Effect of Social Responsibility Costs on Value of Quoted Firms in Nigeria: Sectoral Analysis

Abstract

This study investigated the effect of social responsibility costs on value of quoted firms in Nigeria. The study employed ex post facto research design and extracted data from annual reports of twenty (20) quoted firms purposively selected from three sectors in the Nigerian Stock Exchange from 2005 to 2015, a period of considerable liberalization of the Nigerian economy. Using the panel least squares regression in a data set of sixty seven (67) observations in a longitudinal framework, the result showed that social and environmental costs have significant effect on value of quoted firms in the identified sectors studied. The study established that each of the sectors’ social and environmental costs have significant effect on net assets book value and further provided evidence that the financial services sector was more socially friendly than the consumer goods and industrial goods sectors, while the consumer goods sector made more investments on social and environmental activities than the industrial goods sector. The study therefore recommended that government and host communities should leverage on the possibilities of proactive dialogue to encourage firms to commit a significant portion of their net income on social responsibility activities. The Nigeria Stock Exchange should ensure that there is standard reporting format that would incorporate social and environmental costs and pertinent stock information in annual reports so as to provide first-hand information for investors and other stakeholders willing to analyze the social costs and market performance trend within a given period. Companies should endeavor to identify and invest in relevant social and environmental areas that would create an impact on the generality of the society.

Keywords: Social responsibility costs, Net Assets Book Value, Financial services sector,  Consumer Goods Sector, Industrial Goods sector, Nigeria Stock Exchange