Effects of Corporate Social Responsibility on Financial Performance of Insurance Firms in Kenya

Abstract

The study sought to investigate the effects of CSR on the financial performance of insurance firms in Kenya. The study considered the three forms of CSR – Environmental CSR (ECSR), Philanthropic CSR and Community Development CSR as the independent variables and financial performance as the dependent variable. The study employed a descriptive research design to test for the effects of CSR on financial performance of insurance firms in Kenya measured by ROA. Investment in CSR was measured using monetary expenditure on CSR initiatives. Secondary data was obtained from audited financial statements, websites, publications and annual reports for the years 2008 to 2017. The objectives of the study were; to examine the effect of environmental CSR on the financial performance of insurance firms in Kenya, to establish the effects of philanthropic CSR on the financial performance of insurance firms in Kenya and to determine the effects of community development CSR on the financial performance of insurance firms in Kenya. Exploratory analysis, descriptive analysis and regression analysis using STATA version 12 was used to test the research hypotheses at 5% level of significance. Results were presented using tables and graphs. The Pooled OLS regression results revealed that environmental CSR had a statistically insignificant negative effect on the financial performance of insurance firms as measured by return on assets. The results indicated that philanthropic CSR had a statistically insignificant negative effect on the financial performance of insurance firms as measured by return on assets. The results showed that community development CSR had a statistically insignificant positive effect on the financial performance of insurance firms as measured by return on assets. The study findings revealed that CSR had mixed statistically insignificant effects on financial performance of insurance firms in Kenya. Therefore, the study concluded that CSR has no effects on the financial performance of insurance firms in Kenya. The researcher recommended that scholars and practitioners in Kenya and elsewhere in the developing world should rethink the concept of CSR to make it relevant, practicable and applicable to the prevailing contexts. insurance firms in Kenya should develop clear comprehensive company policies and implementation frameworks to guide their CSR operations and reporting on the same. The researcher also recommended that there is need for the Government develop comprehensive legal, regulatory and policy framework to guide CSR activities in the country so that the CSR movement can be focused on the country’s development agenda in their CSR initiatives.