EFFECT OF CORPORATE SOCIAL RESPONSIBILITY ON FIRMS’ ECONOMIC PERFORMANCE: IMPLICATIONS FOR BANKING SECTOR IN TANZANIA

Abstract

 For decades, commercial firms have been providing aids in the form of Corporate Social Responsibility (CSR) and such aids have been used as one of the key determinants to firms’ economic performance. At different moments, these firms believed that such aids contributed heavily to positive returns of such firms. However, there is a great debate among scholars on the influence of CSR on firms’ performance. The existing strand of literature provides inconclusive findings and thus, little is known on the matter in Tanzanian context especially in the banking sector. The objective of this study was to examine the influence of CSR on the performance of registered banks in Tanzania. The study employed the Probit and Fixed Effects econometric techniques to establish empirical evidence on the influence of banking sector’s CSR on firms’ economic performance. A total of 20 registered banks by BOT were analyzed based on unbalanced panel data spanning from 2008 to 2019. The key findings revealed that, the likelihood of banks performance decreases with support offered by the banks to the society through CSR. The finding was consistent both in CSR offered to education and health sectors from both analytical methods. Such findings imply that managers need to review and develop appropriate marketing strategies of their firms in order to achieve a better firms’ economic performance. The study recommends firms to manage their CSR schemes by reviewing related policies based on cost benefit analysis to establish consistent and win-win CSR strategies