Corporate Social Responsibility, Image, Size and Performance of Firms Listed at the Nairobi Securities Exchange

Abstract

The relationship between corporate social responsibility (CSR) and firm performance (FP) has attracted attention of scholars and policy makers. There is no convergence in the existing literature as to whether CSR directly leads to improved FP or it enhances corporate image which eventually translates into better FP. Moreover, it is not clear whether CSR-FP linkage is contingent upon the size of the firm. The main objective of this study was to investigate the relationship among CSR, corporate image, firm size and performance of firms listed at the Nairobi securities exchange (NSE). This study is anchored on legitimacy theory, stakeholder theory, resource based theory and signaling theory. Regarding philosophical orientation, the study is grounded on positivist research paradigm. Descriptive cross-sectional research design was adopted where a census survey of 61 firms listed at the NSE was undertaken. The data gathered was analyzed using descriptive and inferential statistics. Descriptive statistics involved computation of the mean, standard deviation, minimum and maximum values. Inferential statistics entailed the application of regression analysis as the principal estimation technique. From the hypotheses tested, numerous findings were reported. First, there was a positive significant linkage between CSR and FP. Secondly, corporate image fully mediated the relationship between CSR and FP. Thirdly, firm size moderated CSR-FP relationship and synergistic interaction was reported. Lastly, there was a significant joint effect among CSR, image size and FP. The study made significant contribution to theory development, policy formulation and management practice. The findings complemented the key propositions of stakeholder theory, resource based view, legitimacy theory as well as signaling theory. On the policy implication, policy prescriptions were made recommendations on development of CSR performance indices as well as image indices tailored for the local context as well as providing a framework for mandatory CSR activities by the corporate bodies based on Global Reporting Initiative (GRI). Concerning management practice, implementation of better CSR practices helps in fostering good relationships with key stakeholders which improves corporate image which in turn translates into better FP. The study had numerous limitations such as, the study being carried out in a single country context hence inhibiting generalizability of findings; study being cross-sectional in nature hence failing to consider what happens after the snapshot and finally lack of universally accepted metrics for operationalizing CSR, corporate image and FP. Finally, the study made suggestions for areas for further study such as testing the bi-directional CSR-FP relationship; using different metrics to operationalize the study variables; using cross-country samples in empirical investigations; using distinct mediating and moderating variables; and finally using longitudinal datasets for analogous studies.