Effect of Corporate Social Responsibility on Financial Performance of Energy and Petroleum Firms Listed on Nairobi Security Exchange

Abstract

An increased demand for more disclosure particularly from investors, an increase in customer interests and competitive labor markets have all piled pressure on firms to remain socially responsible in their activities. The operations of energy and petroleum firms in Kenya result into pollution and other adverse effect to the environment. Some of these companies are involved in extraction of energy from underground which can result into instability in area of establishment. The study sought to determine how CSR affected financial performance of energy and petroleum firms listed on NSE. The study adopted a cross sectional descriptive design. The population of the study comprised of 5 energy and petroleum firms listed on NSE. A census was undertaken since the population was small to carry out sampling. Secondary data was collected using data collection sheet for a ten-year period from 2008 all through to 2017. The findings were analyzed using SPSS software through descriptive and inferential statistics. Descriptive statistics included means and standard deviation while regression formed the inferential statistics. The findings were presented using tables and figures. The study established that environmental CSR (β=0.236, p=0.018<0.05), education CSR, (β=0.192 p=0.017<0.05) health CSR, staff welfare (β=0.133, p=0.000<0.05) and the size (β =0.410, p=0.000<0.05) all had a positive and significant influence on financial performance. The study concludes that CSR has a positive and significant effect on financial performance. The study recommends that the top and senior management team of all petroleum and energy firms in Kenya should improve on health and staff welfare CSR in order to positively influence financial performance. Policy makers including the ministry of energy and petroleum in Kenya should make it a policy for all firms to invest in CSR activities.