Corporate Social Responsibility and Financial Performance: Does size Matter? Evidence from Kenyan Listed Firms

Abstract

The principal objective of this empirical investigation was to probe whether size matters in moderating the relationship between corporate social responsibility and financial performance using cross-sectional dataset drawn from 61 firms listed at the Nairobi Securities Exchange for the period 2016 to 2020. Corporate social responsibility composite score was generated by aggregating the five indicators, namely: community, environmental customer, employee, investor and supplier dimensions. The size of the firm was operationalized using sales turnover while financial performance was measured by price to book value ratio. The estimation technique employed to tests the research hypothesis was regression analysis and the findings were presented in form of tables and figures. The estimation results revealed that the relationship between corporate social responsibility and financial performance varied with the size of the firm as the hypothesized linkage strengthened as firms became larger. From the findings, synergistic moderation was confirmed. The findings also validate the tenets of legitimacy theory.

Keywords: corporate social responsibility, firm size, financial performance, legitimacy theory