EFFECTOF CORPORATE SOCIAL RESPONSIBILITY ON FINANCIAL PERFORMANCE: REFERENCED FROM LARGE MANUFACTURING FIRMS IN ADDIS ABABA, ETHIOPIA

Abstract

Corporate Social Responsibility (CSR) is concurrent issue in the world.It is the integration of social, economic and environmental aspectsin the business operations to keep the interest of stakeholders with in firms. The main aim of thisinvestigationwas toexaminethe effectof CSR practices on financial performance of large manufacturing firms in Addis Ababa, Ethiopia. In this study for measuring CSRemployee, customer, supplier, community, government and environmental related practices of firms are used. To measure financial performance of large manufacturing firms ROA wasapplied. Additionally, firm size wasemployed as control variableto clearly understand the effectof CSR on ROA. To carry out this investigation and to attain the specified objective,the researchutilizedexplanatory type of research designand quantitative research approach. To obtain data from81large manufacturing companies’in Addis Ababa, which was selected from 102large manufacturing firms using stratified sampling method,questionnaire anddocumentanalysis of audited financial statementservedas instrument. The collected dataanalyzed through using descriptive and inferential statistics. To entertain this,multiple regression analysis wasused and Ordinary Least Square (OLS) applied toestimate the parameters.Based on the regression result, employee, communityandgovernment related CSR practice and firm size positively and significantly affect ROA. Suppliers’ related social performance has also negative and significant effect on ROA. Customers and environment related CSR activities have insignificant effect on ROA,but the association between environment and ROA was negative. In general, large manufacturing firms are recommended to apply CSR initiatives to increase their productivity.