The Effect of Corporate Governance on Corporate Social Responsibility in Firms Listed at the Nairobi Securities Exchange

Abstract

The current study sought to assess the effect that CG has on CSR in Kenyan organizations. It carries out a quantitative study using secondary data, and performs various statistical tests to arrive at key conclusions. Correlation analysis showed that independence of the board, its size, and the size of the firm all exhibited significant and positive correlations with expenditure on CSR, meaning that companies with larger boards are likely to spend more on CSR and the ones with more non-executive directors are more likely to spend more on CSR. Larger companies are also expected to spend more on CSR. Since correlation is not causation, the study also used regression analysis to investigate causation, and it was established that larger board sizes are associated with more spending on CSR spending by an organization, and that a larger number of non-executive directors on the board are associated with more spending on CSR. Firm size showed Beta = 0, which indicated no relationship between CSR spending and firm size. Analyses, in general, discovered relationship that was positive and significant between CG and CSR, since important measures of CG showed a significant causal effect on CSR spending.