The effect of Corporate Social Responsibility on Financial

Performances: The case of some selected Commercial Banks in

Ethiopia
_____________________________________________________________________________

A Thesis Submitted to the post Graduate Studies of CPU College in Partial

Fulfillment of the Requirements for the Award of the Degree of Master of
Business Administration (MBA)

By: Yohannes Solomon

Advisor: Biru Desta (PhD Candidate)

MBA PROGRAM

POSTGRADUATE STUDIES

MASTER OF BUSINESS ADMINISTRATION PROGRAM

JUNE /2021

ADDIS ABABA, ETHIOPIA

1
 DECLARATION
I, Yohannes Solomon, declare that the thesis entitled “The effect of Corporate Social
Responsibility on Financial Performances: The case of some selected Commercial Banks in
Ethiopia” is my original work. I have carried out the present study independently with the
guidance and support of the research advisor, Biru Desta (PhD Candidate). Any other
contributors or sources used for the study have been duly acknowledged. Moreover, this study
has not been submitted for the award of any Degree or Diploma Program in this or any other
Institution.

_______________ _______________

Teferi Belay Signature Date

________________ _________________

Biru Desta (PhD Candidate) Signature Date

 CERTIFICATE
This is to certify that the thesis entitled ““The effect of Corporate Social Responsibility on
Financial Performances: The case of Some selected Commercial Banks in Ethiopia””
submitted to CPU College for the award of Degree of Masters’ of Business Administration
(MBA) and is a record of bona fide research work carried out by Teferi Belay , under our
guidance and supervision. Therefore, we hereby declare that no part of this thesis has been
submitted to any other university or institutions for the award of any degree or diploma.

Name of Advisor ____________________ Signature ________ Date ____________

Name of Internal Examiner _________________ Signature ________ Date ___________

Name of External Examiner ____________________Signature _________Date _______

Name of MBA Program Coordinator ______________Signature________ Date _______

 Acknowledgements
First and foremost, I would like to thank the almighty God for making it all possible. I would also
like to thank my Advisor, Biru Desta, for his expert guidance, helpful criticism, valuable
suggestions and encouragement at every stage during the making of this paper. My thanks goes to
my parents who supported me throughout the process of my study. Finally, I would like to thank
all my friends and teachers that have helped me in different ways during the course of this
research. I am also very much obliged to express my special thanks and indebtedness to all those
who participated in this research as respondents of the questionnaire who are found in
commercial bank of Ethiopia.

Finally, my acknowledgement would be incomplete without the biggest source of my strength,

my family especially my mother and my sister, and friends for the constant encouragement and
support given to me all the times.

Table of Contents
DECLARATION...............................................................................................................................................3
CERTIFICATE..................................................................................................................................................4
Acknowledgements......................................................................................................................................5
Abstract......................................................................................................................................................10
CHAPTER ONE.............................................................................................................................................11
INTRODUCTION..........................................................................................................................................11
1.1 Background of the study...................................................................................................................11
1.2 Statement of the Problem................................................................................................................14
1.3 Basic Research Questions.................................................................................................................17
1.4 Objectives of the Study.....................................................................................................................18
1.4.1. General Objectives of the Study...................................................................................................18
1.3.2. Specific Objectives of the Study....................................................................................................18
1.5 Hypothesis of the study....................................................................................................................18
1.6 Significance of the study...................................................................................................................18
1.7 Scope of the Study............................................................................................................................19
1.8 Limitation of the Study.....................................................................................................................20
1.9 Organization of the Paper.................................................................................................................20
CHAPTER TWO............................................................................................................................................21
REVIEW OF RELATED LITERATURE..............................................................................................................21
2.1 Review of Concepts and Theories.....................................................................................................21
2.1.1 Defination of Corporate Social Responsibility............................................................................21
2.1.2 The Roles of Banks on Corporate Social Responsibility..............................................................23
2.2.2 Corporate Philanthropy.............................................................................................................26
2.2.3 Marketing Performance.............................................................................................................27
2.2.4 CSR and profit............................................................................................................................28
2.2.5 CSR and Sales volume................................................................................................................32
2.2. Review of Empirical Studies.............................................................................................................33
2.3 Review of Conceptual Framework....................................................................................................35
2.3.1 Stakeholder theory....................................................................................................................36
CHAPTER THREE..........................................................................................................................................41
METHODOLOGY..........................................................................................................................................41
3.1 Study Area/Setting............................................................................................................................41
3.2 Research Design...............................................................................................................................42
 3.3. Research Approach..........................................................................................................................43
3.4. Population and Sampling Design.....................................................................................................43
3.4.1. Population of the Study............................................................................................................43
3.4.2. Sampling Design & Sample Size Determination........................................................................44
3.4.3. Sample Selection Technique.....................................................................................................44
3.5. Source of Data.................................................................................................................................44
3.6. Methods of Data Collection.............................................................................................................45
3.6.1. Validity and Reliability...............................................................................................................45
3.7. Methods of Data Analysis................................................................................................................46
3.8. Ethical Consideration.......................................................................................................................47
CHAPTER FOUR...........................................................................................................................................48
DATA ANALYSIS, FINDINGS, AND DISCUSSIONS..........................................................................................48
4.1 Introduction......................................................................................................................................48
4.2. Descriptive Statistics........................................................................................................................48
4.2.1 Descriptive Statistics on Background Information of Respondents...........................................48
4.2.2 Responses on Employee Competency.......................................................................................51
4.2.3 Responses on external Suppliers...............................................................................................56
4.2.4 Responses on customer.............................................................................................................59
4.2.5 Responses on Community..........................................................................................................60
4.2.6 CSR Practices..............................................................................................................................64
4.3. Correlation Analysis.........................................................................................................................66
4.4 Model validity...................................................................................................................................69
4.4.1. Multicollinearity Test................................................................................................................69
4.4.2. Normality Test..........................................................................................................................70
4.4.3 HeteROSkedasticity Test............................................................................................................73
4.4.4 Autocorrelation Test..................................................................................................................74
4.5. Interpretation, Analysis and Discussion...........................................................................................75
CHAPTER FIVE.............................................................................................................................................78
SUMMARYOFFINDINGS, CONCLUSIONS ANDRECOMMENDATION............................................................78
5.1. Summary of Major Findings.............................................................................................................78
5.2 Conclusion........................................................................................................................................81
5.3 Recommendations...........................................................................................................................83
Reference...................................................................................................................................................84
Appendix...................................................................................................................................................116

List of Tables

Table 1: Summary of descriptive statistics of study variables for the period 2014-2019 .............
65
Table 2: Correlation Matrix ...................................................................................................... 68
Table 3 Normality test descriptive analysis tables ..................................................................... 70
Table 4 Normality test M-Estimator table .................................................................................. 70
Table 5: Normality test analysis using Kolmogorov-Smirnova and Shapiro-Wilk table .............. 71
Table 6: HeteROSkedasticity Test: Whites test .......................................................................... 72
Table 7: Model Summery .......................................................................................................... 72
Table 8: Breush-Godfrey serial correlation LM Test ................................................................. 73
Table 9: Results of linear Regression Model.............................................................................. 75
Table 10: Shows background information of Respondents ......................................................... 48
Table 11: Shows the Responses on Employee Competency (n=270) .......................................... 51
Table 12: Shows Responses on suppliers (n=270) .................................................................... 56
Table 13: Response on customer (n=270) ................................................................................. 58
Table 14: Shows results Employees Responses on community ................................................... 60
Table 15: Responses on Employee Performance Appraisal (n=270) .......................................... 64
 Abstract
Corporate social responsibility (CSR) is a self-regulating business model that helps a
corporation to be socially accountable to itself, its stakeholders, as well as the public in general.
In a developing country like Ethiopia, the banking sector can play an active role as part of its
CSR activity while also benefiting i.e. attracting new customers, keeping existing customers loyal,
which in turn may have an impact on financial performance of the bank. The aim of the study is
to determine the effect of corporate social responsibility on the financial performance of five
commercial banks in Ethiopia. The study employed both primary and secondary sources of data.
Primary data collected using questioners with department heads responsible directly for issues
relating to CSR, while secondary data obtained from annual reports and other published
documents of the banks. Econometric regression model used to determine the relationship
between CSR and Financial performance for the period of 6 years from 2014 – 2019 and the data
be analyzed by using statistical software SPSS VERSION 24. In the following study corporate
social responsibility measure by ROA (return in asset) be the dependent variable and financial
performance measured by the Donation expense, be the independent variable .The researcher
included ROE, ROS, RMS, and RNIM as control variables. The results from the regression
showed that there is a positive and insignificant relationship between ROA and donation expense,
whereas the control variables ROE, ROS, RMS, and RNIM showed a negative and significant
relationship with the dependent variable. Hence, the researcher concluded that CSR is an
expense with no return for now but if implemented properly and disclosed consistently the
outcomes will be different. Finally, the study recommended banks to improve in the areas of CSR
disclosure, and to be proactive rather than reactive in carrying out these activities.

Key words
CSR = Corporate social responsibility

ROA = Return on asset

ROE = Return on equity
ROS = Return on sales

RMS = Return on market share

RNIM = Return on net interest margin.

 CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The start of the 21st century brought a few monetary scandals because of administrative
advantage and enormous size of bookkeeping extortion, lessening partners' trust in business
undertakings. The bookkeeping outrage at Enron, the Wall Street's emergency happened in 2008
and the Madoff scandals raised remarks alluded as ''a rot in business profound quality'' (Chih et
al., 2010). Generally, the social outcomes of these crises made reputational issue for associations,
restricting their intensity and productivity.

Previously mentioned analysis might actually clarify why business delegates, overall population
pioneers, governments, investors and different partners become advocates of the hypothesize as
indicated by which the organization can't seek after a technique to augment the monetary
outcome to the detriment of satisfying its commitments towards its workers, the climate and
society all in all. Because of this case, organizations start carrying out corporate social
responsibilities exercises and different methodologies that permit them to improve their standing
and reestablish stakeholder’s confidence. (Servaes and Tamayo, 2013).

In last decades the concept of corporate social responsibility has, growing is an exponential
manner. Corporate social responsibility is not a new thing of interest for the business in world.
However, corporate social responsibility is important because its influence all the aspects of a
bank’s operations. Corporate Social Responsibility is a concept with many definitions and

Practices. The concept of CSR originated in USA since 1950s but became more prevalent in
1970s (Srivastava, Negi and Pandey: 2012).

Karen Hogan et al (2014) on their CSR and Shareholder Return study locate that abundance
returns are decidedly identified with an association's Governance Disclosure score however
adversely identified with its Social Disclosure score. Overall, Community Spending as a Percent
of EBITDA has any impact on the incentive to the firm. They use Stakeholder Theory as a
hypothetical base for Bloomberg's Proprietary Quant Model with Environmental Disclosure
Score, Social Disclosure Score, Governance Disclosure Score, Corporate Governance Quotient
(CGQ) Index Score, CGQ Industry Score, and Global Metrics International (GMI) Overall
Global Rating Score Independent Variables.

The connection between CSR and Suppliers/Retailer likewise studded by various researchers
among these examinations. Study by Che-Fu Hsueh (2012) which utilize Qualitative Research
Analysis by to examine CSR Activity by utilizing KEJI Index model that have Labor Union
Existence and Labor Unionization Ratio as Independent Variable found that the proposed model
and calculation could give ideal recommending estimations of CSR execution levels and pay.

Inside and out examinations about CSR in the financial area in Turkey (Aylin P.A. 2012). Results
show that corporate social responsiblity and bookkeeping based marker has positive
relationships. As additionally discoveries meant there is caused based relationship existing
between factors anyway method of this relationship is range from monetary pointers to social
obligation. At the end of the day in Turkey, monetary execution of the organizations decide
social duty execution of the organizations. This demonstrated by utilizing Good Management
Theory, Resource Theory, and Instrumental Stakeholder Theory. Also, Principal Component
Analysis model utilizing ROE, ROA, ROS, obligation/resource proportion, Total Sale, Total
Asset, Employees, Equity, Profit Independent ROE, ROA, ROS, Debt/Asset Ratio, Total Sale,
Total Asset, Employees, Equity, Profit As An Independent Variable.

In Some investigations, the degree of CSR Disclosing shows that there is absence of unveiling,
the consequences of relapse models disprove a genuinely huge connection among ROA and ROA
with CRSDI. This is demonstrated by utilizing Stakeholder Theory and Content Analysis Model
by

Fadma, Rachid (2012)

CSR can be concentrated from the purpose of Donation as free factor and utilizing Net Profit
Margin and Earning per Share as autonomous variable. Base on Stakeholder hypothesis the
subsequent result of Descriptive Analysis show that there is positive connection between the firm
divulgence of CSR and the Firm's Performance regarding Net Profit Margin and Earning per
Share. At the point when the firm goes through some cash on the general public (Donation), the
general public get advantage from it, yet it doesn't imply that society won't pay to the firm.
Society likewise pays to the firm in feeling of Good or Reputation or great picture of organization
in the personalities of clients just as financial backers. Nadeem Iqbal et al (2014)
In another Quantitative Analysis Study by Sulaiman R.W. (2012) show that there is a huge
connection between the levels of bank's (CSR) and the bank's (CFP). There is a huge connection
between bank's size and (CFP). There is a huge connection between the degree of danger in the
bank and (CFP). There is a huge connection between the degree of promoting costs in the bank
and (CFP). (CSR) identify with society's necessities and the idea of encompassed climate. The
investigation depends on Stakeholders hypothesis and use CSR as an Independent Variable and
ROA as a Dependent Variable. SIZE, RISK, Advertising Intensity think about Constant.

In Africa, likewise a few examinations show that Accounting and market based Indices Earnings
per Share, Return on Capital Employed and Divided per Share, in deciding the effect of CSR on
monetary execution. The aftereffect of the basic relapse for speculation one indicated that
Earnings for every offer have a negative huge relationship with corporate social duty. In this
examination

Positive Accounting hypothesis, utilizing Ex-post Facto research configuration model is utilized.
MICHAH C. OKAFOR (2016)

Instrumental Stakeholder Theory and Good Management Theory study utilizing Content Analysis
Model show that there is a critical positive connection between CSR divulgence and the
monetary exhibition of GCC Islamic banks. These outcomes confirm the theories and are
additionally in accordance with the hypothetical structure that predicts a positive connection
between the corporate social presentation and monetary execution of the Islamic financial
industry. Thus, it tends to be presumed that the higher the degree of CSR exposure, the better the
bank's benefit because of GCC Islamic banking. Elena Platonova et al (2016) utilize both
Descriptive and Regression Analysis to analyze CSR Disclosure Index, Individual Dimensions,
Size, and Capital Ratio, advance Ratio, Overhead Expense, Debt Ratio as Independent Variable.

The outcome shows CSR decidedly impacts productivity and stock returns. There by manifesting
that it pays to be socially capable. It clarifies from the finding that CSR, as important and back
asset, can be misused to make an upper hand for the firm. Shafat Maqbooln, M. Nasir Zameer
(2017) in there study Stakeholders Theory and Panal regression model where used to analyze
CSR and Profitability, SMR as Independent Variable.

1.2 Statement of the Problem

Tewelde (2012) the setting of Ethiopia and its interface with corporate social Responsibility has
shown utilizing Carroll's model. Albeit numerous models on CSR created in the West Prescribe
widespread utilizations of the segments and needs, the relevant variables in agricultural nations as
a rule and Ethiopia specifically may not permit the immediate selection of such models. In
Ethiopian setting, the training like numerous other African nations is on the monetary part of the
CSR and such accentuation might be to the detriment of different measurements. In such a
circumstance how we can accommodate the various parts is the significant provokes that should
be tended to.

