Exploring the impact of Corporate Social Responsibility on the Financial Performance of Rural and Community Banks in Ghana

Abstract

The interest of Rural and Community Banks (RCBs) in CSR activities which include education and leadership development, Health, Community development are geared towards ensuring the wellbeing of community members. This means that CRS is key to the success of RCBs. Based on the above reasons the study attempts to examine the influence of CSR on the financial performance of selected Ghanaian Rural and Community Banks. RCBs sampled for this study were fifteen (15) from the Kumasi Metropolis in Ghana using annual reports for a six-year-period from 2012 to 2017. Regression analysis was employed to measure the effect of CSR, financial indicators, bank age, and size of the board of directors using the Data Envelope Technique on the performance of the RCBs. Findings showed that technical efficiency and productivity were low in some RCBs over the six-year-period. The results also showed that technical change, technological change, and Total Factor Productivity affected performance. However, the size of the board of directors was inversely related to the performance of RCBs. There is therefore the need for RCBs to improve input savings and also ensure an efficient allocation of monetary resources to corporate social responsibility activities as a way of enhancing their overall productivity. Not much has been written about the impact of CSR on the financial performance of RCBs in Africa. This study thus is among the first significant attempts to explore the impacts of CSR on the financial performance of RCBs in Africa.