INTRODUCTION to conduct the company in a transparent way,


To date, companies not only maximize
their shareholders’ return but also their activities should be beneficial to
the whole society they operate. Managers of businesses should manage the
company in such way to conduct the company in a transparent way, moral
values, with great respect for the environment, community and employees, and
for the benefit of whole society. The companies are
increasingly are more and more focused toward participation in Corporate Social
Responsibility (CSR) behavior. Available literature argues that CSR behavior is
a way to contribute to sustainability to the community and maximizations of the
shareholder returns (Sun et al., 2010).

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Following the arguments
of Lobo (2017) in Siueia & Wang (2017), the banking sector is vital for a
country’s economics and the whole society. Consequently, researchers are
growing number and number of empirical research in CSR activity in the baking
industry (Branco &
Rodrigues, 2006; Scholtens, 2009; Soana, 2011; Kvasi?, Cerovi? and Drazenovi?,
2016; Platonova et al, 2016; Suteja et al. 2016; Tijani et al. 2017). So in general, the banking sector has
certain characteristics that do interest researchers in developing detailed and
specific studies focused on them. The majority of researchers who focused on
this issue consider the relationship between CSR and FP for western countries,
developed countries, and emerging economies. Overall, they provided widely a
positive and significant relationship about the theme. However, there is scant
research investigating this relationship in the under-developed economies
particularly, African countries. This study aims at investigating the
relationship between Corporate Social Responsibility (CSR) and Financial
Performance (FP) in the Mozambican Banking industry over the period from 2010
to 2016. Thus, the present study tries to answer these three questions: “is
there a significant and positive relationship between CSR and FP in the
Mozambican Banking industry? Whether the implementation of CSR behavior conduct
a high degree of financial performance in the Mozambican Banking sector and
vice-versa? And, are banks primarily disclosing information regarding their
customer and products?” To answer the questions, we following the stakeholder
theory in the accounting literature. In the literature, we can found a different type of theory that examines the
relationship between CSR and FP. In the present study, we applied the
stakeholder theory that, in our point of view, had better explain this
association. According to prior accounting literature, we summarize our
hypothesis as follows:

There is a positive relationship between CSR reporting and FP in the Mozambican Banking industry.

Companies displaying a higher level of CSR behavior achieve greater FP in the Mozambican Banking sector.

All the dimensions of CSR practice have an individual significant and positive
effect on the FP of Mozambican

Banks are primarily disclosing information regarding their customer and products.

Better profitable firms are those that adopt greater CSR behavior.

We test our hypotheses
using data from the annual statement of Mozambican banks available online at
the Bank of Mozambique (Central bank of Mozambique) and individual banks’ website.
Following the previous study in this field (Freedman and Jaggi, 1986; Simpson and Kohers, 2002) we used the appropriate
measure of FP that is based on measures of profitability, such as ROE (return
on equity) and ROA (return on asset). In
addition, we applied
the content analysis to assess the CSR activities dimensions extracted from
bank annual reports and extracted from the individual bank web site.

main findings of our study are as follows. Firstly, we found a significant and
positive association between FP and CSR implying that the Mozambican banking
sector is socially responsible. Secondly, we found a bidirectional association
between FP and CSR, suggesting that CSR behavior accrue to better firms’
profitability and the higher profitability driven by higher CSR activities.
Thirdly, we found evidence that banks primarily disclose information about
their customer & products comparatively to other categories of CSR

Our study attempts to fill the existing
gap in the accounting literature, contributing to the knowledge of how banks strive to achieve
CSR behavior and improve better FP in under-developed countries, particularly
in the African context.