Financial Decisions and Corporate Social Responsibility in the Selected Manufacturing Firms in Nigeria

Abstract

Corporate social responsibility is an integral part of a firm’s commitment to its stakeholders, playing an indirect role in achieving the organization’s broader objectives and mitigating conflicts of interest. Despite its importance, many companies find implementing CSR challenging, as satisfying the needs of the society in which they operate involves a complex process that can impact the company’s long-term financial performance. Despite the large number of scholarly works dedicated to corporate performance, there is a lack of research examining the combined impact of four key financial decisions on a firm’s CSR. Hence, this study examined the relationship between financial decisions and CSR among selected consumer manufacturing companies in Nigeria from 2013 to 2024. Adopting stakeholder theory, the study measures financial decisions as dividend, financing, investment, and liquidity decisions, represented by ratios such as dividend payout ratio (DPR), debt-to-equity ratio (DER), asset turnover ratio (AST), and Liquidity ratio (LQR). These ratios are regressed on CSR, represented by the ratio of corporate social responsibility to sales (RCSS). Relying on panel data from 10 selected companies, the data were analyzed descriptively and inferentially, specifically using descriptive statistics, a correlation matrix, a residual cross-sectional dependence test, and Feasible Generalized Least Squares (FGLS). The study found that while DPR (β = 0.5363, p = 0.0001) and LQR (β = 2.2925, p = 0.0000) have significant positive effects on RCSS, DER (β = -0.0420, p = 0.4835) has an insignificant negative effect, while AST (β = -0.0253, p = 0.0073) has a negative and significant effect on RCSS. The study concluded that financial decisions have a statistically significant influence on RCSS, demonstrating that manufacturing firms’ financial decision frameworks actively support social responsibility. Thus, the study argues that integrating social responsibility into the financial decision-making frameworks of manufacturing firms significantly advances the achievement of the Sustainable Development Goals (SDGs).