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Corporate Social Responsibility (CSR) has received greater attention in the finance literature in the last few decades. Determining the direction of the relationship between CSR and financial performance has been a controversial issue among researchers, government agencies and policy makers. This paper examines the relationship between corporate social responsibility and firm financial performance of 36 Nigerian listed firms for the 10-year period, 2005-2014. Ordinary Least Squares regression analysis was used to determine the direction and strength of the relationship between CSR and firm performance. The result indicates a positive and significant relationship between CSR (measured by logarithm of corporate social responsibility expenditure) and firm financial performance (Return on Asset, and Profit Margin). The outcome of the study is consistent with some prior empirical studies and provides evidence in support of both social impact and positive synergy hypotheses. Management of firms are encouraged to put in place CSR policies that suit them and which are also beneficial to their host communities; since socially responsible firms are associated with some benefits which ultimately improve their financial performance.
Key words: Corporate social responsibility, Financial performance, Social contract, Social impact hypothesis, Positive synergy hypothesis