As per Tewelde (2012),as per the conversation of CSR in Ethiopia plainly the lawful and moral
obligations are the most un regarding practice as it is the situation in the greater part of African
nations setting. In spite of the fact that, there is no 100% clear meanings of CSR on the planet.
There is extraordinary need to make understanding about CSR and moral way to direct the
business in practical manner. Furthermore, rarely to track down a particular type of corporate
social duty rehearses in the creating scene that could be seen from business points of view. Since
Ethiopia is one of the agricultural nations the way of thinking of corporate social obligation isn't
all around created. Corporate social responsibility of banks in Ethiopia is immaculate part. The
National Bank of Ethiopia (NBE) has mostly assume part of guideline on the financial
performance execution of business banks as relate to the standards and guidelines set by the
country to secure general society and create certainty on the administrations given by banks. To
give yearly reports by all banks enlisted by NBE once per year and to show their status could
considered as releasing CSR of banks. In any case, this is restricted to the degree of announcing
just monetary issue. In any case, the requirement for CSR requires more for the banks to give
uncommon consideration towards incorporation of social and ecological worries in their business
tasks to accomplish maintainable. This investigation paper has evaluated the training and part of
private business banks on corporate social duty in Ethiopia.
Tahir Islam et al. (2021) in there Study show the impediment of the Research they direct is that,
first, they utilized just purposive examining for information assortment with telecom
administrations clients from Pakistan. Second, their examination estimated it’s Constructs as one-
dimensional, yet the Constructs contain Psychological, Financial, and Procedural Sub
measurements; therefore, their investigation's generalizability is restricted. Subsequently, for
future exploration they prescribed to utilize multidimensional Constructs and apply similar
calculated model in different business sectors. Third, the outcomes depend on a Cross-sectional
investigation, so Longitudinal Research needed to check the connection between CSR and
Customer Outcomes and approve the examination's outcomes. CSR requires top administration's
responsibility and critical assets, so a Longitudinal Study could check Customer Responses to the
social activities the organization performs. Fourth, the reasonable model tried in there research
depended on telecom organizations in which certain Factors are Fixed, so the discoveries may not
be completely relevant in different societies. At last, they thought about just the telecom area.
Since hierarchical designs and culture differs from Industry to Industry.

A few examinations led by Fadma El Mosaid et al. (2012) zeros in just on Accounting Based
Performance Measurements and the investigation directed on eight Banks for a very long time
2009 and 2010. As a Future examination proposal, others can think about Market Based
Performance Measurement with Largest Sample. Furthermore, there study centers on CSR
divulgences in banks' yearly reports. Different types of correspondence channels, for example,
the bank's site, independent manageability type reports, papers and in-house magazines have used
to convey corporate social obligation exercises. Henceforth, future examination may think about
such revelations.

Different investigations show the CSR from the purpose of Profitability Majid K. furthermore,
Abdul M. (2013) Their investigation noticed that there is a positive connection between CSR
exercises, for example, climate situated duties, local area arranged obligations, clients duties
exercises and legitimate duties and productivity of the business association. Along these lines,
directors of the business association should actualize CSR exercises to upgrade their productivity.
It additionally noticed that there is a positive connection between CSR exercises and piece of the
overall industry of the business association. The discoveries of this examination call for chiefs of
the business association to impart their CSR endeavors to the clients, which can at last prompt
expanded piece of the pie. Additionally Camelia-D.H. (2018) on his examinations about CSR and
Profit the observational aftereffects of this exploration showed that there is a connection between
"Progressing nicely" and "Doing Good" utilizing calculated and contemporaneous econometric
investigation of the board information and the creativity comprises likewise on the investigation
of CSR exercises for the organizations that enrolled misfortunes. Recommended for that CSR can
see a future exploration course alludes to are relative investigation with other European nations
fabricating a full scale primary pointer like the one from the investigation of Schwan. Our
outcomes can help strategy creators receive vital administrative change to improve the CSR
practices and upgrade authoritative authenticity. Proceeded with research on these lines
guarantees the components that take key choices in the organizations the chance to give them a
significant upper hand in the momentum serious climate and for the financial backers the
disposition towards hazard. Camelia-D.H. (2018)

Zhiyu Cu et al. (2015) in their Research find that there is a requires a more cautious examination
concerning diverse institutional conditions and their parts in upgrading or hindering corporate
social activities., Our finding of the balance of firm size may accommodate the writing's
conflicting results with respect to CSR–CFP connections. They additionally see Due to the cross-
sectional plan; one can't infer that CSR responsibility produces frail deals development for little
firms. Future examination can likewise recognize distinctive CSR activities and their presentation
suggestions separately or potentially intelligently, notwithstanding asking about the monetary
outcomes of business morals and CSR, further scholarly undertakings can adopt a humanistic
strategy to look at other significant social out comes like wellbeing, fulfillment, and equity.

This paper aim to shows the impact of corporate social responsibility on financial performance of
the banking sector in Ethiopia. Based on global banking sector the research aim to find
significant relationship between corporate social responsibility and banks financial performance.
Previously studies have mainly focused on the developed countries and the case of Ethiopia only
focus on commercial bank of Ethiopia there is less work done in country like Ethiopia to
measuring the impact of corporate social responsibility on financial performance. Because In less
developed countries, most of the firms are unaware with the importance of corporate social
responsibility and not put much attention on the corporate social responsibility. Now today
people having more much knowledge about corporate social responsibility companies who works
for the welfare of the society. (Bushra and Rabia 2017) Therefore, it is important to make
discussion and see the impact of corporate social responsibility on financial performance of
banking sector in Ethiopia.

It needs empirical investigation and study of existing CSR situation, awareness of CSR as
business strategy and ground to implement it. The problem is that the relationship between banks
and CSR practices are unclear. Therefore, the study tried to assess CSR practices in Commercial
Banks in Ethiopia.

1.3 Basic Research Questions

At the end of the problems stated above the researcher developed the following basic research
questions

• What CSR initiatives that have been found to be valued most and marketing performance
measured by revenue market share in the Banking Industry?

• What the effects of CSR on sales volume are in terms ROE, ROA, ROS, increase in the
Banking Industry?

• What are the effects of CSR and profit (net interest margin (NIM)) in the Banking
Industry?

1.4 Objectives of the Study

1.4.1. General Objectives of the Study

The broad objective of the study is to assessed CSR and its effect on financial performances of
commercial banks in Ethiopia.

1.3.2. Specific Objectives of the Study

• This examination investigates the connection between CSR activities that discovered to
most and Marketing Performance estimated by Revenue market share.

• To assess the effect of CSR on sales volume increase in the banking industry based on
banks ROE, ROA, and ROS.
 • To assess the relationship between CSR and profit in banking industry in terms of NIM.

1.5 Hypothesis of the study

• H1: There is positive and significant relationship between CSR and Marketing
performance.

• H2: There is a positive and significant relationship between corporate social

responsibility and financial performance
• H3: There is a positive and significant relationship between CSR and profit.

1.6 Significance of the study

It is hoped that the findings of the research would contribute to the growing body of knowledge,
identifying CSR in the Ethiopia context, especially with regard to its CSR dimension. Likewise,
Results reached from this study are expected to give important messages to policy makers in CSR
and organization performance. The findings of the study would also contribute to the limited
knowledge on CSR of banks in Ethiopia on organization performance by way of reference
material. It is also hoped that researchers on CRM would benefit from this study, directly or
indirectly, in terms of the research approach and can be used as an input for other researcher. The
research also provide relevant information to decision makers (Universities, stakeholders, policy
makers and airlines training consultant, airlines sector, and budget allocation decisions) need to
adopt the approach where SRM and organization performance can be boosted which will lead to
greater organizational performance and eventually elevate their business performance as well as
to answer academic questions and to serve as a base for further research that enable the sustained
operation with regard to CRM.

1.7 Scope of the Study

This study laid emphasis on assessing Corporate Social Responsibility on financial performances
on available data of five selected commercial Banks at head office level and some random
branches in Addis Abeba, and this be: Dashin bank, Abyssinia Bank, Hibret Bank, Addis
international bank, Zemen bank. From these banks, data be collect using both primary and
secondary data. Primary data be collect using questioners with management in the position of
deciding on CSR activities and secondary data be collect using annual reports and other
published documents.

1.8 Limitation of the Study

Limitation of the study are due to difficulty of CSR measurement and unavailability of many
similar literatures for effect of CSR on Financial performance in the Ethiopian context therefore,
most references made from other studies undertaken outside of Ethiopia. The study focused on
selected Commercial Banks in the study is time taking and access for data collection for each
bank is impractical in such a limited time and budget the study only focus on five commercial
banks at head office level. When the research came to final data analysis utilization of the SPSS
package was difficult due to lack of appropriate training in class.

1.9 Organization of the Paper

This research paper consists of five chapters. The first chapter contains statement of the problem,
purpose of the study, research questions, significance of the study, limitation of the study, and
organization of the thesis. In the second chapter has the review of concepts and theories, review
of empirical studies, conceptual framework and the importance of research on interrelationships
between subjects. The third chapter contains a research design; study area, sample size &
population as displaying measurement variables. This chapter also shows how the data are
collected, Sample Size and Methods of Sampling and shows how the data are analysis and
describes the characteristics of the sample. In the fourth chapter the result and interpretation are
present. In the fifth chapter, the conclusion along with implications, recommendation, and
suggestions for the future research are provided.
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Review of Concepts and Theories

2.1.1 Definition of Corporate Social Responsibility

Concept and Definition of CSR Corporate social responsibility (CSR) is the way a corporation
achieves a balance between its economic, social, and environmental responsibilities in its
operations to address shareholder and other stakeholder expectations. It known by many names,
including corporate responsibility, corporate accountability, corporate ethics, corporate
citizenship, sustainability, stewardship, and triple-bottom line (economical, ethical, and
environmental).

CSR is a general management concern, it is important to all aspects of business, and it integrated
into a corporation’s operations through its values, culture, decision-making, strategy, and
reporting mechanisms. The ideas of Corporate Social Responsibility perceive essentially, it is
„doing right things‟. CSR about how organization’s existence affects stakeholders beyond own
insular interests, recognizing the impact of its operations on the community at large. Economical
arrangements that help society and the planet while developing business. By embracing CSR
system the organization activity can affect positivity, prompting feasible advancement and money
related increases. There has been an essential increment in concerning CSR recently (Basu and
Palazzo, 2008).

As it studied by many scholars and agreed that, it is quite difficult to have an agreed definition
that clearly reveals the concept of corporate social responsibility. How CSR defined and concepts
under the context of economic, social and environmental perspective of CSR assessed. Hameed
(2010) had provided the definition of the corporate social responsibility in such a way that
Corporate Social Responsibility (CSR) provides strategic framework for achieving sustainability
by considering the ethical concern in the society. Dahlsrud, (2008) quoted in the works of
Hameed and forward the very important definition which was included in the study is that there is
no as such correct definition of CSR. The most commonly used definitions of CSR come from
the Commission of the European Communities in 2001. “A concept whereby companies integrate
social and environmental concerns in their business operations and in their interaction with their
stakeholders on a voluntary basis.”Helg (2007) had forwarded definition of CSR by stating: The
European Foundation for Quality Management (EFQM) is a membership based not for profit
organization, created in 1988 by fourteen leading European businesses with a mission to be the
driving force for sustainable excellence. EFQM defines CSR as follows, “CSR refers to a whole
range of fundamentals that organizations are expected to acknowledge and to reflect in their
actions. It includes – among other things- respecting human rights, fair treatment of the
workforce, customers and suppliers, being good corporate citizens of the communities in which
they operate and conservation of the natural environment. It is better to look at definitions of
CSR that help me to analyze the problem statement. NBE does not provide the definition of CSR
under the Ethiopian Commercial Banks’ law. For the purpose of this study, it is thus important to
adopt a working definition for CSR as a system of rules and institutions that determine the roles
and direction of banks. In this regard, Yeung (2011) defines key element of CSR in the banking
sector such as, understanding of financial services complexity, risk management, strengthen
ethics in the banking business, strategy implementation for financial crisis, protection of
customers’ rights and channels settings for customer complaints. (Yenenesh 2015)

Baker (2011) summarized the definition and scope of corporate social responsibility as delivering
the economic, social, legal, environmental and technological advantages to all stakeholders of a
firm in its business operation.

He also proposed that it is the role of managers to initiate and advice shareholders to implement
various social responsibility programs and by doing so enable the business organization to meet
its strategic objectives.

On the other hand, Moon (2004) stated that CSR is a difficult concept to separate it with other
concepts like ‘corporate citizenship, sustainable business, and environmental responsibility’ and
contextual in different areas in which the business is established and run its operation.

One of the known approaches by Carroll (1991) has covered the four major scope of CSR as;
Economic Responsibility; is about satisfying the very objective of business organizations to earn
as many profit as possible by exchanging goods and services in return. In Legal Responsibility,
the laws and standards set to govern the market in the business processes should not violated. The
Ethical Responsibility states that companies must strive to fulfill the needs of the society beyond
the legal rules and requirements imposed by the law of a country. Finally, Philanthropic
Responsibility shows the commitment of firms to contribute to the common well-being of the
society.

Like other researchers Kotlerand Lee (2005), defined CSR as to give portion of the company’s
profit to develop and improve the quality of life of employees and the society. They said that it is
the responsibility of decision makers to implement programs, which improves the wellbeing of
the community in addition to their objective of achieving the target profit. Based on this
definition he proposed several key issues, the first issue is about the accountability of firms
followed by the companies’ obligation not to pollute the environment. The third issue he
addressed is that companies should improve the life of the society by encouraging education,
culture and other community improvements.

2.1.2 The Roles of Banks on Corporate Social Responsibility

Lenders are more sensitive to CSR activities of debtor in the area of less secure environment.
Research has also showed that less creditworthy borrowers who engage voluntarily in CSR
activities have higher credit spreads and shorter maturity of loans; banks meet a supervisory role
over companies. Within a credit approval process and subsequent verification, banks gain much
more information about the company than other interested parties do on the market do. Therefore,
they best placed to assess the level of socially responsible activities undertaken by the company
(Lenka and Jiri, 2014). Yeung (2011) has described role of banks in CSR that global regulations
imposed for banks is holding reserve against loans and achieving AAA grade ratings. In the past
years, some banks tried to bundle up loans to private customers and companies, and selling these
to one another on the inter-bank market. Mcllroy (2008 cited in Yeung (2011) these securitized
loans are often referred as asset-backed securities (ABSs) and are then sold on as more complex
financial instruments as collateralized debt obligations (CDOs). As the loans removed from the
banks‟ balance sheet, the banks were able to make further advances. The issue raised since then
is on the security of loans, transparency of risk to investors, and regulations involved in further
advances. As a socially responsible bank, it not only executes lawful banking practice, but also
practices wisely and prudentially with close supervision of transactions for providing customer
confidence under prosperous and glooming economic conditions. (NCA, 2006) cited in
ZerayehuSime, KagnewWolde and TeshomeKetema (2013) has indicated that banks play a key
role in improving economic efficiency by channeling funds from resource surplus unit to those
with better productive investment opportunities. Banks also play key role in trade and payment
system by significantly reducing transaction costs and increasing convenience. Intensive
competition may lead to excessive risk taking by banks, which would result in deterioration of
the quality of banks’ lending portfolio and balance sheets. Yeung (2011) defines key element of
CSR in the banking sector such as understanding of financial services.

Examination of the potential relationship between CSR and CFP has been the focus of many
research studies. Scholars and business analysts have devoted a significant effort attempting to
determine how much businesses should spend on CSR initiatives, how to maximize the return of
their CSR initiatives, and what initiatives to invest in to enhance market share and financial
performance. Several researchers have contributed to the study of the CSR-CFP relationship
(Aigner, 2016; Torugsa et al., 2012; Usman & Amran, 2015).

The correlation between CSR and CFP, which varies on a situational basis following the capacity
of the stakeholders’ influence, was one of the themes present in the literature about CFP (Ameer
& Othman, 2012). Researchers identified institutional business systems as one of the many
dependent variables that explain the diversity of business returns from CSR actions (Wang, Duo,
& Jia, 2015). One study utilizing the absorptive perspective suggested that strategic CSR
regulates financial performance (Tang, Hull, & Rothenberg, 2012).

Jung’s (2016) study confirmed that CSR increases financial performance through differentiation.
Additional literature regarding CSR strategies determined that corporate activities focusing on
social benefits and socially responsible behaviors create a competitive advantage (Jung, 2016)
enhancing firm reputation and differentiating the company from competitors (Jung & Kim,
2015). There is a wealth of supporting evidence that differentiation strategies (Cruz, Boehe, &
Ogasavara, 2015) and the social reputations (Chen & Slotnick, 2015) of organizations influence
financial performance. Zhu, Sun, and Leung (2014) also discovered the definite link between
CSR and financial performance, and further discussed ethical leadership as a moderator between
the two.

