The Impact of Corporate Social Responsibility on Stock Returns: Evidence from African Securities Exchange Association (ASEA)

Abstract

The growing concern over environmental degradation, social inequities, and the need for transparent corporate governance has transformed CSR into a critical consideration—not only for corporate image and stakeholder engagement, but also for firm valuation and investor confidence. Therefore, the current study analyzed the environmental, social, and economic dimensions of CSR, examining both their individual and composite effects on stock returns across ASEA member exchanges. The study was guided by three theories, including; Stakeholder theory, Legitimacy theory and Signaling theory. The study applied secondary panel data covering 10 years (2012 2022) across five African subregions and six key industries. Data was both descriptive and inferential statistics, including linear mixed effect modelling. Data was analyzed with RStudio 14.1717. Results from the correlation analysis revealed that stock returns (SR) have a significant and positive association with all three disaggregated CSR dimensions (Environmental, social and Economic). Similarly, the study found that there is a strong positive and significant association between composite CSR index and stock returns. Further analysis from the mixed effect model, established that each of the CSR dimension (Environmental, social and Economic) has a positive and significant effect on stock returns. Also, composite CSR index had a positive and significant effect on stock returns. Conversely, the study found a negative significant interaction effects in North Africa and Southern Africa, and a marginal effect in West Africa, with East Africa showing no significant moderation. The study concludes that companies and policymakers should consider local investor expectations, cultural norms, and regulatory environments when formulating CSR policies and also firms operating in these regions may need to increase awareness and communicate the business value of CSR to investors more effectively.