The Effect of Corporate Social Responsibility on the Performance of Large Manufacturing Companies in Kenya

Abstract

Most of the firms in the country and other parts of the world engage in CSR activities to improve their images and reputations towards the members of the public with a view to enhancing their performances. Nonetheless, evidence from previous studies provide conflicting results with some of them identifying positive link between firm performance and CSR activities whereas others identify negative link or no link between them. The current study evaluated the link between the performance of large manufacturing firms in the country and CSR activities between 2010 and 2020. Its specific objectives were two and they included determining the influence that community-related CSR activities had on firms’ performances and appraising the influence that environmental-related CSR activities had on the firms’ performances. Both ROA and ROE were used to measure firm performance. Secondary data obtained from the firms’ financial reports and sustainability reports were used to determine how CSR initiatives influenced both ROE and ROA. Both correlation and fixed effect regression analysis method were used to conduct the study. The study found that community CSR projects had negative influence on ROA, but not ROE. Additionally, it established that the environmental CSR projects had positive influence on ROA, but not ROE as well. Despite the variations in the influence, the study recommended that the large manufacturing firms in the country should invest in both community and environmental CSR projects to enhance their images and reputation with a possibility of influencing their performances positively.