Impact of corporate social responsibility on financial performance of Nepalese commercial banks

Abstract

The role of businesses has evolved from a traditional point of view of businesses’ main focus of profit maximization to a more contemporary view of social responsibility and responsiveness over the last few decades where the importance of CSR is gradually increasing and is becoming ever more significant. This study aims to examine the impact of CSR on financial performance of Nepalese commercial banks. CSR expenses has been used as a proxy for the independent variable CSR while ROA, ROE and EPS have been used as proxies for the dependent variable financial performance. The sample includes 16 out of 27 commercial banks of Nepal with a study period of five years from the fiscal year 2016/17 till 2020/21 making observations of 80 cases. The study is based on secondary data collected from the annual reports of the sample banks as NRB directives from 2016/17 mandated BFIs to allot a percent from net profit for CSR funds for the following year and disclose CSR initiatives in the reports. This study employs a causal comparative research design and uses mean, standard deviation, coefficient of variance, correlation and regression to draw conclusions. The research findings conclude that there is a negative and significant relationship and impact of CSR on ROA, while there are no significant relationships between CSR and the dependent variables ROE and EPS. Key Words: Corporate social responsibility, financial performance, return on assets, return on equity, earnings per share.