory problem of agency costs that arise when control of companies is separated from the ownership, whereby managers employ the firm’s resources for personal gains instead of maximizing the value of the firm or owners’ equity. The value of the firm and the shareholders’ wealth can be maximized through enhanced profitability via efficient expense on corporate social responsibility ventures.
Linear, Agric-Business, Firms, Profitability.
Despite the fact that numerous academics have studied the subject of corporate social responsibility, the focus has been on different industries outside the agro-allied sub-sector of the economy. Majority of this research is either conducted on other nations, on the manufacturing sector (Usman et al., 2019) or on Nigeria as a whole (Olayinka & Temitope, 2012). Study seeks to fill the vacuum in the existing literature via studying the impact that corporate social responsibilities’ weighs on the performance of agro-allied firms in Nigeria.
Moreover, implementation of corporate social responsibility is fast becoming one of the major objectives of firms; in consonance with sustainable development (Thi Hinh et al., 2015). However, the reasons directors spend hugely on corporate social responsibilities, instead of retaining earnings, are gradually becoming of concern to shareholders. Study set out to investigate the nature and strength of the nexus between corporate social responsibility and business performance in Nigeria. Further, it examines why business entities consistently choose to spend on social responsibilities like environmental preservation and community involvement. Nigeria as a huge market gradually increases over time, resulting in more demands that must be met. In same vein, agriculture sector increasingly attracts attention due to increasing demand for food and the high rate of returns it offers; hence, Nigeria daily increases in numbers of functioning multilateral agro-allied firms.
As these firms become financially stabilized, the public expects specific obligations from them, which they must meet with to peacefully remain in business. Conventionally, it is now a norm for corporations that operate in a place prosperously to give back to the society towards increasing the people’s quality of life. Thus, corporate social responsibility is now perceived as corporate governance moral technique of achieving set goals. It implies voluntary incorporation of social and environmental factors into business' decision-making process. Bowen (1953) asserts that corporate social responsibility constitutes beneficial pursuit of executives to societal ideals. It constitutes an expense too; hence, managers are expected to be very meticulous in choosing when to actually execute corporate social responsibilities. In line with this thought, it is expedient to measure the degree of impact that corporate social responsibility expense weights on profitability of firms. Hence, study investigates the weight that corporate social responsibility has on sustaining profitability in Nigeria’s agro-allied industry.
Significance of the Study
The study's findings would aid agro-allied firms’ decisions about funding corporate social responsibility. It will contribute to the corpus of literature on the issue, help develop future study on the subject, and fill some gaps in the body of knowledge that have been identified.
H1: Corporate social responsibilities have no impact on gross profit of agro-allied firms in Nigeria.
H2: Corporate social responsibilities do not affect profit after tax of agro-allied firms in Nigeria.
In Nigeria, there are 335 registered agro-allied businesses, out of which five listed on the stock exchange make up the study's sample. The samples were chosen simply at random. The data analysed for the study were gathered from these five firms’ audited annual reports; obtained from their official websites. The African Financials’ website authenticates the data collected. With SPSS, we used simple linear regression to analyse data in order to understand the relation between the independent and dependent variables. The audited end of year profits of sample firms constitutes the study's dependent variable; using both the gross profits and profits after tax. The sample firms' corporate social responsibility activities serve as the study's independent variable; measured by the actuals spent on such activities during the relevant years. Study covers 11 years, from 2010 to 2020. Kindly see the appendix.
Model Specification
P = β0 + β1R + Ɛi
Where: P = Gross Profit or Profit after Tax
β0 = an intercept of P
β1 = a coefficient of CSR
R = Corporate Social Responsibility
Ɛ = the error term
Priori expectation = β0, β1 > 0
Results of Data Analysis
Kindly see Tables 1, 2, 3, 4 & 5 in the appendix for data computed from the financial statements of sample firms. Meanwhile, the table below displays the results of regression, which highlights the nature of the link between the selected firm's gross profit and corporate social responsibilities over 11-year period.
