Effect of Corporate Social Investments on Financial Performance of Firms Listed at the Nairobi Securities Exchange

Abstract

Businesses have a significant deal of power to influence society and have a positive or negative impact. Besides business organizations have a duty to their stockholders to be profitable and remain competitive. The goal is to figure out how corporations can improve their competitiveness while still having a positive impact on society. CSI is one of the ways that has emerged as a means of meeting these targets. The intention of the research was to see how CSI affected the performance of NSE-listed companies. The study's population included all 63 NSE-listed companies. CSI, defined as cost of CSI to total assets in a particular year, was used as a predictor variable in this study. The control variables were liquidity assessed by the current ratio, total assets natural log measuring company size, and leverage measured by the ratio of total debt to total assets per year. Return on assets served as the response variable representing financial performance. Secondary data was collected on a yearly basis for five years (January 2016 to December 2020). The research variables were analyzed using a descriptive design. The results yielded a 0.294 R-square value, indicating that variations in the chosen independent variables account for 29.4 percent of changes in financial performance amongst firms, whereas other factors accounting for 70.6% of variance in financial performance amongst NSE listed firms. Independent variables had a strong relationship with company performance (R=0.542) in this study. The F statistic at 5% was significant with p<0.05, according to the ANOVA results. This demonstrated that the overall model was effective in determining the variables' relationships. CSI had a positive as well as statistically significant impact on financial performance. Liquidity also had a positive as well as statistically significant impact on the performance of the NSE listed companies while leverage exhibited a negative and significant influence. In this research, the size of the firm had no statistical significance. This suggestion is that NSE-listed companies should continue offering CSI, improve liquidity positions, and have a target leverage level, as the three factors has a substantial influence on their financial performance.