Usman and Amran (2015) found that Nigerian companies that utilize CSR initiatives to
communicate social performance to their stakeholders experienced an enhancement in financial
performance with one exception. Company disclosures regarding human resources, customers,
and community involvement enhanced financial performance while environmental disclosures
had the opposite effect indicating that sharing environmental impact information may be
detrimental to company value in Nigeria (Usman & Amran, 2015). Luethge and Han (2012) also
examined CSR and social disclosure. However, their analysis of companies in China determined
that there was a positive relationship between social disclosure and firm size but no connection
between profitability and disclosure (Luethge & Han, 2012). Many variables could account for
the adverse findings such as cultural aspects or the communication medium used to convey social
disclosures.

An additional theme in recent studies is the discovery that CSR activities have a distinct and
positive effect on employee attitudes (Chun, Shin, Choi, & Kim, 2013). Corporate social
responsibility incorporates the provision of social benefits to all stakeholders including internal
stakeholders such as employees; therefore, organizations engaging in CSR activities have an
increased likelihood of delivering more support to employees (Suh, 2016; Farooq, Payaud,
Merunka, & Valette-Florence, 2014). Fu, Ye, and Law (2014) suggested that increased support
for employees could promote the feeling of obligation to respond to the company with amplified
commitment.

Scholars discovered that CSR initiatives enhance job satisfaction and employee commitment (De
Roeck, Marique, Stinglhamber, & Swaen, 2014). According to Hansen, Dunford, Boss, Boss, and
Angermeier (2011) employees interpret the CSR activities of their organization as a character
virtue increasing the level of trust employees have that the business keep employee welfare in
mind. The improvement in employee attitudes translates into greater financial performance for
firms (Suh, 2016). Hofman and Newman (2014) and Oh, Chang, and Martynov (2011) indicated
that these findings are particular to North American employees leaving scholars to question
whether the outcomes might differ in other regions.

In conclusion, numerous studies have proven that organizational involvement in CSR practices
affect the social and financial performance of a firm. The enhancement in performance stems
from the effect of CSR on various stakeholders. Stakeholders affected the company’s
performance. In turn, other shareholders feel the effect of company performance. The entire CSR
process included employees, shareholders, and consumers. The influence of CSR initiatives
varies among the stakeholders. Stakeholders do not all share the same needs or wants. Therefore,
it can be challenging to manage stakeholder relationships. Successfully managing these
relationships is imperative to the longevity and sustainability of an organization.
Corporate social responsibility translates differently to varying regions, cultures, and sciences
(Ahen & Zettinig, 2015). Researchers should consider a further inquiry into additional factors
that influence the motivation of organizations to invest in CSR initiatives. Though the results of
CSR activities are the improvement of society or the environment, cultural and religious
influences of businesses also considered when analyzing the focus and motivation for
engagement in CSR.

2.2.2 Corporate Philanthropy

Many scholars view corporate philanthropy as a typical CSR strategy. However, 26 there is an
ongoing debate in scholarly research as to whether corporate philanthropy should play a role in
business or CSR (Aakhus & Bzdak, 2012; Carroll, 1999). Von Schnurbein, Seele, and Lock
(2016) suggest that corporate philanthropy and CSR stand apart from one another based on the
voluntary nature of philanthropy. However, Visser (2011) suggested that CSR is not only
charitable, but that business responsibility manifests in a philanthropy period in which
organizations support diverse social and environmental causes through sponsorships or
donations. Establishments also perform corporate philanthropy through corporate giving,
corporate volunteering, or corporate charitable foundations (Ducassy, 2013; Gautier & Pache,
2015). Interestingly, Kinderman (2012) discovered that business leaders concentrated specifically
on the importance of voluntarism in the policy documents.

One theme presented in the study of corporate philanthropy is the view that strategic corporate
philanthropy is at the intersection of social and economic values (Brower & Mahajan, 2013). The
Committee Encouraging Corporate Philanthropy (CECP) (2014) also recognized a positive
correlation between corporate philanthropy and profit margins. Since 2010, Fortune 100
organizations that donated 10% or more experienced an 11% increase in median revenues while
those who gave less than 10% experienced a 3% decrease in revenues (CECP, 2014).

Von Schnurbein, Seele, and Lock (2016) proposed in a recent article that the four fundamentals
of corporate philanthropy include economic, motivational, creative, and moral. La Cour and
Kronmann (2011) added that the ethical origins of the engagement of corporate philanthropy
trigger mistrust in public. Trust is a necessary element to establishing legitimacy and without
trust CSR efforts, despite the motive or execution, are ineffective. Barsky and Dvorak (2015)
offered and alternate view by suggesting that corporate philanthropy can be cost efficient and
utilized as a value creating marketing instrument through well-crafted corporate giving program.

2.2.3 Marketing Performance

Market share treated in various ways in academic research: as an independent variable (a market
based asset driving company performance), and as a dependent variable (reflecting the
effectiveness of marketing efforts; Rego, Morgan, and Fornell, 2013). Market share treated in the
latter way in the current study—as evidence of the effectiveness of marketing efforts. In this
interpretation, market share considered as an intermediate performance outcome, with financial
performance being the ultimate effect.

Studies of market share have used two approaches to operationalization. One approach has been
to use unit sales data to calculate market share, whereas another uses sales revenue (Rego et al.,
2013). In the current study, the authors opted for the latter approach—focusing on sales revenue
— because of non-availability of unit sales data for the companies in the study sample.

Impact of CSR on Marketing Performance

Although the research findings are mixed (Cheng et al., 2014), a number of studies have reported
a positive effect of CSR on company performance (Wang, Chen, Yu, and Hsiao, 2015). A
significant proportion of the benefits identified may be considered marketing related
(Bhattacharya and Sen, 2010; Maignan, Ferrell, and Ferrell, 2005). Researchers have suggested,
for example, that engaging in CSR activities creates a reputation for the company as honest and
reliable and that customers consider the products and services of such companies as more reliable
and of better quality (Mciams and Siegel, 2001). Engaging in CSR activities also enhances the
purchase intention of potential customers (Fagerstrøm et al., 2015). In other words, CSR can be
seen as akin to a marketing tool (Chahal and Sharma, 2006; Fagerstrøm et al., 2015), and
successful employment of this tool might help companies to build a competitive advantage,
leading to the enhancement of their marketing performance (Vorhies and Morgan, 2005).
Researchers have hypothesized that engaging in CSR activities might lead to improved marketing
performance, as measured by market share, sales value, and customers’ and channel partners’
satisfaction and retention (Chahal and Sharma, 2006). In keeping with this interpretation, studies
have shown that CSR initiatives indeed can create marketing advantages for companies, which
can lead to improved financial performance (Lai et al., 2010). Studies have demonstrated that
CSR activities can have a positive effect on brand equity, as well as on brand sales performance
(Lai et al., 2010). CSR activities positively affect brand equity among all stakeholders, not just
customers (Torres, Bijmolt, Tribó, and Verhoef, 2012). Other recent studies have demonstrated
the significantly positive impact of brand equity on financial performance, in both the short and
the long term (Mizik, 2014). Marketplace polls also have shown that customers tend to have a
better perception of companies that engage in CSR activities. One study found that “84 percent of
Americans say they would be likely to switch brands to one associated with a good cause, if price
and quality are similar” (Bhattacharya and Sen, 2004, p. 9).

The study also reported, “79 percent of Americans take corporate citizenship into account when
deciding whether to buy a particular company’s product, and 36 percent consider corporate
citizenship an important factor when making purchasing decisions (Bhattacharya and Sen, 2004,
p. 9). Customers even may be ing to pay a higher price for products and services of companies
that engage more in CSR activities (Servaes and Tamayo, 2013).

2.2.4 CSR and profit

Researchers around the world have analyzed corporate social responsibility topics. Fifka (2013)
studied whether there are different approaches to empirical research on determinants of
responsibility reporting starting from the geographic regions and found that there were different
approaches but resulted minor differences. Krisnawati (2014) developed a chronology of theories
applicable to CSR, their evolution, the link between them and the current state of knowledge.

Freeman et al. (2010) considered that the interests of the various stakeholder groups are common
and that the value creation process best handled by managing stakeholder relations. Another
fundamental aspect of stakeholder theory is to identify stakeholders, how companies interact with
them. In other words, which stakeholders matter in decision-making processes, and whether they
have an advantage?

Donaldson and Preston (2018) identified two stakeholder groups: one in which management has
an obligation or duty and one that affects or affected by the entity. Their conclusion is that,
although management may need to take into account the interests of both groups, only the first
group is legitimate enough that management decisions act in its best interests.
Stakeholder theory closely related to value creation for the entity and the stakeholder. Dumitru et
al. (2018) studied the relationship between stakeholder theory and value creation through
integrated reporting and found that communication is an important element for value creation,
and that there are discrepancies in the content of disclosure reports that address different
stakeholder categories (investors, customers, and employees).

For our study, the most relevant is the stakeholder theory (1984) because it could interpreted as
an essential condition for CSR. It combines the wellbeing of the stakeholders with ethical
obligations, thus also maximizing the wealth for the society. Another important aspect of this
theory is the transparency through the extending of non-financial reporting. It also offers
guidance regarding the balance of the stakeholder interests based on sustainability and the
necessary management tools for business operation (2006). An important category of
stakeholders is employees and “CSR can have positive effects on employees’ motivation, morale,
commitment, and loyalty to the firm” (2018).

In a broader way, CSR represents achieving success in an ethical manner with respect to
people, community and environment. If philosopher Aristotle referred to good deeds, later the
utilitarian has, beginning with Bentham (2000) and Mill (1998), concentrated on this concept in
accordance with its effects and consequences, while Kant (993) had another vision, bringing the
ethics of duty into consideration.

In this vision, the attitude of a company to do well has as its goal the long-term economic
outcome, where for Kant the intention of an action is important, not its effect, when its ethical
and moral value is considered. He referred to the concepts of “necessary or owed duty towards
others” and

“Meritorious duty to others” showing that “the natural end that all beings have is their own
happiness”.

The ethical elements applied to the CSR concept manifested at the individual level by “being a
better person” and at the group level refers to the social behavior of the company and the people
within it, to “profit” and “CSR” values.
From all these theoretical positions, results an increasing concern of correlating the company’s
well-being with the well-being of society and the environment in which it operates. In this group,
the environmental concerns and the integration of companies could integrated, as well as the way
in which the rights and freedoms of the individual are respected as active members of the
company’s activities, which also attracts some concepts derived from the theory of law, such as
the social contract, universal and constitutional rights and labor law.

From the research done on key words “profit”, “profit” and CSR, it found that several researchers
were concerned about defining these concepts in published articles. Most have considered that
“profit” is associated with a profit-generating business, i.e., with being profitable, while “CSR”
with CSR. Kotler and Lee (2005) mentioned in their book the practical aspects of CSR and
formulated six options for “CSR” and twenty-five best practices for “doing the most good for the
company and the cause”.

The two concepts are often used together to capture the attention and understand that it can create
a win–win situation. Laszlo (2003) is the promoter of the responsibility–profitability relationship
and asserted that CSR brings value to the company in the long term.

The opposite concept of “profit” is “loosely” that is equivalent to financial losses from
companies, but which can recovered later through CSR actions. In addition, the opposite of
“CSR” is “loss”. These expressions have assimilated to a new concept, corporate social
irresponsibility (CSI) that describes the effect of harmful activities in which a company engages.

From the literature review, over the last twenty years, it found that there are theoretic, qualitative
and quantitative papers that have studied the correlation between the two concepts “profit” and
“CSR”. We selected the most relevant papers in the literature, from Web of Science and other
important databases.

From the theoretical point of view, Kittilaksanawong (2011) analyzed the conceptual framework
of CSR to identify long-term social objectives in line with stakeholders’ expectations, proposed
new CSR strategies, and pointed out that the practical implementation of CSR involves costs but
should considered as long-term investment. Kreps and Monin (2011) studied cases of
inconsistency between private and public moralization, identified some of the precursors of moral
consciousness, analyzed the expected positive or negative consequences and highlighted the
reasons why corporative actors show ambivalence in their public statements, exposing moral
frameworks and appreciating psychological complexity and multiple factors influencing moral
decision.

Falk and Heblich (2007) advocated the idea that CSR is a “win–win strategy”, showed the
evolution of CSR over time and argued for the planning process and the strategy of the CSR
activities, as a requirement to meet the stakeholders’ needs. Varadarajan and Kaul (2017)
proposed elements of innovation of the relationship through “alleviating negative environmental
impacts and social impacts of value chain activities”.

Rojas et al. (2006) highlighted that “the stakeholder approach may benefit from a number of
theoretical tools developed in the fields of organizational economics, business strategy and
finance”. Sneirson (2007) analyzed the arguments behind the stakeholder theory and identified
the following common justification: subsidies (grants) received by corporations from the state,
the size and economy of corporations, the economic effect of their activities, the separation of
shareholders from the control activity, and managerial discretion.

Based on the analyzed studies, Aspelund et al. (2017) found that the stakeholder theory
frequently invoked and “the international firms engage in CSR activities in order to satisfy
external stakeholders, rather than a deeply held commitment to ‘do good’”. He supports more the
idea of firmly adhering to the company’s ethical code, without accepting influences from the host
country, which may sometimes interfere with the company’s behavior and decisions, as well as
with the social rigors of the location, especially those who have a transnational positioning and
are trying to adapt to local conditions and requirements.

The conclusion of most theoretic articles showed a positive relationship between “profit” and
“CSR”, but this relationship could change under an inefficient market. The opinion expressed by

Karnani (2011) was contradicted by Rivoli and Waddock (2012) who claimed that CSR is not “an
illusion, but an integral part of human progress”.

In the qualitative research, on the analyzed topic, the authors used as methods: the review of the
sustainability reports, experimental studies and case studies.

Sherman (2015) analyzed the sustainability reports and provided an overview of the Triple
Bottom
Line (TPL) concept and the way it changes how corporations report their CSR activities. He
concluded that there is a need for TBL reports to provide relevant, comparable, and externally
verified information about an organization to assess its relative economic, environmental and
social performance.

Popowska and Ratkowska (2015), based on the analysis of the sustainability reports of 13
multinational companies from products sector, proposed a definition and presented a method of
analyzing corporate global commitment to the CSR approach. Provided insight into how
companies can create value for different stakeholder group and showed that businesses are aware
of the needs and expectations of different stakeholders and know how to fulfill them.

In experimental studies, Chernev and Blair (2017) demonstrated that social good change the
consumers’ perceptions of the products of companies that are involved in social activities and are
perceived to have better performances, so “CSR can really translate into a profit”. In another
experimental study, Wilson, et al. (2017) summarized the design principles for ensuring a
socially responsible product and their impact on the world as a whole by minimizing the negative
environmental impact.

Looser and Wehrmeyer (2017) studied, through a qualitative analysis of a focus group of
managers from multinational companies and from small and medium companies (SMEs) from
Switzerland. the behavior regarding CSR, the differences in motives for CSR between large
companies (LC) and SMEs and “concluded that “CSR” matters more for some than “profit”, but
those who do good do not necessarily care whether they do well by CSR”.

The studied qualitative research highlighted a strong relationship between CSR and performance
and the companies must be more socially responsible for a better reputation, to meet the need of
the stakeholders.

2.2.5 CSR and Sales volume

Although the CSR concept discussed for decades, the literature has failed to provide a
wellaccepted definition (Mciams, Siegel, & Wright, 2006; for a review, see Carroll, 1999). One
commonly accepted definition calls CSR the ‘firm’s consideration of, and response to, issues
beyond the narrow economic, technical, and legal requirements of the firm’ (Davis, 1973: 312).
As with many definitions originating in Western countries, that definition excludes basic legal
responsibilities. In developing countries, where non-compliance, tax evasion, and fraud are
common, strictly following the rules and regulations may well be manifestations of a responsible
firm (Dobers & Halme, 2009; Jamali & Mirshak, 2007). To make sure the concept of CSR is
relevant in the local context (Li,Leung, Chen,&Luo,2012;Tsui,2007,2009), we define CSR more
broadly as embodying legal, ethical, and discretionary responsibilities.

