Firm-Level Determinants of Corporate Social Responsibility

Evidence from Small and Medium- sized Enterprises in Ghana

Abstract

This paper examined firm-level determinants of social performance among small and medium-sized enterprises (SMEs) in Ghana, using specific traits, such as firm age, firm size, financial performance, leverage and managerial competence. It contributes to our knowledge on how firm-level characteristics influence the corporate social responsibility (CSR) initiatives among SMEs. The study analysed primary data of 423 SMEs, using regression analysis. It documented positive relationships between managerial competence, financial performance and CSR, and a negative relationship between leverage and CSR. The thrust of the study is that, besides managerial competence, financial performance variables were far more important determinants of the social performance of SMEs than non-financial ones. Therefore, it recommended that policy makers that desire active participation of the SME sector in addressing societal problems should institute measures that will improve their financial performance. These could include providing cheaper alternatives to accessing funds and maintaining a sustainable macroeconomic environment that support the financial prosperity of this sector. Finally, since it has been proven that managerial competence improves social performance, SME owner/managers are being encouraged to invest a lot of time and resources in sharpening their managerial competencies.