Investment in Corporate Social Responsibility and its impact on companies financial performance in Ethiopia

Abstract

The issue of whether CSR investments are an additional cost that undermines shareholders' value is still being debated. This study aimed to create a profile of the fundamental relationship between CSR and financial performance of businesses, as well as to analyze stakeholders’ awareness of CSR and their impact on a company's image and competitiveness. To attain these objectives, the researcher gathered quantitative data from purposively selected 62 companies’ five-year financial statements (2017-2021) and qualitative data via questionnaires from selected convenient stakeholders (employees, customers, government offices, suppliers, and local communities). Based on analyzed data through OLS regression model; a one-point activity increment in CSR might result in a 0.35increase in ROA and a 0.29enhancement in ROE which implies greater the CSR activities, the better the financial performance of companies. Additionally, based on qualitative data the study finalized that more CSR activities lead to more fulfilled clients, longterm growth, boost competitive advantage, enhance public image, and at last higher levels of firm performance. Even if most companies do not have sufficient awareness of the importance of CSR, balance the socio, economic, political, legal and technical aspects which is important for financial performance.

Keywords

• csr activities
• financial performance
• companies
• stakeholders
• ethiopia