Our definition underscores the importance for firms to integrate actively legal and ethical
guidance with business practices, such as by ensuring product safety and adequate information
disclosure, beyond philanthropy. Scholars have long debated CSR’s relationship to firm
performance. Some have taken the profit-maximizing view to argue that social responsibility
impairs shareholder value because it causes inefficient resource allocation, distracts from
maximizing profits, induces unnecessary costs, and disadvantages firms in economic competition
(Friedman, 1970; Jensen, 2002; Mciams & Siegel, 1997). In contrast, others have taken a
stakeholder view to assert that corporations depend on relationships with many constituent
groups (stakeholders), which affect and affected by their decisions (Donaldson & Preston, 1995;
Freeman, 1984). Key stakeholder groups include employees, customers, suppliers, creditors,
communities.

2.2. Review of Empirical Studies

A study was carried out by Uvaneswaran & Hussien (2017) to assess investment on CSR and its
effect on financial performance covering 11 commercial banks for the period of five years
(20122016). The researchers analyzed data using descriptive statistics as well as econometrics via
multiple regression analysis which the researchers later modified to a single regression due to
existence of multicollinearity with the three independent variables they intended to study. The
study had taken financial performance in terms of Net profit before tax (NPBT) as the dependent
variable Y, and CSR activities in monetary value as the independent variable X. The findings
indicated a p-value of 0.000 proving there is a significant relationship between CSR activities and
NPBT at 1% significance level.

More over the above study determined in detail the type and exact figures that were invested in
various CSR activities and concluded that commercial banks generally engage in education
activities, followed by health and environment CSR activities.
Another study was carried out by Daniel (2014) with the objective of determining effect of CSR
on financial performance of banks in Kenya. Secondary data was used on 44 commercial banks
for the period of five years 2009-2013.Multiple regression analysis was used to identify the
relationship between CSR and firm’s performance at 5% significance level. The researcher
measured financial performance in terms of Net profit before tax as the dependent variable Y and
investment in CSR measured using monetary spending on social activities as the independent
variable X. the findings indicated CSR has a positive and significant effect on firms’ financial
performance in addition the study revealed that CSR improves financial performance of all
commercial banks regardless of their size.

Yigit & Mukhtar(2017) aimed to examine the effect of CSR dimensions on corporate financial
performance (CFP) of commercial banks in emerging economies, namely Turkey and Nigeria.
Secondary data was used to collect data for the period of six years 2009-2014 from 12 selected
banks from turkey and 14 banks were selected from Nigeria stock exchange making the number
of observations 156. The researchers used Descriptive statics and Panel data multiple linear
regression analysis to determine the relationship between CSR and CFP. The researchers took
CFP as the dependent variable whereas CSR is corporate social responsibility score is the
independent variable. Size as a log of total assets and age as the number of years passed from the
foundation of the bank were the control variables. The study employed accounting based
measurement for financial performance using Return on asset (ROA) and net interest margin
(NIM). The findings show that CSR has a positive impact on CFP in Nigeria. However, there was
no statistically significant relationship between CSR and CFP in Turkey. Additionally, Bank size
and CFP were revealed to have a significant relationship.

Ofori et.al (2014) studied the views of Ghanaian banks on CSR practices, the motives behind
their CSR activities and the relationship between CSR practices and their financial performance.
Both primary and secondary data was used with a sample size of 22 Ghanaian banks and
purposive sampling method was employed to select respondents from the banks. Moreover, to
determine the relationship between CSR and CFP correlations and regression analyses was used.
ROE and ROA were taken as the dependent variable while mean scores of banks’ CSR practices
were taken as the independent variable in addition debt ratio (DR), origin (ORIG), size (SIZE)
and growth (GROW) were the control variables. The researchers found that banks in Ghana view
corporate social responsibility practices to be a strategic tool; banks are motivated to practice
corporate social responsibility by legitimate reasons as much as they are motivated by
profitability and sustainability and 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 instead it depends on other
control variables, like growth, origin, debt ratio, and size.

Szegediet al (2020) investigated corporate social responsibility (CSR) in Pakistan’s banking

sector, CSR disclosure practices and their impact on financial performance using data from the
period of 2008 – 2018. The researchers used content analysis to measure CSR disclosure and
panel data to determine the relationship between CSR and Financial performance. They findings
showed that CSR Disclosure had increased over time and as a result accounting based financial
performance measured by the return on equity (ROE) and return on assets (ROA) has also
improved however, market based measures were not affected by it.

Selcuk & Kiymaz (2017) studied the relationship between financial performance and corporate
social responsibility (CSR) of firms listed on Borsa Istanbul stock exchange during the period of
2009-2011 using return on asset (ROA) as the dependent variable and CSR disclosure in three
dimensions the depth of CSRD (the total number of sentences the company devotes to the seven
CSR dimensions in its annual report), depth of CSRD (the total number of pages dedicated to
CSR), and CSRD breadth (the number of CSR dimensions that the corporation refers to in its
annual report) as the independent variable while controlling size, liquidity, risk , R&d , leverage
and growth of the firms .The researchers found a negative relationship between CSR and
financial performance of firms who disclosed their CSR activities. However, larger and more
liquid firms have higher profitability than smaller and less liquid firms while highly levered firms
and firms with higher beta coefficients experience lower profitability and research and
development expenditures do not have a significant relationship with profitability.

Another study carried out by Taskin (2015) analyzed the bidirectional relationship between CSR
practices of Turkish banks and their financial performance which is proxied by ROE, ROA and
NIM where as content analysis was employed to find out the degree of CSR level while
controlling for Size. The researcher concluded that CSR scores were found to decrease ROA and
ROE, no statistical significance and thatbanks with more CSR practices have lower profitability.
However, CSR-index had a positive and significant coefficient, suggesting that banks with higher
CSR scores tend to charge higher NIMs from their customers. Lastly Size was found to have a
positive and significant effect on the ROA and ROE but a negative effect on the NIMS.

2.3 Review of Conceptual Framework

Corporate Social Responsibility Theories

One major theme in the literature about CSR is that companies who seek to improve their
community do well in business as a result (Boulouta & Pitelas, 2014). Contrasting themes
indicated that the primary focus of a business should be to increase profits and that CSR
investments conflict with that goal (Byerly, 2013). Bellow (2012) argued that efforts to be a good
corporate citizen not only benefits society as a whole, but also provides significant benefits for
the company.

Bellow (2012) suggested that innovation could serve as a factor in ensuring that company and
social benefits align. There are several theories utilized by researchers studying CSR. These
approaches vary based upon the level of analysis and the aspect of CSR examined. Scholars’
exploring CSR at the institutional level employ institutional theory (Aguinis & Glavas, 2012).
Alternatively, researchers analyzing CSR at the individual level apply organizational justice,
social influence, needs, and self-determination theories (Rupp & iams, 2011). Furthermore,
scholars concentrating on the organizational level tend to select resource-based view of the firm
theoretical frameworks (Barney, Ketchen, & Wright, 2011). I examined institutional theory and
stakeholder theory to provide a comparison of theories used in similar studies.

2.3.1 Stakeholder theory

Stakeholder theory is a comprehensive generalized method that has the dual purpose of
explaining the structure and operation of a corporation and serving as a primary guide for the
business itself (Donaldson & Preston, 1995). Mansell (2013) stated that stakeholder theory plays
a significant role in exemplifying the importance of theorization about the social responsibilities
of organizations. Scholars proposed that through stakeholder theory, organizations have a moral
duty to operate as socially responsible entities even though the underlying goal of a company is
to maximize profits (Brown & Forster, 2013; Luethge & Han, 2012). Donaldson and Preston
(1995) viewed the corporation as an entity in which numerous internal and external stakeholders
accomplish various purposes.
Scholars also use stakeholder theory as a framework to examine stakeholder management
(Walley, 2013). This approach identifies the significance of relationships between organizations
and stakeholders, noting that these relationships influence the sustainability and level of success
experienced by the company (Hill & Jones, 1992; Stueb & Sun, 2015). Stakeholder theory
applies to any organization; however, each institution needs to conduct an individual examination
to determine which stakeholders exist (Spence, 2016). Managing the conflicting agendas of
stakeholders is imperative to the success of project management. Stakeholder theory correctly
includes suggestions that the sustained success and existence of an organization is dependent on
the unceasing support and approval of stakeholders (Luethge & Han, 2012). Companies risk
losing societal legitimacy when they neglect to incorporate stakeholder concerns with strategic
outlook (Brower & Mahajan, 2013).

Epstein and Buhovac (2014) also found that improving stakeholder relations by addressing social,
environmental, and economic issues imperative to those stakeholders improves business
profitability and sustainability. Ayuso, Rodríguez, García-Castro, and Ariño (2012) stated that
stakeholder theory has connections with literature examining CSR and sustainability. Usman and
Amran (2015) established that the longevity and sustainability of an organization are reliant on a
successful balance between profit maximization and social performance. Chabrak (2015)
suggested that corporate managers focus more than ever on equally attending to all stakeholders
to maintain effective relationship management.

Greenwood (2007) also applied stakeholder theory to the analysis of political implication
associated with stakeholder management. Walker (2013) explored the use of stakeholder
relationship management to affect and moderate regulatory processes. Furthermore, Walker
(2009) suggested that the application of stakeholder theory emphasizes how organizations
employ grassroots lobbyists to strengthen personal political, social, and economic interests.

Finally, Mansell (2013) discovered a substantial intersection between stakeholder theory and
CSR. Stakeholder theory incorporates the idea that CSP activities are necessary to respond to
stakeholders, enhance corporate reputation, and increase productivity supporting the presence of
a positive relationship between stakeholder theory and CSP (Inoue & Lee, 2011). Similarly,
Huang and Yang (2014) utilized stakeholder theory to confirm a significant positive CSP-CFP
relationship.
Stakeholder identification is an action that requires an organization to recognize key stakeholders
who can affect organizational activities and who are affected by the activities of an organization
(Freeman, 1984; Kumar, Rahman, & Kazmi, 2016). Managing stakeholder relationships is
imperative to the success of any corporation. Gil Lafuente and Paula (2013) stated that building
sustainable relationships with stakeholders begins with stakeholder identification. Many
companies prefer that a specific department handle the identification of stakeholders while others
task managers with this duty. Hill and Jones (1992) and Stueb and Sun (2015) confirmed that
relationships with stakeholders play a significant role in the sustainability of an organization
through the lens of stakeholder theory (Hill & Jones, 1992; Stueb & Sun, 2015).

The basis of this review of the literature surrounding stakeholder identification is CSR strategy.
Most researchers agree upon the importance of stakeholder identification and categorization.

However, researchers have not adopted one universal identification or classification approach
(Kumar et al., 2016). Much of the current literature surrounding stakeholder identification relied
upon previously developed theories (Walley, 2013). Some studies utilized a managerial
perspective approach in which managers personally identified key stakeholders based upon their
perception of the stakeholder’s influence (Kumar et al., 2016). Byerly (2013) suggested that
organizations identify the stakeholders that create the operational atmosphere and then prioritize
them based upon their strategic importance to the company

Freeman’s approach (1984) focused on every stakeholder all at once. Furthermore, Freeman
divided stakeholders into two categories, internal and external (1984). Clarkson (1995)
categorized stakeholders as either primary or secondary 19 stakeholders with primary
stakeholders being critically vital to an organization’s success while secondary stakeholders have
a limited ability to affect the organization. Henriques and Sharma (2005) offered yet another
contrasting approach, which based the identification and classification of stakeholders upon their
dependence on resources. Epstein and Buhovac (2014) suggested that stakeholders are either core
stakeholders, who are evident and affect organizational decisions or fringe stakeholders who are
weak and impartial. Though scholars do not agree on the best way to identify stakeholders, they
do concur that it is an imperative step.
Source: (Carroll, 1979), Wood (1991), Dakito (2017)

CHAPTER THREE

METHODOLOGY

3.1 Study Area/Setting

This study was conducted on one government owned bank branch (commercial bank of Ethiopia)
and three selected private banks (Awash bank, Dashen bank and bank of Abyssinia) which are
found in Addis Ababa city, Ethiopia. It was selected due to the fact that its proximity of the
researcher eases access to its Respondent.

3.2 Research Design

The researcher used cross sectional descriptive and explanatory research design. A cross sectional
descriptive research design was undertaken in order to ascertain and be able to describe the
characteristics of the variable of interest in the study. A cross sectional survey enables data to be
collected across several respondents at the same time (Cooper and Schindler, 2003). The research
aimed at offering a profile of the phenomena of interest from a specific perspective. The research
was restricted to fact findings and the results were used in forming important principles of
knowledge and solutions to significant problems. To accomplish the objectives of the study both
qualitative and quantitative (mixed) research strategies are used to know the current conditions of
selected banks in Addis Ababa with regard to CSR and Organisational performance (ROE, ROA,
and ROS). The rational of using such a mixed strategies is to gather data that could not be
obtained by adopting a single method (Creswell, 2003).

3.3. Research Approach

This study employed more of quantitative case study method to answer the research questions
and used some qualitative information to know the current conditions of Banks with regard to
relationship CSR and Organizational performance (ROE, ROA, and ROS). This quantitative
approach was applied to identify the impact of relationship CSR and Organizational performance
(ROE, ROA, and ROS). In this research both Quantitative and Qualitative or mixed methods
approach can be applied to study a topic. The rational of using such a mixed approach is to gather
data that could not be obtained by adopting a single method (Creswell, 2003). It proved to be
suitable for the researches that were used structured questionnaire to collect data, depend on
small sample size and results would be presented and analyzed using statistical methods. It places
greater emphasis on the numerical data and statistical test to achieve conclusion that can be
generalized (Saunders, 2012). Thus, to attain the objective of the study and answer the research
questions; researcher was adopt both quantitative and qualitative (mixed) research approach to
know the current conditions of selected branches banks in Addis Ababa city with regard to
relationship CSR and Organizational performance (ROE, ROA, and ROS).

3.4. Population and Sampling Design

3.4.1. Population of the Study

The study had a population of 16 commercial banks as listed by the National Bank of Ethiopia as
2019/2020 Annual report. From these 5 Banks branches were incorporated in the study base on
their size and geographical location. Thus ,the target populations of this study are customers of
Commercial Bank of Ethiopia, banks (Dashin bank, Bank of Abyssinia, Hibret Bank, Addis
international bank, Zemen bank) which are located in Addis Ababa city consider previously and
recently emerged Banks in the market. Unit of analysis is related with the population (specific
population) that is used to collect data. Thus the unit of analysis for this study was employee of
selected bank.

3.4.2. Sampling Design & Sample Size Determination

According to Williams (1997) it is necessary to select a subsection of the elements from the
population under consideration to make the research more manageable. If this subsection is
chosen following the correct principals it should be possible to draw inferences about the
characteristics of the population on the basis of the statistics derived from the sample (Brannick,
1997). The sample frame be design from the total number of commercial banks in Ethiopia
(There are 16 banks as total population). For the purpose of this study, the population is all
private commercial banks in Ethiopia. The research focus on Private Banks establish with major
objective of generating profit. The area in which private banks is open their branch is in the area
where quick return expect. From the given numbers of banks, the study focused on total number
five banks (Dashin bank, Bank of Abyssinia, Hibret Bank, Addis international bank, Zemen
bank) of population assume and sample be taken. The sample is considered risk and compliance
management, Audit, IBD and operation practitioners (Directors, managers, analysts, recovery
/monitors officers, Division head/audit analysts /officers, Section Head) to require information
and give interview.

3.4.3. Sample Selection Technique

The research used a Non-probability Sampling, which is Purposive Sampling by thinking about
the CSR inclusion and accessibility of Data on the Banks to choose test from the Total Population
of 16 business banks.

3.5. Source of Data

The primary data for the research are gathering over a three week period. In addition to the
sources of secondary data, the researcher tried to refer to different books, published and
unpublished documents, journals/articles, policy, procedure, annual reports, and magazine are
used to support the facts acquired through primary data to get information on theoretical CSR of
bank employee and consider CSR and Organizational performance (ROE, ROA, and ROS). After
taking into consideration the large number of potential respondents in the sample size along with
the information required to meet the research objectives the research instrument was decided on a
well-designed questionnaire.