| Table 1 OLS Using Gross Profit and Corporate Social Responsibility data from 2010-2020 | |||||||||||||||
| Model | R | R Square | Adjusted R Square | Std. Error of the Estimate | |||||||||||
| 1 | 0.310a | 0.096 | 0.077 | 35889976332 | |||||||||||
| Table 2 Anovaa | ||||||||||||
| Model | Sum of Squares | Df | Mean Square | F | Sig. | |||||||
| 1 | Regression | 6.4151E+21 | 1 | 6.4151E+21 | 4.98 | 0.030b | ||||||
| Residual | 6.05402E+22 | 47 | 1.28809E+21 | |||||||||
| Total | 6.69554E+22 | 48 | ||||||||||
| Table 3 Coefficient | ||||||
| Model | Unstandardized Coefficient | Standardized Coefficient | t | Sig. | ||
| B | Std. Error | Beta | ||||
| 1 | Constant | 29144620925 | 5.74E+09 | 5.074 | 0 | |
| 2 | Corporate social responsibility | 48.176 | 21.587 | 0.31 | 2.232 | 0.03 |
| Table 4 Summary of the Findings | ||||||
| Hypothesis | Regression weights | Beta coefficient | R2 | F | P-Value | Hypothesis supported |
| H1 | CSR-GP | 0.310 | 0.096 | 4.980 | 0.030 | Yes |
| Table 5 Model Summary | ||||
| Model | R | R Square | Adjusted R Square | Std. Error of the Estimate |
| 1 | 0.314a | 0.098 | 0.079 | 11584127670 |
Model Summary
We subject the collected non-parametric data to linear regression analysis. Mean≠ Median≠Mode. Study investigates as stated in its null hypothesis (HO1) if corporate social responsibilities have no impact on gross profit of agro-allied firms in Nigeria. The alternative hypothesis is that corporate social responsibilities have significant impact on profit. Hence, gross profit (GP) was regressed on corporate social responsibilities (CSR) to test the alternative hypothesis. Pearson correlation of estimate, R=0.310, indicates a positive relationship that exists between the two variables of study. Results indicate that CSR can play a significant role in shaping GP. F (1, 47) =4.980, p˂0.05 (b=48.176, p˂0.05). These results clearly direct the positive effect of corporate social responsibilities on gross profits of the firms under study. Moreover, the R2=0.096 depicts that the model explains 9.6% of the variance in GP. Table 4 below shows the summary of the findings
Interpretation of Regression Result 1
The corporate social responsibility variable has a positive sign from the analysis presented in Table 4 above, showing a positive association with a p-value of 0.030.
Additionally, the output's coefficient of correlation (R2) value of 0.96 implies that 9.6% of the variables affecting gross profit is attributed to corporate social responsibility. Interpreting the results, the firms’ gross profits and expenditures on corporate social responsibilities are positively correlated. The result indicates a value that provides sufficient support for the null hypothesis to be rejected. The p-value of 0.030 implies that corporate social responsibility initiatives have significant impact on the gross profit of agro-allied businesses in Nigeria (Table 6).
| Table 6 Anova | ||||||
| Model | Sum of Squares | df | Mean Squares | F | Sig. | |
| 1 | Regression | 6.88496E+20 | 1 | 6.88496E+20 | 5.131 | 0.028b |
| 2 | Residual | 6.30702E+21 | 47 | 1.34192E+20 | ||
| 3 | Total | 6.99552E+21 | 48 | |||
Research hypothesis 2
H2: Organizational Corporate Social responsibility actions do not affect the profit after tax of agro-allied firms in Nigeria.
Study investigates as stated in its null hypothesis (HO2) if corporate social responsibilities have no impact on profit after tax of agro-allied firms in Nigeria. The alternative hypothesis is that corporate social responsibilities have significant impact on profit after tax. Hence, profit after tax (PAT) was regressed on corporate social responsibilities (CSR) to test the alternative hypothesis. Pearson correlation of estimate, R=0.314, indicates a positive relationship that exists between the two variables of study. Results indicate that CSR can play a significant role in shaping PAT. F (1, 47) =5.131, p˂0.05 (b=15.783, p˂0.05). These results clearly direct the positive effect of corporate social responsibilities on the after tax profits of the agro-allied firms under study. Moreover, the R2=0.098 depicts that the model explains 9.8% of the variance in PAT (Table 7).
| Table 7 Coefficientsa | ||||||
| Model | Unstandardized Coefficients | Standardized Coefficients | T | Sig. | ||
| B | Std. Error | Beta | ||||
| 1 | Constant | 1069184928 | 1853768458 | 5.768 | 0 | |
| 2 | Corporate Responsibility | 15.738 | 6.968 | 0.314 | 2.265 | 0.028 |
Decision
The probability displayed above provides sufficient proof that the null hypothesis should be rejected. The P-value of 0.028 indicates there is evidence against the null hypothesis H02. This shows that changes in corporate social responsibility initiatives have significant impact on the after tax profitability of agro-allied businesses in Nigeria (Table 8).
