A Business Case Argument for Corporate Social Responsibility Disclosure in Nigeria.

This study uses ordinary least square, fixed effects and random effects models to investigate the relationship between CSR and financial performance for thirty Nigerian Stock Exchange (NSE) firms over a period from 2005 - 2014. The study adopts an approach of developing hypotheses using the stakeholder, agency and slack resource theories of CSR. Tobin’s Q and Return on Equity (ROE) were adopted as the proxies for long-term and short-term performance respectively. Owing to the amorphous nature of CSR, a weighted measurement approach was used after extracting its components from the Global Reporting Initiative Index (GRI). First, the OLS model show a positive relationship between CSR and financial performance with the three CSR theories. However, OLS model does not address unobserved heterogeneity issues; hence, the adoption of fixed effects and random effect estimates. The hausman test was used in deciding which panel estimates was appropriate. The results show a positive relationship between CSR and Tobin’s Q with fixed effects as the appropriate model. This result strengthens the argument that CSR creates value for stakeholders. The second result produced a negative result between CSR and ROE. The result alludes to the idea that a short-term approach to CSR negates any business case assumptions. The third and final result show a negative result between ROE and CSR. The result does not hold forth for the claim that firms tend to consider CSR only when they have excess funds. The last two hypotheses gave rise to equations that had simultaneity bias problems. The problem was resolved by introducing instrumental variables. The implications of this study lie in the common knowledge that Nigerian companies need to start addressing CSR from a strategic context of meeting stakeholder needs, rather than the narrow conception of gifts, aids and donations to society