Ownership and corporate social responsibility: an empirical investigation on data from the Nigerian industry

The impact of ownership structure on corporate decisions to allocate resources to Corporate Social Responsibility (CSR) has assumed renewed significance in the burgeoning literature of developing economies given the exigency for corporate executives to allocate firm specific resources to other social objectives that may detract from profit maximization. The central issue underpinning this growing international literature is that different ownership types have varying implications for firm’s CSR engagements. This study compliments evolving literature in looking at the effect of different degrees of ownership structures on CSR practices of firms in the Nigerian industry. This paper differs markedly from the methodologies of previous studies which used composite CSR indices. Since the aggregation of various forms of CSR into a composite index may blur the nature of the exact relationship between ownership structure and each category of CSR contained in the index, this work deconstructs CSR expenditure into five categories - public goods, socially desirable goods, corporate philanthropy, women on board used to proxy employee-relations and environmental conservation - and estimate the effects of government ownership, high levels of government and foreign shareholding, board independence, institutional investors and politically affiliated directors on CSR variables controlling for such factors as firm size, return on assets and capital intensity.
Using new data on listed Nigerian firms, this paper carries out its empirical investigation with panel data estimation in order to deal with heterogeneity and endogeneity issues. I control for further endogeneity bias via the treatment effect and Two-Stage Least Squares. To control for possible correlation between the error terms of different CSR equation given the multivariate nature of our CSR dependent variables, I also conduct seemingly unrelated regression model. Since the impact of firm-specific trend is not usually captured in Fixed-effect estimation, this work also controls for specific growth-variations that may confound the relationship between CSR and ownership structure via the Fixed-effect and Firm-specific Trend model. The findings of this paper reveal that government ownership has a significant and positive effect on CSR expenditure on corporate philanthropy and percentage of women on board used to proxy employee relations. I also find that high levels of government shareholding have a significant and positive effect only on CSR expenditure on social goods, while high levels of foreign shareholding have a significant and positive effect only on CSR expenditure on corporate philanthropy and percentage of women on board. Board independence has statistically insignificant effect on all the categories of CSR save for CSR expenditure on social goods, while institutional investors have a significant and positive effect only on CSR expenditure on social goods and corporate philanthropy. Politically affiliated directors have no significant impact on all the forms of CSR investigated in this work. The findings of this study suggest the need to institute incentives schemes and regulatory constraints that will compel different ownership structures to commit resources to CSR especially the core-CSR issues like environmental conservation and employee-relations