| Table 8 Below Shows the Summary of the Findings | ||||||
| Hypothesis | Regression weights | Beta coefficient | R2 | F | P-Value | Hypothesis supported |
| H1 | CSR-PAT | 0.314 | 0.098 | 5.131 | 0.028 | Yes |
Discussion of Findings
The degree to which variations in dependent variable are influenced by the independent variable is indicated by the coefficient of determination, and it is clear from this that while the model is effective for strategic predictions, it is not appropriate for making short-term predictions. This indicates that every firm should embrace long-term perspectives in their considerations. Study result is consistent with Friedman's assertion of 1970 (McWilliams & Siegel, 2000) that corporate social responsibility is effective as long as it engenders wealth. Some other previous studies that found corporate social responsibility effectiveness on profitability statistically significant include Margarita (2004), Choi et al. (2010), Olayinka & Temitope (2012), Amole et al. (2012), Emezi (2015), Adriana and Simon (2017), and Usman et al. (2019). Notwithstanding, we still find some that found no significant correlation between the two variables. These include Ullmann (1985) cited in Amole et al. (2012) and Mulyadi & Anwar (2012). In fact, Cho et al. (2019) declare that corporate social responsibility performance is inversely correlated with profitability.
Policy Implication
All agro-allied firms listed on the Nigeria Stock Exchange should be encouraged to incorporate corporate social responsibility into their operations, since it has positive long-term effects that may not be seen in immediate (Table 9, 10, 11, 12 &13).
| Table 9 Data Computed from Annual Reports of Dangote Sugar Nigeria PLC | |||
| YEAR | GROSS PROFIT | PROFIT AFTER TAX | CORPORATE SOCIAL RESPONSIBILITY |
| ₦ | ₦ | ₦ | |
| 2010 | 18,098,323,000 | 11,282,240,000 | N/A |
| 2011 | 13,733,316,000 | 7,111,318,000 | N/A |
| 2012 | 23,228,510,000 | 10,796,416,000 | 3,780,000 |
| 2013 | 26,969,898,000 | 13,537,612,000 | 230,500,000 |
| 2014 | 21,734,602,000 | 11,908,690,000 | 16,090,000 |
| 2015 | 22,835,147,000 | 12,659,855,000 | N/A |
| 2016 | 25,484,274,000 | 14,198,693,000 | 48,440,000 |
| 2017 | 52,651,356,000 | 37,822,608,000 | 344,643,000 |
| 2018 | 41,959,198,000 | 25,830,941,000 | 302,660,543 |
| 2019 | 40,334,175,000 | 24,102,818,000 | 84,140,235 |
| 2020 | 53,207,132,000 | 31,370,659,000 | 910,179,700 |
| Table 10 Data Obtained from the Annual Reports of Honeywell Flour Mills PLC | |||
| YEAR | GROSS PROFIT | PROFIT AFTER TAX | CORPORATE SOCIAL RESPONSIBILITY |
| ₦ | ₦ | ₦ | |
| 2010 | 5,834,171,000.00 | 1,948,396,000.00 | 700,000.00 |
| 2011 | 1,228,626,000.00 | 2,412,769,000.00 | 3,150,000.00 |
| 2012 | 4,794,745,000.00 | 2,600,712,000.00 | 3,891,000.00 |
| 2013 | 7,921,060,000.00 | 2,843,520,000.00 | 5,227,000.00 |
| 2014 | 10,457,631,000.00 | 3,351,564,000.00 | 7,681,658.00 |
| 2015 | 7,503,534,000.00 | 1,120,267,000.00 | N/A |
| 2016 | 4,361,394,000.00 | 3,023,852,000.00 | 11,707,774.00 |
| 2017 | 12,712,622,000.00 | 4,304,955,000.00 | 20,901,974.00 |
| 2018 | 16,052,649,000.00 | 4,426,978,000.00 | 15,263,699.00 |
