Exploring the relationship between corporate social responsibility dimension disclosure and firm performance in the Ethiopian banking sector

In this study, we examine the relationship between corporate social responsibility disclosure (CSRD) and Ethiopian private bank financial performance between 2012 and 2023. Information regarding corporate social responsibility disclosure was obtained from fourteen Ethiopian private banks’ audited financial statements. Using panel data from the sample banks, the research investigates whether enhanced corporate social responsibility dimension disclosure practices contribute to improved financial performances. The study employs content analysis to develop a CSRD index based on four key dimensions: environment, human resources, products and customers, and community involvement. Financial performance was measured using Return on Assets (ROA) and Return on Equity (ROE). According to the analysis, both the human resource and product and customer disclosure dimensions are positive and significantly correlated with banks’ financial performance, which corroborates the corresponding hypotheses and aligns with stakeholders’ theory. In contrast, banks’ financial performance is not significantly affected by corporate social responsibility dimension towards community involvement and the environment. The study contributes to the limited body of literature on Corporate Social Responsibility disclosure and bank performance in developing countries and provides practical insights for scholars, policymakers and banking executives aiming to align social responsibility with financial success.