The study examines the impact of firm characteristics on corporate social responsibility: the moderating role of firm life cycle in quoted non-financial firms in Nigeria. The ex-post facto research design was used in this research alongside the positivism research philosophy. The population of the study comprises of all non-financial firms quoted on the floor of the Nigerian Stock Exchange. The sample for the study is 73 companies which have available and accessible annual reports that covers the study period. The method of sampling was done using the simple random sampling technique. Secondary data was used for this study. The data were retrieved from corporate annual reports of the sampled quoted on the Nigeria Stock Exchange companies for the period 2010-2019 financial years. This study employed descriptive statistical methods and will includes descriptive techniques such as the mean, standard deviation, range, frequency distribution. More importantly, the random effects (RE) and fixed effects (FE) regression was estimated. Panel data regression is chosen because of the multidimensional nature of the data which has both time or periodic dimension and also cross-sectional dimension. The findings of the study reveals that (i) an increase in the firm size results in a decline in CSR disclosures. (ii) that the older the firms gets, the lower the CSR disclosures and hence younger firms tend to be characterized with increasing CSR disclosures (iii) an increase in the firm leverage results in a decline in CSR disclosures and hence highly levered firms can exhibit declining CSR disclosures. (iv) firms that are more profitable appear to disclose less of CSR information. (v) the type of industry and particularly environmental sensitive industries tend to significantly improve CSR disclosures. (vi) firm life cycle is a significant moderator of the extent to which the firm attributes affect CSR. In the light of the study findings, the following recommendations are suggested. Firstlyy, the study recommends that though CSR disclosure is voluntary, there is the need to ensure that firms of all sizes are held accountable for ensuring social responsibility. Secondly, the study recommends that institutional bodies such as the Financial Reporting Council of Nigeria and Securities and Exchange commission can entrench CSR disclosure practices for older firms that may display tendencies for reduced CSR. Thirdly, the study recommends that highly levered firms can build and sustain creditor confidence by improving their disclosure practices with emphasis also on CSR. Hence, it is in the best interest of highly levered firms to dispel the perception of information asymmetry that reduced disclosures could signal. Fourthly, the study recommends that CSR and profit maximization should not occur at an opportunity cost of each other and both can actually occur simultaneously which is now the mainstream philosophy.

