Effect of Corporate Social Responsibility on the Profitability of Commercial Banks in Kenya

Abstract

Every business takes birth, survives and grows with the consent and co-operation of the society. It is the society which provides inputs to the business and accepts its output. Naturally the business owes everything to the society. It has a broad spectrum of obligations towards the society. Therefore in order to be a good citizen every business has to accept and fulfil its proportionate responsibilities towards the society. The business being the creator of wealth has to help to alleviate the problem of poverty and unemployment. It should develop more economic opportunities and also help the government in bringing down economic disparities. The business has to play an important role in bringing greater stability of economic activity. CSR denotes organizations’ willingness to take responsibility and be accountable for the effects of their activities and decisions. It is concerned with how companies manage the business processes to produce an overall positive impact on society. The objective of the study was to determine the effect of corporate social responsibility on the profitability of commercial banks in Kenya. Secondary Data was collected from Central Bank and banks financial reports and multiple regression analysis used in the data analysis. From the finding on the Adjusted R squared is coefficient of determination , the stduy found that there was greater variation on profitability of commercial banks due to changes in corporate donation to education , poverty alleviation , charity work , size of the bank , banks deposits and liquidity of the bank , this shows changes in profitability of commercial banks could be accounted to changes in corporate donation to education, poverty alleviation, charity work, size of the bank, banks deposits and liquidity of the bank. From the finding on the correlation coefficient, the study found that there was strong positive relationship corporate social responsibility to education, poverty alleviation, charity work, size of the bank, banks deposits and liquidity of the bank and profitability of commercial banks. The research also

revealed that contribution to community education lead to the organization’s profitability. The research revealed that financial contribution to the corporate social responsibility contributed to the organization’s profitability.