INTRODUCTION To date, companies not only maximizetheir shareholders’ return but also their activities should be beneficial tothe whole society they operate.
Managers of businesses should manage thecompany in such way to conduct the company in a transparent way, moralvalues, with great respect for the environment, community and employees, andfor the benefit of whole society. The companies areincreasingly are more and more focused toward participation in Corporate SocialResponsibility (CSR) behavior. Available literature argues that CSR behavior isa way to contribute to sustainability to the community and maximizations of theshareholder returns (Sun et al., 2010).Following the argumentsof Lobo (2017) in Siueia & Wang (2017), the banking sector is vital for acountry’s economics and the whole society. Consequently, researchers aregrowing number and number of empirical research in CSR activity in the bakingindustry (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 hascertain characteristics that do interest researchers in developing detailed andspecific studies focused on them. The majority of researchers who focused onthis issue consider the relationship between CSR and FP for western countries,developed countries, and emerging economies.
Overall, they provided widely apositive and significant relationship about the theme. However, there is scantresearch investigating this relationship in the under-developed economiesparticularly, African countries. This study aims at investigating therelationship between Corporate Social Responsibility (CSR) and FinancialPerformance (FP) in the Mozambican Banking industry over the period from 2010to 2016. Thus, the present study tries to answer these three questions: “isthere a significant and positive relationship between CSR and FP in theMozambican Banking industry? Whether the implementation of CSR behavior conducta high degree of financial performance in the Mozambican Banking sector andvice-versa? And, are banks primarily disclosing information regarding theircustomer and products?” To answer the questions, we following the stakeholdertheory in the accounting literature. In the literature, we can found a different type of theory that examines therelationship between CSR and FP.
In the present study, we applied thestakeholder theory that, in our point of view, had better explain thisassociation. According to prior accounting literature, we summarize ourhypothesis as follows: H0:There is a positive relationship between CSR reporting and FP in the Mozambican Banking industry.H1:Companies displaying a higher level of CSR behavior achieve greater FP in the Mozambican Banking sector.H2:All the dimensions of CSR practice have an individual significant and positiveeffect on the FP of MozambicanBanks.
H2a:Banks are primarily disclosing information regarding their customer and products.H3:Better profitable firms are those that adopt greater CSR behavior.We test our hypothesesusing data from the annual statement of Mozambican banks available online atthe 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 appropriatemeasure of FP that is based on measures of profitability, such as ROE (returnon equity) and ROA (return on asset). Inaddition, we appliedthe content analysis to assess the CSR activities dimensions extracted frombank annual reports and extracted from the individual bank web site.
Themain findings of our study are as follows. Firstly, we found a significant andpositive association between FP and CSR implying that the Mozambican bankingsector is socially responsible. Secondly, we found a bidirectional associationbetween 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 abouttheir customer & products comparatively to other categories of CSRpractices.Our study attempts to fill the existinggap in the accounting literature, contributing to the knowledge of how banks strive to achieveCSR behavior and improve better FP in under-developed countries, particularlyin the African context.