Efficacy of Social Accounting Practices on the Financial Performance: Evidence from Ethiopia

Uvaneswaran S M, Tsega Zemen, Seid Muhammed


Abstract


This aims of this paper is to examine the effects of social accounting practices on the financial performance of business organizations in the city of  Dessie, South Wollo, Ethiopia. To fulfill this objective, a stratified-random sampling design was used, followed by proportional sampling techniques. The research data were obtained from primary and secondary sources and analyzed using multiple linear regression to understand the effect of corporate social responsibility accounting practices on financial performance. The results of the study indicated that report on social accounting was indeed necessary, however, there was no standard guideline followed when reporting except the Ethiopian commercial code and statement of socio-economic operations. Likewise, the observation during this research showed that an increase in corporate social responsibility scores would lead to an increase in the company's financial performance.


Keywords


Corporate social responsibility; social accounting; financial performance

Full Text:

PDF

References


Aguilera, R. V., D. E. Rupp, C. A. Williams and J. Ganapathi. (2007). Putting the S back into corporate social responsibility: A multilevel theory of social change in Organizations, Academy of Management Review, 32(3), 836–863

Bondy, K., & Starkey, K. (2014). The dilemmas of internationalization: Corporate social responsibility in the multinational corporation. British Journal of Management. https://doi.org/10.1111/j.1467-8551.2012.00840

Chepkoech, Z. M., Chenuos, N. K., & Kosgei, D. K. (2015). Green procurement strategies as determinants of financial performance: evidence from small and medium enterprises in Uasin-Gishu County, Kenya. International Journal of Small Business and Entrepreneurship Research, 3(2), 1–15

Cochran PL (1984), Corporate social responsibility and financial performance. Academy Journal of Management, 27(1), 42-56

Crisóstomo, V. L., De Souza Freire, F., & De Vasconcellos, F. C. (2011). Corporate social responsibility, firm value and financial performance in Brazil. Social Responsibility Journal. https://doi.org/10.1108/17471111111141549

Crowther, D. (2000). Social and environmental accounting. London: Financial Times Prentice Hall

Daniel F. Ofori, Richard B. Nyuur, Mildred D. S-Darko (2014). Corporate social responsibility and financial performance: Fact or fiction? a look at Ghanaian banks. available at http://www.actacommercii.co.za/index.php/acta/article/download/180/255 retrieved on 8/05/18

Deegan, C. & Rankin, M. (1996).Do Australian companies report environmental news objectively? an analysis of environmental disclosures by firms prosecuted successfully by the Environmental Protection Authority. Accounting, Auditing & Accountability Journal, 9(2), 50-67

Dhaliwal, D., Li, O. Z., Tsang, A., & Yang, Y. G. (2014). Corporate social responsibility disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency. Journal of Accounting and Public Policy. https://doi.org/10.1016/j.jaccpubpol.2014.04.006

Dhaliwal, D. S., Radhakrishnan, S., Tsang, A., & Yang, Y. G. (2012). Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure. Accounting Review, https://doi.org/10.2308/accr-10218

Dowling, J. & Pfeffer, J. (1975). Organizational legitimacy: social values and organizational behaviour. Pacific Sociological Review, January: 122-136

Du, S., Bhattacharya, C. B., & Sen, S. (2010). Maximizing business returns to corporate social responsibility (CSR): The role of CSR communication. International Journal of Management Reviews. https://doi.org/10.1111/j.1468-2370.2009.00276.x

Friedman, M. (1970). The social responsibility of business is to increase its profits, NY Times Magazine

Farah Naz ,Farrukh Ijaz and Faizan Naqvi (2016), Financial performance of firms: evidence from Pakistan Cement Industry, Journal of Teaching and Education, 05(01), 81-94. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2788357

Gallego-Álvarez, I., Prado-Lorenzo, J. M., & García-Sánchez, I. M. (2011). Corporate social responsibility and innovation: a resource-based theory. Management Decision. https://doi.org/10.1108/00251741111183843

Global Reporting Initiative (GRI), (2006). Sustainability reporting guidelines. Draft version for Public comment, GRI, Amsterdam 2 January 2006-31 March 2006.