3.6. Methods of Data Collection

This section presents explanation of the methodological issues and considerations regarding
obtaining and handling the data used in the study. In all there are 50 items/questions on the
questionnaire using a five point Likert scale. The Likert scale was used whereby the respondents
asked to rate a particular issue on a scale that ranged from strongly disagree to strongly agree.
The rating scale had an even number of choices ranging from a scale of one to five. The scales
used in the questionnaire were based on a 5-point Likert scale (with 1= strongly disagree, 2=
disagree, 3= no opinion, 4=agree, 5= strongly agree) for each close-ended question. The
questionnaire are prepared in English language they could easily understand the questions
because the respondents were known and told through English language. The items in the
questionnaires comprised of close-ended items. The instrument used in the study was a standard
questionnaire adapted from “Corporate Social Responsibility: A Survey among SMEs in
Bergamo’’ developed by Campopiano Giovannaa (2012). The physical questionnaires are
administered to the respondent in their office at the end of their work, whereby questionnaires are
handed out to respondents for self-completion and returned to the researcher immediately. Their
participation was voluntary and completely anonymous. It took approximately 20 to 30 minutes
to complete the questionnaires.

3.6.1. Validity and Reliability

Validity and reliability of the measures need to be assessed before using the instrument of data
collection (Hair 2003).

3.6.1.1 Validity
Validity concerns whether an instrument can accurately measure, while reliability pertains to the
consistency in measurement. The questionnaires are tested for content validity via university
academics from the school of graduate studies at CPU College with advisor and academic
background. An approval from advisor and other consultants is applied in order to increase the
content validity.

3.6.1.2. Reliability
Bhattacherjee (2012) defined reliability as the degree to which the measure of a construct is
consistent or dependable. Reliability implies consistency, but not accuracy. Cohen et al. (2007)
stated that alternative measure of reliability as internal consistency is the Cronbach alpha,
frequently referred to as the alpha coefficient of reliability, or simply the alpha. The Cronbach
alpha provides a coefficient of inter-item correlations, that is, the correlation of each item with
the sum of all the other relevant items, and is useful for multi-item scales. It also indicates that
whether a scale is one-dimensional or multidimensional. The normal range of Cronbach’s
coefficient alpha value ranges between 0-1 and the higher values reflects a higher degree of
internal consistency. Different authors accept different values of this test in order to achieve
internal reliability, but the most commonly accept value is 0.70 as it should be equal to or higher
than to reach internal reliability.

3.7. Methods of Data Analysis

Once raw data was collected, quantitative methods of data analysis which transforms raw data
that makes it easily to understand and interpretable. The data was transformed into useful outputs
such as frequency tables and descriptive statistics was used to describe the data. The results are
used to draw conclusions, recommendations from existing literature were used and sources
acknowledged. Then based on the information obtained from data analysis, generalizations about
the population are made.

Data obtained analyzed using descriptive statistics such as frequencies of response and
percentages use of SPSS Version 25 at the 0.05 level of significance. Regression analysis used to
know by how much the independent variable i.e. effect of organizational cultures, the dependent
variable which is employee performance. Correlation analysis also conducted to measure the
strength of the effect of organizational cultures dimensions and employee performance. And also
descriptive analysis used for the demographic factors such as sex, age, education level and
employment group. Classical linear regression model used to analyze the relationship between
the dependent and independent and control variables at 5% significance level.
Model specification with variables
This section involves the adoption of a model to explain the effect of the corporate social
responsibility on financial performance. Depending on pervious literature from the Ethiopian
context, a panel regression model be employ and the model be develop as follows

ROA = α + Donation expense + ROE + ROS + RMS + NIM + £

ROA it = αi + β1* DON it + β2*ROE it + β3*ROS it + β4*RMS it + β5*RNIM it + £

Where:

• ROAit= Return on Asset for bank i at time t

• ROEit= Return on equity measures measure of financial performance bank i dividing net
income by shareholders' equity at time t

• ROSit= Return on seal measure how efficiently a bank i turns sales into profits at time t
• RMSit= Market Share for bank i at time i measured as a percentage of an industry's total
revenues.
• RNIMit= Net interest margin is a measure of the difference between the interest income
generated by banks i and the amount of interest paid out to their lenders, relative to the
amount of their assets at a time t.

• £it = error term

3.8. Ethical Consideration

Ethics is the core to human relations and dignity. Ethical codes are written to cover the specific
problems and issues that researchers frequently encounter during research work. In this study, the
researcher informed the participants about the objectives of the study. The respondents assured of
confidentiality and protection of their name. Also it made clear that the information gathered
would solely be used for the purpose of this study. Any deceptions in data collection were
avoided. Finally, the research was took at most precaution before undertaking the research and
informs the participants in the study about the objectives of the study, and is consciously consider
ethical issues in seeking consent, avoiding deception, maintaining confidentiality, respecting the
privacy, and protecting the anonymity of all respondents.
 CHAPTER FOUR
DATA ANALYSIS, FINDINGS, AND DISCUSSIONS

4.1 Introduction
This study aimed to identify the effect of corporate social responsibility on the financial
performance of five commercial banks by using panel data for the period of six years starting
2014 – 2019. This chapter presents the descriptive statistics, CLRM assumptions diagnostic test
results for multicollinearity, heteROSkedasticity, autocorrelation, normality and analysis and
interpretation of regression output from SPSS Version 24.

4.2. Descriptive Statistics

4.2.1 Descriptive Statistics on Background Information of Respondents

The background information is the demographic characteristics of respondents that include:

gender, age, level of education, work experience and job category. This aspect of the analysis
deals with the personal data on the respondents of the questionnaires distributed to them. This
information was required to ensure that the sample that participated in the study have similar
distribution of the respondents by characteristics to that of the population it was drawn from. This
determines the accuracy and representatives of information drawn from the sample to the
population. The table below shows the details of background information of the respondents.

Table 1: Shows background information of Respondents

S.No. Characteristics of the Frequency Percentage (%)

Respondents

1 Gender

Male 124 60.8

Female 145 39.2

Total 270 100.0

2 Age

21 to 30 years 138 51.2

31 to 40 years 103 38.4

41 to 50 years 25 9.6

51 to 60 years 4 .8

Total 270 100.0

3 Educational Qualification

College Diploma 8 4
Bachelor Degree 216 80

Master’s Degree 46 16
Total 270 100.0

4 Work Experience

1 to 3 years 118 44

4 to 7 years 81 30

above 7 years 70 26

Total 270 100.0

5 Job Category

Clerical Staff 216 80

Managerial Staff 54 20

Total 270 100.0

6 Work place

Head Office 54 20

Branches 216 80

Total 270 100.0

Source: Researcher`s Survey Data (2021)

As shown in table 5 above, as far as gender of respondents is concerned, the survey results show
that there are more males as compared to females. Male respondents represented 60.8%, on the
other hand 39.2% are females. To this extent, the findings can be generalized on the male
respondents. Accidentally, this indicates that there is male dominancy within the respondents for
the study under consideration.

As shown in table 5 above, as far as age of respondents is concerned, the results show that an
overwhelming majority, 236 (99.2%) , of the study respondents were below 41 years of age,
while only 34 was above 41 years of age. This indicates that the majority of staff in the bank is in
their most productive age group and will have much time to serve the company as long as the
company remains best place to work in. Such employees are likely to perform better at their jobs
and can be more productive if motivated properly.

As regards educational level of respondents, indicated in table 5 above, it can be said from the
survey that most, 256 (96%), of the respondents were first degree and Masters Holders. These
results show that a majority of the respondents had adequate education and knowledge to enable
them to understand the concept of the questions and respond to the questionnaire asked in the
study. The results also practically imply that the bank has adequately educated employees who
are likely to perform better at their jobs. Therefore an employee with better educational level has
a chance to effectively and efficiently perform their tasks that enhance organizational
performance. Regarding work experience of the respondents shown in table 5 above, the
majority of the respondents (56%) had worked in the bank for over 4 years. This implies that due
to the experience adequately obtained by majority of the respondents, this study is likely to
benefit because they would give more comprehensive information and acceptable responses to
questionnaires in the study. It is also implied that experienced staffs are likely to perform better
and be productive at their jobs if well motivated due to the job experience gained over time.

Pertaining to the Job Category of respondents, the respondents were asked to indicate their job
category in the bank in which they worked. The findings in the table 5 above show that, of the
samples, 216 (80%) of the respondents represented clerical staff whereas 54 (20%) of the
respondents were managerial staff. The implication on the research is that the respondents were
evenly distributed and therefore a variety of the responses were obtained.

Finally, with respect to work place in the bank, as indicated in the table 5 above, of the samples,
20 of the respondents was from the employees of various profession or position at the head office
whereas 80 % of the respondents were from the various employees of various profession or
position at branches of the bank. These results show that a majority of the work place had the
same number of respondents. The implication on the study is that varied responses from the
different departments of head office or positions of branches can adequately explore all the
expected responses from the entire organization and therefore would give balanced information
with regard to the study questions.

4.2.2 Responses on Employee Competency

This part tries to determine the level employee competency in relation employee performance.
Respondents were asked to evaluate their competence (knowledge, skills and attitude) as used in
their current job positions according to five alternative ratings as shown in the table below. Table
2: Shows the Responses on Employee Competency (n=270)

No Relationships with Strongly Agree Neutral Disagree Strongly

employees agree disagree

1 Allow Flexible 27 (10.%) 45 (16.7%) 36 0 (0%) 162 (60%)

working hours (13.3%)
2 Possibility of 27 (10.%) 171 72 (26.7)
expectation at work (63.3%)
and promotion.
3 Nursery for mothers 27 (10.%) 18 (6.7%) 45 (16.7) 36 144
(13.3%) (53.3%)
4 Suitable work place 36 126 18 (6.7%) 90
environment and (13.3%) (46.7%) (33.3%)

Canteen
5 Provision of Soft 90 144 36
loans (33.3%) (53.3%) (13.3%)
6 Additional healthcare 153 (56.7) 81 (30.0%) 36
benefits for (13.3%)
employees.

7 Group retreats for 63 81 (30.0%) 126

vacation, Trips and (23.3%) (46.7%)

events
No Communication with Strongly Agree Neutral Disagree Strongly
employees agree disagree

1 Provide and properly 63 171 36

use Box of ideas (23.3%) (63.3%) (13.3%)

2 Have Intranet 63 117 36 54

communication (23.3%) (43.3%) (13.3%) (20.0%)
system

3 Conduct Satisfaction 27 171 36 36

survey (10.0%) (63.3%) (13.3%) (13.3%)

4 Business newspaper 90 108 36 36

(33.3%) ( 40.%) (13.%) (13.3%)
5 Periodic meetings to 216 45
show results (80%) (16.7%)

No Involvement of Strongly Agree Neutral Disagree Strongly

employees agree disagree
1 Employee Volunteer 81 (30%) 45 72 36 36
with time schedule (16.7%) (28.7%) (13.3%) (13.3%)
chosen by workers

2 Employee Volunteer 81 (30%) 99 54 (20%) 36

with time schedule (36.7%) (13.3%)
chosen by the firm

3 Employee engage in 99 63 36 36 36
Fundraising as a (36.7%) (23.3%) (13.3%) (13.3%) (13.3%)

percentage of salary

No Training: Strongly Agree Neutral Disagree Strongly

agree disagree

1 Have appropriate 81 153 36

Hours of training per- (30.0%) (56.7%) (13.3%)
capita for individual
development.

2 % of 36 162 72(26.7%)
involved (13.3%) (60.0%)
employees in training
high and equal.
No Formalization of Strongly Agree Neutral Disagree Strongly
strategies to ensure agree disagree
equal opportunities:

1 Formalized 72 162 36
(26.7%) (60.0%) (13.3%)
2 Not formalized 90(33.3%) 90(33.3%) 90(33.3%)

No Support women’s Strongly Agree Neutral Disagree Strongly

work agree disagree

1 Flexible working 36(13.3%) 108(40.0%) 36(13.3%) 54(20%) 36(13.3%)

hours

2 Job sharing 99(36.7%) 81(30%) 90(33.3%)

 3 Suspension of career 45(16.7%) 45(16.7%) 72(26.7%) 54(20%) 54(20%)
at maternal times

No Hire detainees, Strongly Agree Neutral Disagree Strongly

internees and agree disagree

disabled
1 Disabled 99(36.7%) 117(43%) 54(20%)

2 Detainees or internees 90(33.3%) 18(6.7%) 90(33.3%) 72(26.7%)

3 Knowledge of tax 126(46.7%) 54(20%) 36(13.3) 54(20%)

credit for hiring of
detainees or internees

Source: output from SPSS Version 24 Analysis As shown in table 6 above, most respondents
162 (60%) strongly disagreed that they have Flexible working hour to do their job this show that
the banks have formal working hour with fixed position. Besides, majority of the respondents 171
(63.3%) indicated they agree that they have the Possibility of expectation at work and promotion.
however, 72 (26.7%) of them were neutral to this statement. It is implied that not all respondents
indicate that they have complain about the flexibility of working hour but there effort has reward
and promotion. On the other hand, majority of the respondents 144 (53.3%) strongly disagreed
that they are privileged with Nursery facility for mothers with infant which help employees to
concentrate on their job and productivity. It can be deduced that majority of respondents do have
confidence to perform their job Suitable work place environment and Canteen that is 126 (46.7%)
agree that they have suitable work place and refreshment area in their office but 90 (33.3%) of
the respondent disagree. Regarding Provision of Soft loans and other Additional healthcare
benefits for employees show that this banks employees strongly agree that the bank provide this
benefits so in figurer it is 90 (33.3%) and 153 (56.7%) respectively, also the remaining
respondents agree 144 (53.3%) and 81 (30.0%) respectively. Regarding Group retreats for
vacation, Trips and events most of the respondent feels Neutral 126 (46.7%) about such activities
organized at bank level.

Majority of respondents 171 (63.3%) either agree or strongly agree that their Provide and
properly use Box of ideas, and 117 (43.3%) of the bank employees agree that they have well
maintained office Intranet communication system also have access information about the bank
and external environment through utilization of Business newspaper and 108 (40.%) and 90
(33.3%) of employees agree and strongly agree that it is a fact. Similarly, most of the respondents
171 (63.3%) and 216 (80%) agree that there is regular Satisfaction survey & Periodic meetings to
show results of this survey and other issues at their office.

In case of employees involvement in the work place the research ask three questions. The first is
that if Employee Volunteer with time schedule chosen by workers which show mixed feeling in
the respondents 81 (30%) Strongly agree, 45 (16.7%) agree and 36 (13.3%) are strongly disagree
that they have mandate on working time schedule. Employee Volunteer with time schedule
chosen by the firm this show the same result that stated in allowing flexible working schedule
that employees respond show that 81 (30%) strongly agree, 99 (36.7%) agree, 54 (20%) disagree
and 36 (13.3%) of the respondent Strongly disagree.

As a personal development scheme the researcher ask in the questioner about training have
appropriate Hours of training per-capita for individual development and among the respondents
153 (56.7%) agree and 81 (30.0%) Strongly agree and tis training programs have high
participants turnout and the respondents also agree at 162 (60.0%).

Regarding ensuring equal opportunities for employee’s respondents agree 162 (60.0%) that the
banks have Formalized equal opportunities for its employees and strongly disagree 90(33.3%)
that it is not formalized.

Most of the respondents 108(40.0%) agree or 36(13.3%) strongly agree that the management of
the bank Support women’s work by allowing Flexible working hours especially at a time of
pregnancy and also allow job sharing 99(36.7%) of the respondent strongly agree and disagree.
Again, most of the respondents 54(20%) disagree or strongly disagree that they use their maternal
times without Suspension of career but 45(16.7%) of them either agreed or strongly agreed and
72(26.7%) were neutral to this statement. It is implied that the respondents did not get the
necessary support from the management and hence may not accomplish heartily and effectively
so as to enhance their performance.

The last question on table 6 regarding Employees in case CSR is about banks flexibility in Hiring
detainees, internees and disabled the response from respondent show that 117(43%) of them
agree that banks hire people with different disabilities. Also regarding Detainees or internees
90(33.3%) disagree and 72(26.7%) strongly disagree that the bank hire them. Knowledge of tax
credit for hiring of detainees or internees clearance is a requirement to the bank.

It can be concluded from the table that not all respondents have the required competency and
involvement with the banks to get most benefit which in return impacts their employees'
performance.

4.2.3 Responses on external Suppliers

This part tries to determine the Customer verification and formal requirement, different Issues of
direct verification of suppliers and banks Purchase of social goods and services. Respondents
were asked to evaluate their questioners according to five alternative ratings as shown in the table
below Suppliers

Table 3: Shows Responses on suppliers (n=270)

No. Customer verification Strongly Agree Neutral Disagree Strongly

and formal agree disagree
requirement.