| 2019 | 11,509,174,000.00 | 68,368,000.00 | 10,299,254.00 |
| 2020 | 13,861,838,000.00 | 650,492,000.00 | 9,531,869.00 |
| Table 11 Presentation of Data Gotten from the Annual Reports of Flour Mills of Nigeria | |||
| YEAR | GROSS PROFIT | PROFIT AFTER TAX | CORPORATE SOCIAL RESPONSIBILITY |
| ₦ | ₦ | ₦ | |
| 2010 | N/A | N/A | N/A |
| 2011 | 19,936,161,000 | 10,095,752,000 | N/A |
| 2012 | 26,686,363,000 | 8,896,718,000 | 15,170,000 |
| 2013 | 23,183,983,000 | 8,745,447,000 | 30,200,000 |
| 2014 | 29,279,322,000 | 10,437,522,000 | 41,500,000 |
| 2015 | 24,943,523,000 | 2,419,544,000 | 27,725,000 |
| 2016 | 24,211,587,000 | 10,425,786,000 | 7,620,000 |
| 2017 | 50,306,466,000 | 9,829,046,000 | 16,000,000 |
| 2018 | 51,576,994,000 | 9,244,729,000 | 20,700,000 |
| 2019 | 33,131,655,000 | 17,549,507,000 | 10,850,000 |
| 2020 | 39,931,476,000 | 12,582,571,000 | 1,202,953,148 |
| Table 12 Data Computed from the Annual Reports of Nestle Nigeria PLC | |||
| YEAR | GROSS PROFIT | PROFIT AFTER TAX | CORPORATE SOCIAL RESPONSIBILITY |
| ₦ | ₦ | ₦ | |
| 2010 | 36,230,842,000 | 9,783,578,000 | 3,000,000 |
| 2011 | 40,792,889,000 | 16,808,764,000 | 12,802,000 |
| 2012 | 50,168,632,000 | 21,137,275,000 | 37,018,000 |
| 2013 | 56,785,929,000 | 22,258,279,000 | 35,826,000 |
| 2014 | 61,229,931,000 | 22,235,640,000 | 45,547,000 |
| 2015 | 67,345,569,000 | 23,736,777,000 | 47,191,259 |
| 2016 | 75,327,592,000 | 7,924,968,000 | 8,778,000 |
| 2017 | 100,871,151,000 | 33,723,730,000 | 2,088,000 |
| 2018 | 113,920,176,000 | 43,008,026,000 | 33,965,000 |
| 2019 | 128,146,782,000 | 45,683,113,000 | 42,905,415 |
| 2020 | 199,211,471,000 | 39,212,025,000 | 787,709,898 |
| Table 13 Data Computed from the Annual Reports of Okomu Oil Palm Company PLC | |||
| YEAR | GROSS PROFIT | PROFIT AFTER TAX | CORPORATE SOCIAL RESPONSIBILITY |
| ₦ | ₦ | ₦ | |
| 2010 | 3,892,252,000 | 1,629,456,000 | 20,000 |
| 2011 | 6,853,655,000 | 3,923,760,000 | 20,200,000 |
| 2012 | 6,305,299,000 | 3,590,763,000 | 55,975,000 |
| 2013 | 4,986,877,000 | 2,092,174,000 | 282,473,000 |
| 2014 | 4,764,956,000 | 1,553,455,000 | 59,437,000 |
| 2015 | 6,312,798,000 | 2,631,145,000 | 94,734,000 |
| 2016 | 10,775,246,000 | 4,910,273,000 | 124,964,000 |
| 2017 | 16,035,465,000 | 9,147,850,000 | 82,343,000 |
| 2018 | 14,898,612,000 | 8,510,849,000 | 257,204,000 |
| 2019 | 12,981,165,000 | 5,049,637 | 183,632,000 |
| 2020 | 15,712,735,000 | 7,780,519,000 | 255,352,000 |
Recommendation
Considering the fact that they assist in nation building, agro-allied firms are advised to embrace corporate social responsibility, but should understand their limits to prevent on toward results.
Appendix
Results show strong correlation between earnings and firms’ expenditures on corporate social responsibility. Hence, we reject the two null hypotheses.
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Received: 26-Apr-2023, Manuscript No. BSJ-23-13543; Editor assigned: 29-Apr-2023, Pre QC No. BSJ-23-13543(PQ); Reviewed: 08-May-2023, QC No. BSJ-23-13543; Revised: 13-May-2023, Manuscript No. BSJ-23-13543(R); Published: 19-May-2023