Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 12 August 2020

Corporate Social Responsibility and Financial Performance Amongst Rural and Community Banks in Ghana

Michael Amoh Asiedu, Emma Yalley, Kwame Owusu Boakye, Richard Oduro, Isaac Nyarko Adu

University of Education Winneba, University of Cape Coast

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10.31014/aior.1992.03.03.264

Pages: 1073-1094

Keywords: Access to Capital, Competitive Advantage, Corporate Financial Performance, Corporate Governance, Corporate Social Responsibility, Structural Equation Modelling

Abstract

This study examines the connection between corporate social responsibility and firms’ financial performance through competitive advantage and access to finance as mediating variables and the role of corporate governance as a moderating variable in such relationship using rural banks as study case. A sample of 126 banks were selected and data from these banks were analysed using structural equation modeling and hierarchical regression with moderation. It was found that embarking on corporate social responsibility leads to improvement in competitive advantage and gaining access to capital. These are both related to increase in corporate financial performance. The study found that business organisations that practise CSR activities turn to gain a defensible competitive position in their industry. The practice of CSR tends to create access to finance for business strategies, resulting in positive impact on financial performance depending on the efficiency of their corporate governance practices. The study recommends that activities of CSR should be integrated into firms’ corporate and business level strategies. It also recommends that rural banks and the banking industry at large should adopt proper corporate governance structures to ensure judicious use of firm resources in order to enjoy improved financial performance.

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