1 Verifying customers 144 126

Self-certification (53.3%) (46.7%)
2 Requirement of 72 162 36(13.3%)
Quality certification (26.7%) (60%)
(ISO/VISION) for

customers
3 Requirement of 117 117 36
Product/service (43.3%) (43.3%) (13.3%)
quality certification
4 Requirement of for 9 63 126 36 36
Certification of proper (3.3%) (23.3%) (46.7%) (13.3%) (13.3%)
waste disposal for
different customers.

No. Issues of direct Strongly Agree Neutral Disagree Strongly

verification of agree disagree

suppliers
1 Exclusion of child labor 108(40%) 108(40%) 36 18
(13.3%) (6.7%)

2 Exclusion of forced labor 72 162(60%) 36

(26.7%) (13.3%)

3 Safeguard health and 45 189 36

safety at work (16.7%) (70%) (13.3%)

4 Safeguarding 81(30%) 117 36 36

freedom of (43.3%) (13.3%) (13.3%)
association

5 Absence of 36 162 36 36
discrimination (13.3%) (60%) (13.3%) (13.3%)

6 No corporal 54 126 54 36
punishment, mental and (20%) (46.7%) (20%) (13.3%)
verbal abuse

7 Regular working 45(16.7%) 189(70%) 36

time (13.3%

8 Provide Salary in 117(43.3%) 126(46.7%) 27(10%)

accordance with legal or
industry minimum wage

No Purchase of social Strongly Agree Neutral Disagree Strongly

goods and services: agree disagree
 1 Introduction of the 9(3.3%) 189(70%) 72(26.7)
disadvantaged in the labor
market

2 Socially responsible 99(36.7%) 117(43.3%) 36 18(6.7%)

production
(13.3%
3 Conduct in Fair trade 81(30%) 117(63.3%) 18(6.7%)

Source: Computation from SPSS 20 Analysis

As indicated in the table 7 above, the survey revealed that majority of respondents 144 (53.3%)
strongly agree that they have the authority to Verifying customers Self-certification and the rest
126 (46.7%) of the respondents also agree, and 16 (60%) agree or 72 (26.7%) strongly agree that
they have Requirement of Quality certification (ISO/VISION) for customers who are potinatialy
lone requesters and again majority suppliers Requirement of Product/service quality certification
to get different services at the bank 117 (43.3%) agree and also strongly agree.; regarding the
Requirement of for Certification of proper waste disposal for different customers have a response
of 36 (13.3%) disagree or strongly disagree and 126 (46.7%) are neutral to this last statement.
Regarding the Issues of direct verification of suppliers the response show that banks only work
with credible and legally operating suppliers and customers of most of the issues like Exclusion
of child labor, and Exclusion of forced labor is national safety issue that more than half the
respondent agree 162(60%) for clarity. Safeguard health and safety at work is mandatory
according to the respondent that show 189 (70%) agreed upon. the findings further revealed that
most of the respondents 117 (43.3%) agree or 81(30%) strongly agree with the statement that
Safeguarding freedom of association and also Absence of discrimination based on different issues
are highly unacceptable so 126 (46.7%) of the respondents agree or 54 (20%) strongly agree.

Furthermore, most of the respondents 189(70%) agree that their Introduction of the
disadvantaged in the labor market. And also the respondents agree that 117(43.3%) of them
accept socially responsible production and also expect their customers and suppliers to Conduct
in Fair trade.

4.2.4 Responses on customer

This part tries to determine the level s Social investments in commercial, Surveys of customer
satisfaction, and Sustainable product line regarding to CSR.

Table 4: Response on customer (n=270)

 No. Social investments in Strongly Agree Neutral Disagree Strongly
commercial: agree disagree

1 Use Advertisement 126(46.7%) 108(40%) 36

messages containing the (13.3%)
social value

2 Cause related marketing 81(30%) 144 36 9(3.3%)

to create positive (53.3%) (13.3%

influence on society
No. Surveys of customer Strongly Agree Neutral Disagree Strongly
satisfaction: agree disagree

1 Conduct Regular 45(16.7%) 189(70%) 36(13.3%)

surveys
2 Conduct Occasional 99(36.7%) 135(50%) 36(13.3%)
surveys
No. Sustainable product Strongly Agree Neutral Disagree Strongly
lines: agree disagree

1 By considering 63(23.3%) 135(50%) 72(26.7%)

Environmental value
2 Dedicated to the 90(33.3%) 36(13.3%) 126(46.7%) 18(6.7%)
disadvantaged of
externalities and

Environmental value.
Source: output from SPSS Version 24 Analysis

As indicated in the table 8 above, most of the respondents, 126(46.7%) either strongly agreed or
108(40%) agreed that there is Use of Advertisement messages containing the social value
whereas 144 (53.3%) of them either agreed or 81(30%) strongly agreed that Cause related
marketing to create positive influence on society is important. This implies that Social
investments in commercial sector are important for the bank. Surveys of customer satisfaction:
Show that the banks use these instruments often to assess their customer outlook. The study
found that the banks conduct Regular surveys on it customers and respondents 189(70%) agree
upon it. Conduct Occasional surveys in different formats also are being happened and the
respondents agree 135 (50%) and also strongly agree 99(36.7%).

Majority of the respondents 135(50%) either agreed or 63(23.3%) strongly agreed that their
banks provide service to their customers by providing Sustainable product lines By considering
Environmental value of the economy. To try to solve the same problems in different ways and
help they solve problems in their work by considering Dedicated to the disadvantaged of
externalities and Environmental value. 36(13.3%) either agreed or 90(33.3%) strongly agreed that
Sustainable product lines is important to utilize potential customer.
4.2.5 Responses on Community

This part tries to determine the level employee motivation in relation employee performance.
Respondents were asked to evaluate their employee motivation as used in their current job
positions according to five alternative ratings as shown in the table below.

Table 5: Shows results Employees Responses on community

No. Donations and Strongly Agree Neutral Disagree Strongly

conditions of delivery agree disagree

1 From the bank Net 63(23.3%) 162(60%) 45(16.7%)

income generated

2 Funds of the corporate 72(26.7%) 126(46.7%) 72(26.7%)

foundation

3 From portion of the 54(20%) 108(40%) 108(40%)

Dividends
No. Areas of the donations Strongly Agree Neutral Disagree Strongly
for community agree disagree

1 Focus on Education 72(26.7%) 126(46.7%) 72(26.7%)

2 Focus on Scientific 144(53.3%) 36(13.3%) 90(33.3%)
research
4 Focus University 108(40%) 72(26.7%) 90(33.3%)
5 Focus on Health care 108(40%) 90(33.3%) 72(26.7%)
6 Focus on Social 72(26.7%) 162(60%) 36(13.3%)
interventions in the

territory
7 Focus of Interventions of 90(33.3%) 108(40%) 72(26.7%)
international cooperation

8 Focus on Entertainment, 108(40%) 72(26.7%) 90(33.3%)

restorations and

exhibitions
No Motivations for banks Strongly Agree Neutral Disagree Strongly
on community support agree disagree

1 Education 90(33.3%) 144(53.3%) 36(13.3%)

2 Scientific research 126(46.7%) 72(26.7%) 72(26.7%)

3 University 90(33.3%) 144(53.3%) 36(13.3%)

4 Health care 90(33.3%) 144(53.3%) 36(13.3%)

5 Social interventions in 90(33.3%) 108(40%)

the territory 72(26.7%)
6 Interventions of 90(33.3%) 72(26.7%) 108(40%)
international cooperation

7 Entertainment, 72(26.7%) 108(40%) 90(33.3%)

restorations and
exhibitions

8 Amateur sport 72(26.7%) 126(46.7%) 72(26.7%)

No Forms of stable Strongly Agree Neutral Disagree Strongly
collaboration between agree disagree

the organization and

the university
1 Grants 90(33.3%) 126(46.7%) 54(20.0%)

2 Research funding 129(46.7%) 90(33.3%) 54(20%)

 3 Internships 108(40%) 108(40%) 54(20%)

4 Sponsorship of cou rses 108(40%) 108(40%) 54(20%)

and events

No Criteria for Strongly Agree Neutral Disagree Strongly

determining the agree disagree
amount:

1 Fixed amount 54(20%) 72(26.7%) 90(33.3%) 54(20%)

2 Related to the quality of 180(66.7%) 54(20%) 36(13.3%)
projects

3 Net income 72(26.7%) 90(33.3%) 108(40%)

No Supply of goods and Strongly Agree Neutral Disagree Strongly
services free of charge agree disagree
for social activity:

1 Plant and equipment 72(26.7%) 126(46.7%) 72(26.7%)

2 Own products for free 72(26.7%) 180(66.7%) 18(6.78%)

3 Own discounted 72(26.7%) 180(66.7%) 18(6.78%)

products

4 Staff time to accomplish 108(40.0%) 144(53.3%) 18(6.7%)

special projects

No People responsible for Strongly Agree Neutral Disagree Strongly

decisions: agree disagree

1 Boards of Trustees 54(20%) 144(53.3%) 18(6.7%)

2 Shareholders 126 108(40%) 36(13.3%)

(46.7%)
3 Board of Directors 126 108(40%) 36(13.3%)
(46.7%)
4 CEO 54(20%) 144(53.3%) 72(26.6%)
Source: output from SPSS Version 24 Analysis
As observed from the table 9 above, most of the respondents 162(60%) either agreed or
63(23.3%) strongly agreed that there is donation provided from the bank Net income generated
by the bank and also 126(46.7%) are agreed and 72(26.7%) strongly agreed that the bank have
separate Funds of the corporate foundation. This Donations and conditions of delivery’s are
mainly funded from the banks portion of the Dividends that 108(40%) of the respondents agreed
up on.

This donations that conducted by the banks may aim at different issues at different time the
research ask divers utilization area of this funds and show respondents response as follow. The
first Focus area is on Education that show 126(46.7%) of the respondents are agreed and
72(26.7%) are strongly agreed. Then Focus on Scientific research is also one area of donation
that show 144(53.3%) respondents choose strongly agree. Different donation may consider
higher education institutions like universities 108(40%) of the respondents strongly agree and
72(26.7%) also agree upon this also it is similar in Health care sector. Also banks engage on
those who are needy in terms of Social interventions in the territory so the survey show that
90(33.3%) respondents are agreed 72(26.7%) are strongly agreed and 108(40%) of them felt
neutral. Regarding Interventions of international cooperation they help in different areas that help
the community this shown in the survey as follow respondents strongly agree 90(33.3%) and also
72(26.7%) agree upon this but again most of the respondents felt neutral. The last is the support
of this banks on different Amateur sport activities this shows 126(46.7%) they agree and
72(26.7%) strongly agree. This show that banks involvement on motivations for community
support.

Regarding community support by the banks on of the key areas include different Forms of stable
collaboration between the banks and the university. This may be in different forms one Grants
which studded in this questioner shown there is agreement of 126(46.7%) by the respondent and
some of them also strongly agreed 90(33.3%). Banks fund different researches and this shown by
the respondents replay that show 129(46.7%) and 90(33.3%) strongly agreed and agreed
respectively on this points. Also banks provide an Internships and Sponsorship of courses and
events and the resulting survey show 108(40%) and 108(40%) agreement and strong agreement
regarding banks involvement in this area.

The main Criteria for determining the amount for donation can be based on Fixed amount which
in the survey show that 72(26.7%) agree it is fixed and the 54(20%) disagree. The other criteria is
based on Related to the quality of projects that is 180(66.7%) are strongly agreed upon. And also
based of financial reporting outcome some respondents agreed 90(33.3%) that this amounts are
determined by Net income.

Banks that involve in CSR provide Supply of goods and services free of charge for social activity
including Plant and equipment that are provided in different times for different relief purposes
and survey show that 126(46.7%) agree and 72(26.7%) strongly agree and also Own products for
free is shown similar results.

The final item regarding community is about People responsible for decisions in the area of the
CSR. This show different stakeholders at different level of management make this decisions. On
the survey respondents shown that Boards of Trustees have decision which 144(53.3%) of
respondents that agree and 54(20%) strongly agree. The other party are shareholders and seen on
the result 108 (40%) and 126 (46.7%) of the respondents agree and strongly agree. Board of
director have a mandate to make a decision in this regard and it survey result show 126 (46.7%)
strongly agree and 108 (40%) agree.

4.2.6 CSR Practices

Table 6: Responses on Employee Performance Appraisal (n=270)

No the degree of relevance Strongly Agree Neutral Disagree Strongly

of the following CSR agree disagree
practices

1 Promotion of 54(20%) 180(66.6%) 36(13.3%)

collaborative
relationships with
workers
2 Major attraction of 54(20%) 144(53.3%) 72(26.6%)
skilled resources
3 Improved relationships 36(13.3%) 144(53.3%) 90(33.3%)
with funders

4 Loyalty of customers / end 126(46.7%) 108(40%) 36(13.3%)

user
5 Suggestions by the client 18(6.7%) 216(80%) 36(13.3%)
companies

6 Improving relations with 36(13.3%) 162(60%) 72(26.7%)

the community

7 Pressures from 36(13.3%) 90(33.3%) 144(53.3%)

associations and P.A.

8 Improved economic 72(26.7%) 162(60%) 36(13.3%)

performance
9 Improved reputation with 108(40%) 90(33.3%) 72(26.7%)
NGOs
10 Decreased risk of 126(46.7%) 108(40%) 36(13.3%)
scandals and crises
Source: output from SPSS Version 24 Analysis
As shown in the table 10 above, most of the respondents 180 (66.6%) either agreed or 54(20%)
strongly agreed that Promotion of collaborative relationships with workers is necessary,
supporting CSR practice also create Major attraction of skilled resources this is understood from
the research respondents 144(53.3%) agreement and among those 54(20%) strongly agreed. CSR
practice in banks in time improve which showed by Loyalty of customers / end user to the bank
and the result also 126(46.7%) of the respondent strongly agree and 108(40%) are agreed. The
other one is the benefit that bank get from publicity by its client companies shown 216(80%) of
agreement from respondents. CSR Improve relations with the community this as a result is shown
by respondents in the survey 162 (60%) agreed and 36(13.3%) Strongly agree. CSR practice is
relevant in the business environment Improve economic performance this shown 162(60%)
agreed and 72(26.7%) strongly agreed. CSR participation create publicity with the community be
Improved reputation with NGOs this show in the study 108(40%) of the respondent strongly
agree and 90(33.3%) are agree. The last question is about weather practicing in CSR Decreased
risk of scandals and crises the respondents answer that 126(46.7%) of the respondent strongly
agree and 108(40%) agree.

4.3. Correlation Analysis

This section presents the descriptive statistics of dependent, independent and control variable
used in this study. The dependent variable used in this study was Return on Asset (ROA) as a
proxy of financial performance. The independent variable was Donation expenditure (DON) as a
proxy of CSR – philanthropic contribution while the control variables under study were ROE,
ROS, RMS and NIM.

The result of the descriptive statistics which includes mean, median, maximum, minimum,
standard deviation and others statistics value and its interpretations are presented below.

Table 7: Summary of descriptive statistics of study variables for the period 2014-2019

Statistics
Source: SPSS Version 24 Output descriptive statistics
As shown in the above table 1 the mean value of return on asset (ROA) is 3.0993 which indicate
that on average selected commercial banks have achieved 3.0993 percent of ROA for the period
2014-2019. The standard deviation for return on asset is 0.73848 percent which implies that
return on asset of commercial banks may deviate from the mean value by 0.73848 percent
ranging from
2.36082 percent to 3.83778 percent. We can also observe that selected commercial banks ROA
had a maximum of 5.13 percent and a minimum of 1.96 percent.

The independent variable donation expenditure which was taken as the fraction of total expense
has a mean value of 0.01469055 percent which implies that the on average the selected
commercial banks 0.01469055% of their total expense were for donation purpose. The standard
deviation for the donation expenditure is 0.045449034% which means that the donation expenses
may deviate from the mean value by ranging from -0.03075848% to 0.06013958%. In addition, it
is shown that donation expense as a fraction of total expense had a maximum value of 0.247651
percent and a minimum value of 0. This indicates that donation expenditure was not always
consistent and carried out in the period of six years.

