Corporate Social Responsibility and Financial Performance: Fact or Fiction? A Look at Ghanaian Banks

Abstract

Orientation: With banks faced with fulfilling the increasing demands of diverse stakeholders, this study sought to explore the views and motives for corporate social responsibility practices in the Ghanaian banking sector and also to investigate any possible relationship between these practices and financial performance.

Research purpose: This article examined the impact of corporate social responsibility on financial performance using empirical evidence from the Ghanaian banking sector.

Motivation for the study: Although corporate social responsibility is a hot topic in Ghana and banks do practise it, no detailed study has been conducted to ascertain whether banks derive any benefits therefrom.

Research design, approach and method: A sample size of 22 banks was involved. A structured questionnaire was used to obtain primary data whilst archival records were used to gather the secondary data.

Main findings: The findings revealed that banks in Ghana view corporate social responsibility practices to be a strategic tool; banks are motivated to practise corporate social responsibility by legitimate reasons as much as they are motivated by profitability and sustainability reasons. Also, although there is a positive relationship between corporate social responsibility practices and financial performance, the financial performance of banks in Ghana does not depend significantly on their corporate social responsibility practices but rather on other control variables, such as growth, origin, debt ratio, and size.

Practical implications: Properly adopted and implemented, corporate social responsibility can pay its way by contributing toward firm performance.

Contribution: There is a positive but currently insignificant relationship between corporate social responsibility and financial performance amongst Ghanaian banks. However, given the numerous benefits of corporate social responsibility, it is recommended that firms continue to give priority to this practice.