EFFECTS OF CORPORATE SOCIAL RESPONSIBILITY ON THE PROFITABILITY OF COMMERCIAL BANKS IN KENYA

Abstract

Every business takes birth, survives and grows with the consent and co-operation of the society. The society provides inputs to the business and accepts its output. Naturally the business owes everything to the society. Corporate Social Responsibility denotes organizations’ willingness to take responsibility and accountability for the effects of their activities and decisions. It is concerned with how companies manage the business processes to produce an overall positive impact on society. This study aimed at investigating the relationship between corporate social responsibility and profitability of commercial banks in Kenya. The objectives of this study were to establish the effect of; financial literacy, employee volunteering in community activities, improving community health and supporting education to the community on the profitability of listed Commercial Banks in Kenya. This study engaged a descriptive research design rich in survey. The target population was 43 commercial banks in Kenya. The study used proportionate stratified sampling method with a sample size of 39 commercial banks categorized in three strata: local private, local public and foreign commercial banks. Primary data was collected using questionnaires and secondary data obtained from the bank’s annual financial reports. Chi Square test was done to identify the association between the dependent and independent variable. The study findings revealed that at 95% level of precision, employee volunteering, community health programs, supporting education and financial literacy programs have significant influence on the profitability of commercial banks in Kenya. Further, the perception of the respondents on the relationship between community health, employee volunteering, financial literacy and profitability contributes to the banks’ profitability by chance and has no direct correlation with the banks’ profitability.