One of the control variable included in this study was ROE measure of financial performance
bank dividing net income by shareholders' equity of the selected commercial banks. The mean
value of 21.9230 percent .The standard deviation is 6.68831 percent which indicates that the
ROE may vary from the average by ranging from 28.61131 percent to 15.23469 percent. In
addition, it was also observed that the banks had a maximum ROE of 41.10 percent and
minimum size of 13.24 percent respectively for the years 2014 - 2019.

Another control variable included to avoid omitting an important variable ROS had a mean value
of 259.79777720 percent which means how efficiently a bank turns sales into profits total sales
revenue of 259.79777720 percent and a standard deviation of 1304.267102 percent implying that
on average the ROS of the five commercial banks will deviate from the mean value of
259.7977772 % by ranging from -1044.46932 percent to 1564.06488 percent. The results also
show that loan loss provision to total loan ratio had a maximum and minimum value of 1.027895
percent and 7164.55 percent respectively.

Another control variable included to avoid omitting an important variable NIM had a mean value
of 4.5537 percent which means measure of the difference between the interest income generated
by banks of 4.5537 percent and a standard deviation of 1.08167 percent implying that on average
the ROS of the five commercial banks will deviate from the mean value of 4.5537 % by ranging
from 3.47203 percent to 5.63537 percent. The results also show that loan loss provision to total
loan ratio had a maximum and minimum value of 2.44 percent and 6.66 percent respectively.
The last control variable included to avoid omitting an important variable RMS had a mean value
of 0.32199411 percent which means Market Share for bank 0.32199411 percent and a standard
deviation of 0.300829553 percent implying that on average the ROS of the five commercial
banks will deviate from the mean value of 0.32199411 % by ranging from -1044.46932 percent
to 1564.06488 percent. The results also show that loan loss provision to total loan ratio had a
maximum and minimum value of 0.040227 percent and .932612 percent respectively.

4.4 Model validity

This study was undertaken to determine the effect of corporate social responsibility on financial
performance of selected commercial banks. The researcher has used econometric model of linear
regression with one dependent variable, one independent variable and four control variables. All
the assumptions of the classical linear regression model have been checked. Multicollinearity test
was done by using the correlation matrix to check for the violation of this assumption .Skewness
and Kurtosis and Jargue Bera tests have been done to check the normality. The absence of
HeteROSkedasticity was done by using white test and finally, autocorrelation was checked by
using Breustch Godfrey serial correlation LM test. After these tests prove the validity of the
model, the study continued into regression analysis. The results will be discussed as follows.

4.4.1. Multicollinearity Test

The researcher used a correlation matrix to identify if there is any almost perfect relationship
between the independent and control variables. Multicollinearity is said to exist when the
independent variables have a correlation of more than 0.8 or an almost perfect or linear
relationship that’s close to positive 1 or negative 1(Gujarati, 2004), thus the result is shown
below

Table 8: Correlation Matrix

 I nter -Item Correlation Matrix
Return
Return on Return Net interest rate of Donation
on asset Equity on sales margin market share expense
Return on asset 1.000 .448 .171 -.301 -.142 .091
Return on Equity .448 1.000 .544 -.036 .454 .487
Return on sales .171 .544 1.000 .297 .187 .970
Net interest -.301 -.036 .297 1.000 .309 .377
margin

rate of market -.142 .454 .187 .309 1.000 .218

share

Donation expense .091 .487 .970 .377 .218 1.000

Source: SPSS Version 24 Output

From the above correlation matrix we can see that every independent variables have a correlation
of less than 0.970, the highest correlation value of -0.301 was observed between income
diversification and ROE, but since there is no correlation value of more than 0.97, the researcher
concluded that there is no multicollinearity issue or a linear relationship between the explanatory
variables present in this study

4.4.2. Normality Test

A normal distribution is said to have a skewness of 0 and a kurtosis of 3. According to Brooks

(2014) if the residuals are normally distributed, the histogram should be bell-shaped and the
Jarque- Bera statistic would not be significant. In this study normality test was done and the
result show that the skewness of the residuals is -0.04 which is close to zero while the kurtosis is
0.509 which is between the ranges of three and negative three. From the figure below using the
Jarque-

Bera test p-value result of 0.631 which is greater than 0.05 we don’t reject the null hypothesis of
normality assumption being met.

Table 3 Normality test analysis table

 Correlations
ROA Donation expense
ROA Pearson Correlation 1 .091

Sig. (2 -tailed) .631

N 30 30

Donation Pearson Correlation .091 1

expense Sig. (2 -tailed) .631
N 30 30
There is insignificant positive relationship b/n ROA and Donation expense r(28)=0.091

p=0.631

Table 9 Normality test descriptive analysis tables

Table 10 Normality test M-Estimator table

M -Estimators
 Huber's M - Tukey's
Estimator s Biweight b
Hampel's M -Estimator Andrews' Wave d

ROA 3.0311 3.0165 3.0405 3.0088

a. The weighting constant is 1.339.
b. The weighting constant is 4.685.
c. The weighting constants are 1.700, 3.400, and 8.500
d. The weighting constant is 1.340*pi.

Table 11: Normality test analysis using Kolmogorov-Smirnova and Shapiro-Wilk table

Tests of Normality
a
Kolmogorov -Smirnov Shapiro -Wilk
Statistic Df Sig. Statistic df Sig.
ROA .078 30 .200 * .964 30 .395
*. This is a lower bound of the true significance.
a. Lilliefors Significance Correction

Figure 1: Normality test result

Source: SPSS Version 24

4.4.3 HeteROSkedasticity Test

Homoscedasticity is the assumption that the variance of the errors is constant. If the errors do not
have a constant variance, they are said to be heteROScedastic (Brooks, 2014). The researcher
used a general test Whites test to check for the presence of HeteROSkedasticity in the residuals.
As shown in the table below we can conclude that there is no presence of HeteROSkedasticty and
the second assumption of the Classical Linear Regression Model has not been violated.(see
appendix 3)

Table 12: HeteROSkedasticity Test: Whites test

Table 13: Model Summery

Model Summaryb

Model R Change Statistics

 Std. Error R
R Adjusted of the Square F Sig. F Durbin
Square R Square Estimate Change Change df1 df2 Change Watson
1 .622a .387 .259 .63580 .387 3.025 5 24 .030 .646
a. Predictors: (Constant), Donation expense, RMS (rate of market share), NIM (net interest marigin), ROE, ROS

b. Dependent Variable: ROA

Source: SPSS Version 24 output.

From the above table all the p-values of both the F-statistic and Obs*R-squared are greater than
0.05 specially in Tables 4 Normality test descriptive analysis tables which indicates the absence
of HeteROScedasticity. So we don’t reject the null hypothesis of Homoscedasticity at 5%
significance level.

4.4.4 Autocorrelation Test

The third classical linear regression model assumption is that the covariance between the error
terms over time is zero or there is no correlation between them (Brooks, 2014). The researcher
used Breusch-Godfrey Serial Correlation LM test to identify if there is any correlation or pattern
between the residual terms. The study lagged for and tested fifth order autocorrelation. The null
hypothesis is that there is no autocorrelation and the results will be depicted below.

Table 14: Breush-Godfrey serial correlation LM Test

Variables Entered/Removeda
Model Variables Entered Variables Removed Method
1 Unstandardized Residual(-2), . Enter
Unstandardized Residual(-1)b
a. Dependent Variable: ROA
b. All requested variables entered.
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .759a .577 .544 .43358
a. Predictors: (Constant), Unstandardized Residual(-2), Unstandardized Residual(-1)
 a
ANOVA
Model Sum of Squares Df Mean Square F Sig.
1 Regression 6.662 2 3.331 17.719 .000 b
Residual 4.888 26 .188
Total 11.550 28
a. Dependent Variable: ROA

b. Predictors: (Constant), Unstandardized Residual(-2), Unstandardized Residual(-1)

a
Coefficients
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 ( Constant ) 3.060 .081 37.870 .000
Unstandardized Residual ( -1) .877 .196 .759 4.462 .000
Unstandardized Residual ( -2) .000 .186 .000 .001 .999
a. Dependent Variable: ROA

Source: SPSS Version 24 Output/

As shown in the above table the Breush-Godfrey Serial Correlation LM Test gives an F-statistic
of 17.719 with a probability of 0.0818 while the Obs*R-squared gives statics of 10.24 with a
probability Chi-Square of 0.0686. Since both are greater than 0.05 we don’t reject the null
hypothesis that there is no correlation between the error terms at 5% significance level.

4.5. Interpretation, Analysis and Discussion

According to Brooks (2014) regression is an attempt to explain movements in a variable by
reference to movements in one or more other variables. Therefore in this study regression was
used for one dependent variable , one independent variable and three control variable to
determine if these independent and control variables affect the dependent variable using SPSS
Version 24. The dependent variable is return on asset (ROA) as a proxy of financial performance
whereas the independent variable is donation expenses as a fraction of total expense (DON) and
the control variables are ROE, ROS,NIM and RMS the researcher used panel data for the
period of six years 2014- 2019. The operational model used is as follows:
ROA it = αi + β1* DON it + β2*ROE it + β3*ROS it + β4*RMS it + β5*RNIM it + £

Accordingly the following table 5 presents the result of the linear regression to determine the
effect of Donation, SIZE, Cr and INC on the dependent variable ROA.

Table 15: Results of linear Regression Model

Source: SPSS Version 24 output

Based on the above output the relationship between the dependent, independent and control
variables included in the model will be represented as follows

ROA it= 2.234 -7.170 *DON it + 0.07*ROE it +0.00 *ROS it -0.071*NIM it -0.9RMSit+ £

According to Brooks (2014), R- squared is a standardized measure or a goodness of fit statistics

that tells us how well a sample regression model fits the data, the same author defined Adjusted
R-squared as modification to R2 is often made which takes into account the loss of degrees of
freedom associated with adding extra variables.
In this study based on table 9 the R 2 and the adjusted R2 are 0.577 and 0.544 respectively, this
implies that 54.4 percent of volatilities in return on asset (ROA) are explained by volatilities in
the independent and control variables donation expense (DON), Return on equity (ROE), Return
on sales (ROS), NIM (net interest margin), and RMS (rate of market share).Thus, we can
conclude that 54.4 percent of the dependent variable has been explained by the variables included
in this model whereas the rest 45.6 percent is unexplained. In this study besides identifying the
relationship between the dependent and independent variables the researcher wanted to identify
the motive behind the selected commercial banks involvement in CSR, a semi structured
electronic questionnaire was provided to bank managers of the departments who involve directly
in the CSR activities. From the questioner the researcher was able to find out that there is no
separate department to carry out the CSR activities rather majority of the banks carry them out
under the marketing department, strategic management and business development directorate.

Therefore, we can conclude that the motive behind commercial banks involvement is image
building and company value rather than profit motive. The banks also seem to involve in areas
such as poverty alleviation, Supporting under privileged groups and job creation. Additional
point discussed in the questionnaire is the method commercial banks used to disclose their
involvement in CSR, all of the managers who responded commented that Annual reports where
the main methods to disclose the activities they involve in. However, in the researchers’ opinion
the annual reports are public but are not sufficient enough to communicate the banks involvement
to the community surrounding it. CSR of banks started to be discussed in a small portion of the
annual reports in recent years however, more work needs to be done in this area. As the
researcher discussed in the literature section of the study involvement in CSR needs to be
communicated to the society for it to have any kind of effect on the financial performance

Response rate refers to the number of people who answered the survey divided by the number of
people in the sample. It is usually expressed in the form of a percentage. In this study, the sample
size was 270 members of staff and a total of 270 valid responses were obtained from the
distribution of this questionnaire, giving the total responses rate of 100.0%. With this overall
high response rate of 100%, the findings of the study were deemed adequate to make conclusions
about the topic under study and, representative of the actual population and could therefore be
generalized, as observed by Sekaran (2003).
 CHAPTER FIVE

SUMMARYOFFINDINGS, CONCLUSIONS
ANDRECOMMENDATION
This study was carried out to find out the effect of corporate social responsibility as measured by
Donation expenses as a fraction of total expense on financial performance measured by return on
asset. The researcher also added control variables such as ROE, RMS, ROS and RNIM to avoid
the omission of important variables. The study used both primary and secondary data. The
primary data was collected from bank managers who directly involve in CSR related activities in
finance related departments, while the secondary data was collected using secondary data sources
from published annual reports of the selected five commercial banks for the period 2014 - 2019.

5.1. Summary of Major Findings

In this study the dependent variable was return on asset (ROA) as a proxy of financial
performance and the independent variable donation as a fraction of total expense as a proxy of
Philanthropic contribution , and control variables such as ROE, ROS, RMS and RNIM, this
variables were regressed using SPSS Version 24. The results from the regression showed that
there is a positive and insignificant relationship between ROA and donation expense, whereas the
control variables size and income diversification showed a negative and significant relationship
with the dependent variable. The other control variable, ROS also showed a negative and
significant relationship.

According to Carroll (1991), Philanthropic responsibility is one of the four classifications of

corporate social responsibility (CSR) it is defined as the voluntary or discretionary activities that
are not imposed by any law making body instead the organization involves in them purely to give
back to the society . As shown in table 10 the result show that donation expenditure as a fraction
of total expense used as a proxy to capture philanthropic contribution has a negative and
insignificant relationship with return on asset at 5 percent significance level. The coefficient -0.17
indicates that holding other factors constant, a 1 % increase in the expense for donation as a
fraction of total expense will result in a 0.17 % fall in return on asset however, this relationship is
statistically insignificant. This negative and insignificant relationship might have been resulted
because the effect of CSR might be more reflected on changes in stock prices however; this
cannot be studied in the Ethiopian context where capital market is absent. The limited amount of
CSR disclosure from the banks side may also have caused a communication gap .This result is
similar to that of Dakito (2017) who found out that the relationship between philanthropic
contribution and financial performance is positive but insignificant as well as Ofori et.al (2014).
However, the finding is different from a study by. Yigit&Mukhtar (2017) they found a positive
and significant relationship with financial performance measured by ROA and CSR in banks in
Nigeria.

• ROE

Researchers have found different ways to measure CFP, CSR, and the relationship between the
two. Some have delineated the measuring of financial performance into three categories including
investor-based, accounting-based, and market-based (Uwuigbe & Egbide, 2012). Crisóstomo,
Freire, and Vasconcellos (2011) added to the relationship study by creating a three-dimensional
argument on the CSR-CFP relationship positing that the relationship can be positive, negative, or
neutral.

One of the control variables included in this study was ROE which was measured as measure of
financial performance bank dividing net income by shareholders' equity, coefficient of the ROE
is 0.07 and it’s significant at 5 percent significance level. This value indicates that holding other
factors constant, when ROE increases by 1 % return on asset on average will also increase by
0.45% and this relationship is statistically significant at 5 % significance level. The result is as
expected; this positive and significant relationship is that whenever a ROA increases it can gain
from economies of scale. This finding is similar to that of Ofori et.al (2014), Tesfaye (2014) and
Dawit (2016).

• ROS

Some studies conducted also reported, “79 percent of Americans take corporate citizenship into
account when deciding whether to buy a particular company’s product, and 36 percent consider
corporate citizenship an important factor when making purchasing decisions (Bhattacharya and
Sen, 2004, p. 9). Customers even may be ing to pay a higher price for products and services of
companies that engage more in CSR activities (Servaes and Tamayo, 2013). Scholars have long
debated CSR’s relationship to firm performance. Some have taken the profit-maximizing view to
argue that social responsibility impairs shareholder value because it causes inefficient resource
allocation, distracts from maximizing profits, induces unnecessary costs, and disadvantages firms
in economic competition (Friedman, 1970; Jensen, 2002; Mciams & Siegel, 1997). ROS was
another control variable in this study the coefficient shows 0.00 and it’s insignificant at 5 %
significance level. This positive and insignificant relationship implies that holding other factors
constant, on average when ROS increases by 1 % ROA will be almost 0.00% and this
relationship is statistically insignificant at 5 % significance level.