Gray, R. H. (2000). Current developments and trends is social environmental auditing and attestation. International Journal of Auditing, 4, 247-268

Huang, X. B., & Watson, L. (2015). Corporate social responsibility research in accounting. Journal of Accounting Literature. https://doi.org/10.1016/j.acclit.2015.03.001

Iyoha F.O and D. Oyerinde (2010). Accounting infrastructure and accountability in the management of public expenditure in developing countries: a focus on Nigeria, Critical perspectives on Accounting 21 (5), 361-373

Jerotich OJ. (2013). The relationship between corporate social responsibility practices and financial performance of firms in the manufacturing, construction and allied sector of the Nairobi securities exchange, International Journal of Business, Humanities and Technology, 3(2):81-90

Kalunda, E. (2007). Corporate social reporting practices: the case of companies listed on the Nairobi stock exchange. Unpublished MBA Project, School of Business, University of Nairobi

M. Karthikeyan. (2013). Social statement approach to cooperative cocial performance assessment: a case of lume adama farmers cooperative union in Ethiopia. In 4th EMES International Research Conference on Social Enterprise. Institute of Cooperatives & Development Studies, Ambo University

Margolis, J. D., Elfenbein, H. A., & Walsh, J. P. (2002). Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Paper presentation at the Academy of Management Meetings, Philadelphia, PA

Maunders, K. (1982), Social reporting and the employment report, in Tonkin, D.J. and Skerratt, L. C. L. (eds) Financial Reporting 1981-1982, London: ICAEW

McWilliams, A., & Siegel, D. S. (2011). Creating and capturing value: strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management. https://doi.org/10.1177/0149206310385696

Mills, D. L.; Gardner, M. J. (1984) Financial profiles and the disclosure of expenditures for socially responsible purposes. Journal of Business Research, v. 12, n. 4, p. 407-424

Oduol, F. O (2009) A survey of the social accounting and reporting practices adopted by the mobile service providers in Kenya. Unpublished MBA project, School of Business, University of Nairobi. Okeyo, W. O. (2004). A survey of levels and determinants of CSR among commercial firms in Kenya. Unpublished MBA project, School of Business, University of Nairobi

Porter, M E & Krammer, M.R. (2006). Strategy & society. Harvard Business Review, 82 (12), 78-92

Pricewaterhouse coopers (2002). Value reporting forecast: Bringing information out into the open. PWC Reports

Resmi, S. I., Begum, N. N., & Hassan, M. M. (2018). Impact of CSR on firm’s financial performance: a study on some selected agribusiness industries of Bangladesh. American Journal of Economics, Finance and Management, 4(3), 74–85. Retrieved from http://www.aiscience.org/journal/paperInfo/ajefm?paperId=4055

Saeidi, S. P., Sofian, S., Saeidi, P., Saeidi, S. P., & Saaeidi, S. A. (2015). How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research. https://doi.org/10.1016/j.jbusres.2014.06.024

Torres, A., Bijmolt, T. H. A., Tribó, J. A., & Verhoef, P. (2012). Generating global brand equity through corporate social responsibility to key stakeholders. International Journal of Research in Marketing. https://doi.org/10.1016/j.ijresmar.2011.10.002

Vogel, D. J. (2012). Is there a market for virtue? the business case for corporate social responsibility. California Management Review, https://doi.org/10.2307/41166315

Wan Ahamed, W. S., Almsafir, M. K., & Al-Smadi, A. W. (2014). Does corporate social responsibility lead to improve in firm financial performance? evidence from Malaysia. International Journal of Economics and Finance. https://doi.org/10.5539/ijef.v6n3p126

Wu, L., Subramanian, N., Abdulrahman, M. D., Liu, C., Lai, K. hung, & Pawar, K. S. (2015). The impact of integrated practices of lean, green, and social management systems on firm sustainability performance-evidence from Chinese fashion auto-parts suppliers. Sustainability (Switzerland). https://doi.org/10.3390/su7043838

Zhu, Q., & Zhang, Q. (2015). Evaluating practices and drivers of corporate social responsibility: the Chinese context. Journal of Cleaner Production. https://doi.org/10.1016/j.jclepro.2015.03.053




DOI: https://doi.org/10.22219/jibe.v3i01.7192 | Abstract views : 435 | PDF views : 25

Journal of Innovation in Business and Economics (JIBE)

Faculty of Economics and Business, Universitas Muhammadiyah Malang

E-mail: jibe@umm.ac.id, jibeumm@gmail.com Jl. Raya Tlogomas No. 246 Malang

Telp. [0341] 464318, Psw. 286

 

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.