Impact of Corporate Social Responsibility on Stock Price Volatility of Listed Commercial Banks in Nigeria: Moderating Role of Tax Rate

Abstract

Corporate Social Responsibility is a vital tool utilized by banks for disseminating their ethical and corporate citizenship status which is imperative in legitimizing their duties and obligation for societal welfare. The purpose of this study is to investigate the impact of corporate social responsibility on stock price volatility of listed commercial banks in Nigeria. The study further examined the moderating role of tax on the association between corporate social responsibility and stock price volatility. The study used ex-post factor research design and adopted a census sample of thirteen listed commercial banks for a period of ten years spanning 2013 to 2022 within which Nigeria commercial banks experienced deteriorating value due to low corporate social responsibility engagements, poor quality disclosures, regulations and stock price volatility. Three proxies were used for the explanatory variable: frequency of corporate social responsibility disclosure, corporate social responsibility monetary spending ratio and corporate social responsibility expenditure and the proxy for the outcome variable is volatility and panel dataset of the study extracted from annual account and report of the census sample was analysed using OLS robust panel estimation technique to test the hypotheses and the results revealed that FCSRD has a positive and significant association with stock volatility. CSRE has a positive and insignificant relationship with stock price volatility while CSRMSR has insignificant association with stock price volatility. Also the regression result shows that effective tax rate exerts positive and significant moderating influences on FCSRD, CSRMSR and CSRE. Conclusively, CSR has a bidirectional impacts on share price volatility, however the bidirectional impacts are positively moderated by ETR. The implication of the findings is that banks should not over-prioritise CSR engagements also the government should consider implementation of tax regime and reduction of other levies that should attenuate the adverse effects of excessive taxes and develop a framework for monitoring and regulating CSR engagements of banks in order to ensure compliance thereby achieving reduction in stock price volatility risks which enhance bank long term sustainability