Relationship Between Corporate Social Responsibility And Stock Return Of Commercial Banks Listed In The Nairobi Securities Exchange

Abstract

Firms have strived to revamp their CSR initiatives with an aim of positively influencing societies and environments within which they do business. Firms that have actively engaged in CSR, social good and ethical business practices often engaged in sustainable reporting. In Kenya, commercial banks listed on the NSE over the past 6 years have embarked on an aggressive integration of CSR into their long-term business plans. Some of the social initiatives undertaken by listed commercial banks at the NSE focus on sectors such as education, healthcare and environment among many others. Several commercial banks listed at the NSE have also adopted sustainability reporting to better communicate to their stakeholders and partners their social initiatives and the impact they are having on society This study set out to examine the linkage between CSR and stock returns of NSE listed commercial banks. The study was grounded on the social theory of contracts, the stakeholder theory and the resource-based theory. The study adopted a causal study design and the population was made up of the eleven NSE listed commercial banks as of 31st December 2019. This study relied on secondary data covering a six-year period between 2014 and 2019. The multiple regression was employed to confirm the comparative significance of the predictor variable in influencing the stock return of NSE listed banks. The study findings revealed that corporate social responsibility had a positive and significant linkages to share returns of the listed banks. The finding revealed that profitability had a positive but insignificant linkage to share returns of the listed banks. Lastly, the results revealed that that the relationship between firm size and share returns of the listed banks was positive and significant respectively. The study concluded that stock returns of the NSE listed banks are positively affected by corporate social responsibility undertakings and the bank’s size.