CHAPTER ONE: INTRODUCTION

1.1       Background to the Study

Corporate social responsibility (CSR) have become a key business practice, to the extent that they now report one of the most important reporting issues in global business environments (Meynhardt & Gomez, 2019; Panda, D'Souza, & Blankson, 2019). According to Foran (2001) Corporate Social Responsibility can be defined as the set of practices and behaviors that firm adopt toward their labour force, toward the environment in which their operations are embedded, toward authority and towards civil society. The focus of firms on CSR reporting has come on the heels of increased criticism of financial reporting failing to adequately satisfy the informational needs of all stakeholders who wish to assess a company’s past and future performance, because it only provides a partial account of business activities, ignoring the social impact made by an entity (Flower, 2015). As a consequence, there have been calls for enhanced reporting on corporate responsibility. According to Tamvada (2020) there is an overall dissatisfaction with the mechanism of conventional accounting and its practices, the application of which results in unfavourable broader social consequences Consequently, the established consensus now is that there is an urgent need to expand the business reporting model especially with corporate social responsibility reporting issues in perspective. As a result, the number of companies disclosing their initiatives and performance with respect to social activities has grown. 
Dahlsrud (2008) examined definitions of CSR, and suggests that the most common element of it is the acknowledgement of business having responsibility towards society or community while engaging in socially benefitting activities. CSR literature has widely acknowledged that corporates and society are interlinked, and that corporates must act for the benefit of society. Historically, corporations took a step back during crises. However, as the role of business in society continues to evolve and stakeholder capitalism becomes mainstream, businesses are rising to the challenge. It’s encouraging to see how, even in the midst of challenging times, corporate social innovation is here to stay. Corporate social innovation encompasses the many ways that businesses can have a positive impact. Through philanthropy, corporations provide direct donations or in-kind support; through advocacy, corporations have the capacity to shape public policy; through corporate social responsibility programmes, corporations use their many resources toward the benefit of society; and through shared value creation (World Econonic Forum, (WEF), 2020)
However, a key recognition that must be brought forward within the push for robust corporate reporting model to incorporate social  is the fact that corporate social resposbility  is still largely voluntary and unregulated especially in developing economies. CSR has for most part remained voluntary (Lamarche & Bodet, 2018; Agudelo, Jóhannsdóttir & Davídsdóttir, 2019) and relied on self-regulation through codes of conduct with the decision to comply with the codes of conduct firmly within the forte of corporations (Bondy, Matten & Moon, 2008). It allows corporations flexible implementation and evaluation of the codes of conduct based on their choices. Therefore, given that CSR reporting is still largely voluntary by firms in Nigeria, it is clear that the decision to engage in and the report CSR information is largely discretionary and thus would be based considerable on cost-benefits evaluation by the firm. Consequenty, rigorous efforts have been made to explore the determinants of CSR , though  Dabor and Dabor (2015) and Soyinka, Sunday, and Adedeji (2017) have pointed out that in depth studies in this area is still in its infancy and there exist considerable inconsistent (Egbunike & Tarilaye 2017). 
The aim of this research is to contribute to the debate on the role of firm charateristics attributes as a driver of CSR in listed firms in Nigeria but adopts an entirely different approach by introducing the moderating effect of firm life cycle. Firms develop over their life cycle, but there has been little research on how firms make strategic decisions over time. This study attempts to identify whether corporate social responsibility (CSR) activities differ by corporate life-cycle stage. While most CSR studies examine firm-level cross-sectional differences, the current study examines historical evolution by employing life-cycle approach. Leveraging corporate life-cycle models used in prior research, we expect that growth-stage firms are more likely to engage in CSR activities: firms in this stage require both a sound ethical reputation and strong financial performance, if they are to survive. They need to build trust with external stakeholders and also achieve the financial success essential to firms starting new businesses. Next, we have no predictions with respect to the CSR activities of mature-stage firms, firms that are less likely to increase their financial performance, as they already generate sufficient earnings; nevertheless, they know it is essential to maintain their ethical reputation. Therefore, we make no ex ante predictions, either positive or negative, with regard to this stage. However, we do expect decline-stage firms to be less likely to engage in CSR activities; rather, they are more likely to engage in more “extreme” adjustments, such as restructuring and mergers and acquisitions. Additionally, as firms’ slack resources are important determinants of investment in CSR activities, decline-stage firms will be unable to invest in CSR; therefore, we expect that demand for CSR should be the lowest at this stage.

 