• RMS

Researchers have suggested, for example, that engaging in CSR activities creates a reputation for
the company as honest and reliable and that customers consider the products and services of such
companies as more reliable and of better quality (Mciams and Siegel, 2001). Engaging in CSR
activities also enhances the purchase intention of potential customers (Fagerstrøm et al., 2015). In
other words, CSR can be seen as akin to a marketing tool (Chahal and Sharma, 2006; Fagerstrøm
et al., 2015), and successful employment of this tool might help companies to build a competitive
advantage, leading to the enhancement of their marketing performance (Vorhies and Morgan,
2005). The other control variable included in this research was RMS measured using as a
percentage of an industry's total revenues. There is a negitive and significant relationship between
financial performance and income diversification at 5 % significance level the coefficient for
income diversification as shown on table 10 is -0.900 which means that holding other factors
constant on average when the ratio of non-interest income to average asset increases by 1 %
return on asset will also decrease by 0.9%. This negative and significant is as a result of lack of
diversifying ones income source boosts income statement that bring economies of scale the
bigger the market share the higher the profit.

• RNIM

The last of the control variables included in this study was RNIM which was measured as the
difference between the interest income generated by banks and the amount of interest paid out to
their lenders, relative to the amount of their assets, coefficient of the RNIM is -0.071 and it’s
insignificant at 5 percent significance level. This value indicates that holding other factors
constant, when RNIM increases by 1 % return on asset on average will also decrease by 0.071%
and this relationship is statistically insignificant at 5 % significance level.

5.2 Conclusion
The study tried to examine the effect of corporate social responsibility on the financial
performance of selected five commercial banks in Ethiopia. Hence, on the basis of the major
findings the following conclusions can be drawn.

Philanthropic contribution has a negative and insignificant relationship with financial

performance. This indicates that even if involving in CSR is said to have various benefits such as
building good public image, improved relationship with the society surrounding the banks,
attracting new customers as well as keeping existing customers loyal this is not significant in
explaining financial performance of commercial banks in Ethiopia, the involvement in banks
seem to follow industry trends i.e. beautifying Sheger project and Abay dam contribution, other
humanitarian donation and community development projects like school feeding programs.

There doesn’t seem to be a constant trend followed to carry out these activities too rather the CSR
expenses tend be dispensed when there is a certain kind of pressure from a third party which is
government, or a proposal submitted by vulnerable groups. Another factor for this insignificant
relationship could also be due to a communication gap occurring from unavailability of stock
market, where researches done in developed nation have evidence that the outcome of CSR is
usually reflected on changes in stock price however, carrying out this type of study is not an
option in a country such as Ethiopia with no capital market. Therefore, for now we can conclude
that CSR expense is a mere expense with no return.

ROE has a positive and significant effect on financial performance of the selected commercial
banks. The researcher controlled for ROE as there had been different literatures carried out in
Ethiopian banking sector that found significant relationships. This positive and significant
relationship is due to the fact that bigger banks tend have the advantage of economies of scale.

ROS has a negative and insignificant effect on financial performance. there had been different
studies done on ROS, its defined as the ratio of evaluate a company’s operational efficiency and
it give insight into how much profit is being produce. Therefore, this negative and insignificant
relationship implies that when ROS increase or when a bank is exposed to it, it negatively affects
the financial performance of commercial banks because high return on bank sales to customers is
not depend on the numbers of customer rather it highly depends on the potential of few high
potential customers.

RMS has is a negative and significant relationship between financial performance and income
diversification that based on firm percentage of an industry revenues. Similarly like return on
banks sales the banks RMS is mainly affected by few potential customers and major managerial
decision of the bank and also national bank decision and mediates. So external macroeconomic
environment have no such effect or much influence.

The last control variable, RNIM has a negative and insignificant effect on financial performance.
However that net interest margin is one indicator of a bank’s profitability and growth based on it
interest payment from lender to deposited. And For a bank, if the non-performing assets are
rising, the interest earned would fall and the NIM will decline. In case the demand for savings
increases relative to the demand for loans, the NIM will fall. Meanwhile, a higher NIM would
increase the profitability of the lender. A negative NIM indicates that the lender has been unable
to make good use of its assets, as returns produced by investments has failed to offset interest
expenses. Thus, NIM is a significant indicator of financial stability of a lender. Thus, their
awareness and perception of social responsibility and sustainability issues towards local
community and surrounding environment are really important and need to be highlighted
correspondingly as they are the core and main driving forces of the economy. CSR and
sustainability concerns will become their competitive means and advantage in a long term.

The CSR and sustainability concept presented above is based on assumptions of social model of
CSR and theory of stakeholders groups. Based on this model we could put forward suitable
solutions to boost CSR and sustainability awareness of enterprises both in their strategic
orientation and actions (daily business activities). Firstly, due to dualism and ambidexterity of
social model of CSR, for the purpose of corporate sustainable development we should propose
adequate solutions to enhance both the sense of individual responsibility (staff members and
managers) toward enterprise and the sense of corporate responsibility toward society. In order to
boost the sense of responsibility of enterprise toward society, each staff member should act in a
responsible way, be aware that they are seeds contributing to image, reputation and active role of
enterprises in the community.

The labor productivity in developing countries is low compared to that in developed parts of the
world. This stems from the low responsibility and weak discipline at workplace and that hasn’t
changed for a long time. Based on practical analysis, it is urgent to educate and enhance
professional qualification of staff members in order to carry out their task efficiently and
attentively, as well as train them on the issues of CSR, sustainability and professional ethical
standards, code of conducts, attitudes and behaviors required at workplace in order to perform
their jobs accordingly. Secondly, to enhance the sense of social responsibility and sustainability
of enterprise social and mutual trust should be consolidated. Enterprise is also a tiny society. In
order to become socially responsible and orient towards sustainability, before being entrusted
with important social missions, it has to be trustworthy for internal staff and to preserve
credibility of external partners. In order to attain this goal, enterprises should deliver dialogues
and conduct interactive debates at all level of enterprise; consolidate mutual trust and
understanding by continuously search for new compromises and consensus.

5.3 Recommendations
The following recommendations are suggested as possible solution based on the findings of this
study. The study resulted in a positive and insignificant relationship, however, the researcher
would like to stress the fact that the positive sign indicates that with better measurement for CSR
and better disclosure that is standardized and detailed regarding information about their yearly
involvement; the return gained from CSR could be significant. In addition, there need to be a
standardized way of carrying out CSR activities with a planned out method of communicating
this activities in order to inform internally the employees which will in return raise their moral
and loyalty as well as externally the society as a whole. So that in a competitive industry, such as
banking, certain banks who are more involved and that disclose this involvements become the
bank of public choice. Lastly, similar to Dakito (2017), the researcher was able to find out from
discussions with bank managers banks way of engaging in CSR is more or less in a reactive way
as the initiative comes from conformity by following industry trend or from proposal submitted
from vulnerable groups, however, they need to be proactive rather than reactive while carrying
them out for the best results, in a way of reaping the benefits developed nations and other
developing countries are enjoying as a result of their involvement in CSR.
Income diversification was also another factor that had a significant effect on performance of
selected banks, banks should try to diversify their sources of income by discovering new and
unique ways that make the customers experiences satisfactory while charging some fees in order
to enjoy a boost it results in financial statements and also focus on broad base customers rather
than high potential customers. Commercial banks in order to reduce their exposure to RNIM they
need to work more in improving the credit granting process to potential borrowers to generate
more interest income.

To formulate well-grounded ethical standards and norms all behaviors in dealing with business
situations, processing transactions and solving corporate and social problems, such as disputes
and conflicts resolution should be friendly and understandable, effectively boosting multilateral
cooperation, enhancing enlisted and consolidated trust and respect of the comprehensive partners
and the whole community. To boost communication and mutual understanding communication
helps promote strategic orientations related to business ethics, social responsibility and
sustainability issues. It conveys important messages to partners in society, while facilitating
cooperation with other enterprises and taking advantage of government support;

Areas of further research ; the study used only one independent variable which was philanthropic
contribution measured as the ratio of donation expense to total expense by up grading from a
previous study in order to add to the limited literature .Thus the researcher recommend other
researchers to identify a better measure of CSR to explain the relationship .Moreover , since the
number of observation for the study is 30 ; 5 banks and 6 years , further research can be carried
out by increasing the number of observation by including additional banks . Lastly, further
research could be carried out when a capital market is developed, by using event study on
changes of stock price as a result of CSR involvement.

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Appendix
CPU College

Graduate Program

Master of Business Administration

This questionnaire is designed to collect information about the Corporate Social Responsibility
practice in Commercial banks and its effects on financial performance. The data or information
collected is going to be used as Primary data in the study, which the researcher use for
conducting as a partial fulfillment for the requirement of my study in Master of Business
Administration at CPU College. The researcher would like to thank you in advance for your
kind response in giving your precious time in filling the questionnaire.

1. EMPLOYEES
No Relationships with employees Strongly Agree Neutral Disagree Strongly
agree disagree
1 Allow Flexible working hours
2 Possibility of expectation at work
and promotion.

3 Nursery for mothers

4 Suitable work place environment
and Canteen

5 Provision of Soft loans

6 Additional healthcare benefits for
employees.

7 Group retreats for vacation, Trips

and events

No Communication with employees Strongly Agree Neutral Disagree Strongly

agree disagree

1 Provide and properly use Box of

ideas

2 Have Intranet communication

system

3 Conduct Satisfaction survey

4 Business newspaper
5 Periodic meetings to show results

No Involvement of employees Strongly Agree Neutral Disagree Strongly

agree disagree

1 Employee Volunteer with time

schedule chosen by workers

2 Employee Volunteer with time

schedule chosen by the firm
 3 Employee engage in Fundraising as
a percentage of salary

No Training: Strongly Agree Neutral Disagree Strongly

agree disagree

1 Have appropriate Hours of training

per-capita for individual
development.

2 % of involved employees in
training high and equal.

No Formalization of strategies to Strongly Agree Neutral Disagree Strongly

ensure equal opportunities: agree disagree

1 Formalized

2 Not formalized

No Support women’s work Strongly Agree Neutral Disagree Strongly

agree disagree

1 Flexible working hours

2 Job sharing

3 Suspension of career at maternal

times

No Hire detainees, internees and Strongly Agree Neutral Disagree Strongly

disabled agree disagree

1 Disabled

2 Detainees or internees

3 Knowledge of tax credit for hiring

of detainees or internees

2. Suppliers
No. Customer verification and formal Strongly Agree Neutral Disagree Strongly
requirement. agree disagree

1 Verifying customers Self-

certification
2 Requirement of Quality
certification (ISO/VISION) for
customers

3 Requirement of Product/service
quality certification

4 Requirement of for
Certification of proper waste
disposal for different
customers.

No. Issues of direct verification of Strongly Agree Neutral Disagree Strongly

suppliers agree disagree

1 Exclusion of child labor

2 Exclusion of forced labor

3 Safeguard health and safety at work

4 Safeguarding freedom of
association

5 Absence of discrimination

6 No corporal punishment,
mental and verbal abuse

7 Regular working time

8 Provide Salary in accordance with

legal or industry minimum wage
 No Purchase of social goods and Strongly Agree Neutral Disagree Strongly
services: agree disagree

1 Introduction of the disadvantaged in the

labor market

2 Socially responsible production

3 Conduct in Fair trade

3. Customers
No. Social investments in Strongly Agree Neutral Disagree Strongly
commercial: agree disagree

1 Use Advertisement messages

containing the social value
2 Cause related marketing to create
positive influence on society

No. Surveys of customer satisfaction: Strongly Agree Neutral Disagree Strongly

agree disagree

1 Conduct Regular surveys

2 Conduct Occasional surveys
No. Sustainable product lines: Strongly Agree Neutral Disagree Strongly
agree disagree

1 By considering
Environmental value

2 Dedicated to the disadvantaged of

externalities and Environmental
value.

4. COMMUNITY
No. Donations and conditions Strongly Agree Neutral Disagree Strongly
of delivery agree disagree

1 From the bank Net income

generated

2 Funds of the corporate foundation

3 From portion of the Dividends
No. Areas of the donations Strongly Agree Neutral Disagree Strongly
for community agree disagree

1 Focus on Education
2 Focus on Scientific research
3 Focus on Scientific research
4 Focus University
5 Focus on Health care
6 Focus on Social interventions in
the territory

7 Focus of Interventions of
international cooperation

8 Focus on Entertainment,
restorations and exhibitions

No Motivations for banks on Strongly Agree Neutral Disagree Strongly

community support agree disagree

1 Education

2 Scientific research

3 University

4 Health care

5 Social interventions in the territory

6 Interventions of international
cooperation

7 Entertainment, restorations
and exhibitions

8 Amateur sport
No Forms of stable collaboration Strongly Agree Neutral Disagree Strongly
between the organization and the agree disagree
university

1 Grants

2 Research funding

3 Internships

4 Sponsorship of courses and events

No Criteria for determining the Strongly Agree Neutral Disagree Strongly
amount: agree disagree

1 Fixed amount
2 Related to the quality of projects

3 Net income
No Supply of goods and services free Strongly Agree Neutral Disagree Strongly
of charge for social activity: agree disagree

1 Plant and equipment

2 Own products for free

3 Own discounted products

4 Staff time to accomplish special

projects

No Supply of goods and services free Strongly Agree Neutral Disagree Strongly
of charge for social activity agree disagree

1 Plant and equipment

2 Own products for free

3 Own discounted products

4 Staff time to accomplish special

projects

No People responsible for decisions: Strongly Agree Neutral Disagree Strongly

agree disagree
 1 Boards of Trustees

2 Shareholders

3 Board of Directors

4 CEO
5. CSR Practices

No the degree of relevance of the Strongl Agree Neutral Disagree Strongly

following CSR practices y agree disagree

1 Promotion of collaborative
relationships with workers
2 Major attraction of skilled resources

3 Improved relationships with funders

4 Loyalty of customers / end user

5 Suggestions by the client companies

6 Improving relations with

the community

7 Pressures from associations and P.A.

8 Improved economic performance

9 Improved reputation with NGOs

10 Decreased risk of scandals and crises

-------------------------------------------------Thank You------------------------------------------

Chi-Square Tests for every dependent and independent variable

ROA * ROE

Chi-Square Tests
 Asymptotic
Significance -(2
Value df sided)
a
Pearson Chi
-Square 840.000 812 .241
Likelihood Ratio 201.299 812 1.000
Linear-by-Linear Association 5.813 1 .016
N of Valid Cases 30

a. 870 cells (100.0%) have expected count less than 5. The minimum
expected count is .03.

Symmetric Measures
Approximate
Value Significance
Nominal by Nominal Phi 5.292 .241
Cramer's V 1.000 .241
N of Valid Cases 30

ROA * ROS
Chi-Square Tests

Value df Asymptotic Significance (2-sided)

a
Pearson Chi-Square 810.000 784 .253
Likelihood Ratio 198.527 784 1.000

Linear-by-Linear Association .849 1 .357

N of Valid Cases 30

a. 841 cells (100.0%) have expected count less than 5. The minimum expected count is .03.
 Symmetric Measures
Value Approximate Significance
Nominal by Nominal Phi 5.196 .253
Cramer's V .982 .253
N of Valid Cases 30

ROA * NIM (net interest marigin)

Chi-Square Tests
Value df Asymptotic Significance (2-sided)
a
Pearson Chi-Square 810.000 784 .253
Likelihood Ratio 198.527 784 1.000
Linear-by-Linear Association 2.621 1 .105
N of Valid Cases 30

a. 841 cells (100.0%) have expected count less than 5. The minimum expected count is .03.

Symmetric Measures
Value Approximate Significance
Nominal by Nominal Phi 5.196 .253
Cramer's V .982 .253
N of Valid Cases 30

ROA * RMS (rate of market share)

Chi-Square Tests
Value df Asymptotic
Significance-sided)
(2
a
Pearson Chi
-Square 840.000 812 .241
Likelihood Ratio 201.299 812 1.000
Linear-by-Linear Association .584 1 .445
N of Valid Cases 30

a. 870 cells (100.0%) have expected count less than 5. The minimum expected count is .03.

Symmetric Measures
Value Approximate Significance
Nominal by Nominal Phi 5.292 .241
Cramer's V 1.000 .241
N of Valid Cases 30

ROA * Donation expense

 Chi-Square Tests
Value df Asymptotic Significance
-sided)
(2
a
Pearson Chi
-Square 810.000 784 .253
Likelihood Ratio 198.527 784 1.000
Linear-by-Linear Association .242 1 .623
N of Valid Cases 30

a. 841 cells (100.0%) have expected count less than 5. The minimum expected count is .03.

Symmetric Measures
Value Approximate Significance
Nominal byNominal Phi 5.196 .253
Cramer's V .982 .253
N of Valid Cases 30