Corporate Social Responsibility Disclosure and Financial Performance: A study from Industrial Goods Firms in Nigeria

Abstract

This study examines the impact of corporate social responsibility (CSR) disclosure on the financial performance of industrial goods firms in Nigeria. Specifically, the study assessed the effect of corporate social responsibility disclosure on Tobin’s Q and return on assets in Nigeria’s industrial goods sector. Utilizing panel data from five (5) leading industrial goods sampled purposively from firms listed on the Nigerian Exchange (NGX) over a 10-year period (2014–2023), fixed-effects regression models were employed to analyze the relationships. The result of the analysis in this study found that CSR disclosure significantly enhances both Tobin’s Q (β = 0.725, p < 0.01) and ROA (β = 0.102, p < 0.01), confirming its strategic value. The stronger effect on Tobin’s Q indicates investors price CSR disclosures as intangible assets, anticipating future gains. The study also posited that firm size positively influences performance, but with diminishing returns on ROA, suggesting scale inefficiencies. The study also deduced that high leverage negatively impacts both Tobin’s Q and ROA, eroding the benefits of CSR investments. The findings of this study also reconcile Stakeholder Theory (CSR builds trust for performance gains) and Legitimacy Theory (CSR as legitimacy-seeking in regulated sectors). The study, among others, recommends that manufacturing companies in Nigeria should incorporate CSR reporting, with a focus on community involvement and environmental compliance, into their main business plan. This increases market valuation premiums and fosters stakeholder confidence.