1.2       Statement of the Problem

Majority of studies on CSR has been focused on the drivers of social  especially given the voluntary disposition. Hence, there has been a proliferation of studies investigating these drivers such as firm characteristics (Egbunike & Tarilaye, 2017; Welback, Owusu, Bekoe & Kusi, 2017, Gnanaweera & Kunori, 2018), corporate governance (Mgbame & Onoyase 2015, De Villiers & Naiker 2011; Larkin  Bernardi & Bosco 2012; Muhammad and Sabo 2015) financial performance (Shaukat, Qiu & Trojanowski (2016), Gender Diversity (Ijas 2012; Prihatiningtias 2012; Harjoto, Laksmana & Lee 2015; Handajani, Subroto, Sutrisno & Saraswati 2014; Hyun, Yang, Jung & Hong 2016). The findings in their studies have been mixed and very much inconclusive. Though  Dabor and Dabor (2015) and Soyinka, Sunday, and Adedeji (2017) have pointed out that in depth studies in this area is still in its infancy and there exist considerable inconsistencies. 
However, looking only at firms characteristcs in order to undertand CSR  of firms is gross inadequate, limited and shields a critical understanding of how firms actually behave. Firms behave differently at various life cycle stages exist. This study argues  that the firm life cycle is probable to be an underlying construct that can be helpful in giving detailed heterogeneous results as regards CSR. In other words, this is to say that firms in a life cycle stage will possibly show distinctive CSR capacity and objective (Zhao & Xiao, 2018). Companies portray diverse strategies, structures, as well as decision-making processes at several phase of the corporate life cycle. Thus, managers can establish their best possible CSR level by embarking on a cost–benefit analysis that depends on their firm’s life-cycle stage (Lins, Servaes & Tamawyo, 2017). 
What is often the tradtion of numerous CSR studies in the Nigerian environment is simply run off to investigate firm-level characteristics and cross-sectional differences as determinants of CSR activities (Aliyu & Noor, 2015; Akanfe, Michael & Bose, 2017; Agudelo, Jóhannsdóttir & Davídsdóttir 2019; Dabor & Dabor, 2015; Ebiringa,  Yadirichukwu, Chigbu & Ogochukwu, 2013; Muhammad & Jamilu, 2017; Ogole & Saniyo, 2018; Okoye & Adeniyi, 2018; Oyewumi, Ogunmeru & Oboh, 2018; Usman, 2019; Uwuigbe, 2011; Uwuigbe & Egide, 2012), to the best of our knowledge, we are not aware of a comprehensive study that has introduced the moderating role of firm life cyle in the relationship beteen firm charcateristics and CSR. This is the gap that this still intends to fill and thereby contribute to knowledge. Thus incorporating a life cycle dimension enables proper understanding of the period dynamics of the relationship (Owolabi 2010). As a result we can juxtapose the CSR  practices against their lifecycle stages and thus be able to infer categorically at what stage in the life cycle did company A for example improve or decrease its CSR. Thus there is the need to provide a more comprehensive approach in the form of the life cycle dimension. 
Though the idea of the moderating role of firm life cycle has bee receiving research attention from researchers in other climes such as Ahmed, Bikram, Ali, Grantley and Mostafa (2017) which examines the association between corporate social responsibility (CSR) performance and financial distress and additionally the moderating impact of firm life cycle stages for Australia, Woo and Seung (2018) examine whether a firm undertakes corporate social responsibility (CSR) activities as a function of its life-cycle stage for China, Mostafa and Ahsan (2017) which examines the association between the corporate life cycle and corporate social responsibility (CSR) motivated by the resource-based theory, Tifanny and Yu-Chuan (2021) which exanine the moderating effect of firm life cycle on the relationship between firm profitability and CSR for Southeast Asia and Elsa, Annisaa  and Rayna (2021) investigating the moderating role of firm life cycle on the relationship  between financial distress and CSR for Indonesia. To the best of the researchers knowledge, the researcher is unware of any known study that has examined this relationship using listed Nigeria firms and herein lies the gap. This study therefore, will introduce firm life cycle as a moderating factor in the relationship between firm characteristics and CSR  in Nigeria.    

 

1.3       Research Objectives

The broad objectives of the study are to examine the effect of firm characteristics on corporate social responsbiity; the mediating effect of firm life cycle in  listed firms in Nigeria.
The specific objectives are to;

1. examine  the effect of  firm size on corporate social responsibility of listed firms in Nigeria.
2. investigate the effect of firm age on corporate social responsibility of listed firms in Nigeria
3. evaluate the impact of firm leverage on corporate social responsibility of listed firms in Nigeria
4. determine the impact of firm profitability on corporate social responsibility of listed firms in Nigeria
5. identify  the effect of firm industry type on corporate social responsibility of listed firms in Nigeria.
6. determine the moderating effect of firm life cycle on  the relationship between firm characteristics and corporate social responsibility of listed firms in Nigeria.

 

1.4       Research Questions

1. What is the effect of firm size on corporate social responsibility of listed firms in Nigeria?
2. Does firm age  impact on corporate social responsibility of listed firms in Nigeria?
3. What is the impact of firm leverage  social responsibility of listed firms in Nigeria?
4. How does the effect of firm profitability impact on corporate social responsibility of listed firms in Nigeria?
5. What is the effect of firm industry type corporate social responsibility of listed firms in Nigeria?
6. Does the the moderating effect of firm life cycle have a significant relationship between firm characteristics and corporate social responsibility of listed firms in Nigeria?

 

1.5       Research Hypotheses

H01. Firm size has no significant impact on corporate social responsibility  of listed firms in Nigeria.
H02. Firm age  has no significant impact on corporate social responsibility  of listed firms in Nigeria.
H03. Firm leverage has no significant impact on corporate social responsibility  of listed firms in Nigeria.
H04. Firm profitability   has no significant impact on corporate social responsibility  of listed firms in Nigeria.
H05. Firm industry type  has no significant impact on corporate social responsibility  of listed firms in Nigeria.
H06.Firm life cycle has no significant moderating impact on  the relationship between firm characteristics and corporate social responsibility  of listed firms in Nigeria.

 

1.6       Significance of the Study

The result of this study is expected to be relevant to different types of stakeholders. They are discussed thus;

Shareholders

The financial statements provide a means by which both the local and foreign investors gain an understanding of the financial position and operating performance of the companies. Prior studies existed that investors see CSR information as very important in making investment decisions and hence demand adequate  of such information. In addition, in this contemporary times, investors not only looking into the profit numbers that the company’s earn but also questioning about the impact of companies’ corporate social responsibility  on their investment or return (Chek, et al, 2013). Hence, this question results the need for companies to voluntarily disclose their social activities on the financial statements. Therefore, the result of this study is expected to aid investors understanding about the determinants of corporate social responsibility financial statement  in Nigeria.

Government

 The government is interested on the level of information disclose about the social responsibility to the society at large. This is because the level of social responsibility required or voluntarily provided to the society indicate how the companies respect the environment or society where they are operating. Therefore, the result of this study is hoped to be paramount to the government to justify this crucial ethical behavior of the firms listed in Nigerian listed companies.

Management

Every business organisations are willing to maintain goodwill about their business because it will help enhance their performance and value. The level of their social responsibility  will tells on their level of ethical responsibility and how they respect the society where they operated. Therefore, the result of this study is intends to provide the factors that determine social responsibility  which will be useful to the management for decision purpose. 

Debt-holders

Debt holders are partly owners of the firm but they received interest on their resources invested on the business. They required sufficient information about the level of social responsibility disclose in the financial reports to enable them make decision when assessing a firm’s ability to pay its debts as at when due. This is because a firm who does not respect the society where they operate may likely not pay their expected debts. Therefore, the result of this study is expected to provide useful information to the debt-owners on the factors that determine social responsibility financial statement  on Nigeria listed firms.  

Researchers and Analyst

This study will also be extremely useful to other researchers and analyst who are interested in this research area as it will form a good foundation for subsequent studies to be carried out. 

 

1.7       Scope of the Study

The study examines the firm charcateristics and CSR disclosues: The moderating effect of firm life cycle in listed firms in Nigeria. The population of the study is all quoted companies listed in the Nigerian stock exchange and the time period is 2010-2019. The scope of variables for the study covers the dependent variable which is CSR  and the key independent variable which is firm charcateristics. The firm life cycle is used as the moderating variable for the study. 

1.8       Definition of Terms

Corporate Social Responsibility (CSR): CSR is widely accepted as a strategy used to assist organizations’ gain, maintain and increase their acceptance in the society wherein they operate as reflected in social-environmental .
Firm Size: Firm size in the context of this study is defined in relation to the asset size of the company.  
Firm Leverage: Leverage one of the important items in the capital structure of companies and it provides a medium for corporate financing as firms borrow money in order to obtain the capital they require for operating their businesses. Leverage can either be short-term or long-term.  
Firm Age:  The most meaningful measure of firm age is the number of years since listing.  
Firm Profitability:  Profitability can simply be described as the firm’s ability to generate earnings by the efficient and effective utilization of available resources over a given period. It reflects the financial condition and achievement of a firm for a certain period of time  
Firm industry type:  This refers to the industrial classification of the company which could either be financial or non-financial in broad terms
Firm life cycle:  The theory of life cycle takes the position that organizations are similar to other natural creatures and hence they are born and then they develop, grow into maturity and eventually die.