Review Reports - Effect of CSR on the Financial Performance of Financial Institutions in Kenya

Round 1

Reviewer 1 Report

The manuscript contains basic ideas for good academic writing (introduction, literature review, research methodology, results and discussion, and conclusion and recommendations). The Literature Review section mentions theories related to the topic (slack resource theory, agency theory, and relational theory). The Research Methodology section explains the operational definition of variables and techniques applied to test the hypotheses. The Results and Discussion section explains the descriptive results of each variable, including independent and dependent variables.

The explanation is followed by correlational and regression analyses and a discussion of the results of hypothesis testing. The Literature Review section contains descriptions of three theories: slack resource theory, agency theory, and relational theory. Unfortunately, there is no sufficient explanation of how the study uses these theories to develop the hypotheses. For example, when the study states that there is a positive relationship between ethical CSR activities and financial performance, the study does not mention which one of the three theories is relevant and helpful to developing a theoretical framework to convince the reader that doing ethical CSR activities are contributing positively to create the financial performance. Similar cases are also for the second and third hypotheses. Instead, in the Result and Discussion section, the study mentions that the study is consistent with the stakeholder theory.The manuscript cites 92 references. Although all the references are mainly relevant to provide frameworks for the topic studied, around 50 of them were written and published by previous scholars from 1963 to 2016. It is not clear to what extent the manuscript contains self-citations since the reviewer cannot certainly define who is/are the author/s. The reviewer cannot acknowledge who is/are the author/s.The research method uses primary data gathered through questionnaires filled by 171 staff of financial institutions, including banks and micro finances. It also mentions indicators for the independent variables (ethical, philanthropic/charitable, gender mainstreaming activities). Since the manuscript uses primary data from staff and the independent variables can be approached through perceptional questions, the reviewer comprehends that the unit analysis of the study is the individual staff. Descriptive statistics analyses presented in the Results and Discussion section confirm it and show using a Likert-like scoring method to quantify the indicators. The manuscript does not explain the process of measuring financial performance (dependent variable) in the Research Methodology section. From the Results and Discussion section, the reviewer finds the descriptive statistics of the financial performance variable. It explains that the study applies five net profit after-tax ranges to score 1 to 5 on the variable cascadingly. From the reviewer's point of view, the quantifying method is quite a bias since it represents the performance of a business entity. It does not fit with the ways the study quantifies the independent variables. In other words, the study uses the perceptual statement of individual respondents as the unit analysis for independent variables, while for the dependent variable, the unit analysis is business entities. What if the individual respondents who work for a similar business entity have and provide different data for the financial performance of the one company? The case would be acceptable if the study explicitly mentions that the respondents represent one business entity. Under this circumstance, the unit of analysis will be business units. The author/s should explicitly confirm what the unit of analysis is.The manuscript provides a pretty clear explanation of how the study was done. However, the study still needs to state some minor points explicitly (for example, what is the unit of analysis). Generally, the study is reproducible based on the explanation.The tables are appropriate and have supported providing a more straightforward explanation of the methods and results. The study applied linear regression analysis to answer the hypotheses. It also employed the Durbin Watson test to determine whether autocorrelation exists among variables. Interestingly, the constant in the regression model is found to be not significant. However, the author/s do/es not explore this issue and its possible contribution to enriching discussion and finding potential novelty since the study is conducted in a developing country. What is the meaning of the insignificant constant in doing ethical activities in financial institutions in Kenya?The Conclusion section contains straight answers to the research questions, consistent with the study results presented in the Results and Discussion section. However, the study lacks contribution to developing the existing theories on corporate social responsibilities studies. How do theories on corporate social responsibility explain that committing to ethical, charitable, and gender mainstreaming activities significantly impact the business's financial performance? One suggestion is that doing corporate social responsibility study from the perspective of individual staff is exceptional since many previous studies use secondary data and content analysis methods to gather and quantify firms' engagement in ethical activities. Using the data and exploring it under behavioral theories may fruitfully create new perspectives on how staffs perceive firms' commitment to do ethical activities.Although the quality and integrity of the study seem to be acceptable, the Turnitin test (not being stored in the repository) shows that the manuscript has a similarity level of 31%.

Author Response

Cover page with Errata Sheet: Responses to Reviewers’ Comments and Corrections

Article Title: “Effect of Corporate Social Responsibility on the Financial Performance of Financial Institutions in Kenya”.

Reviewer #1

The manuscript cites 92 references. Although all the references are mainly relevant to provide frameworks for the topic studied, around 50 of them were written and published by previous scholars from 1963 to 2016. It is not clear to what extent the manuscript contains self-citations since the reviewer cannot certainly define who is/are the author/s. The reviewer cannot acknowledge who is/are the author/s. The research method uses primary data gathered through questionnaires filled by 171 staff of financial institutions, including banks and micro finances. It also mentions indicators for the independent variables (ethical, philanthropic/charitable, gender mainstreaming activities). Since the manuscript uses primary data from staff and the independent variables can be approached through perceptional questions, the reviewer comprehends that the unit analysis of the study is the individual staff. Descriptive statistics analyses presented in the Results and Discussion section confirm it and show using a Likert-like scoring method to quantify the indicators. The manuscript does not explain the process of measuring financial performance (dependent variable) in the Research Methodology section. From the Results and Discussion section, the reviewer finds the descriptive statistics of the financial performance variable. It explains that the study applies five net profit after-tax ranges to score 1 to 5 on the variable cascadingly. From the reviewer's point of view, the quantifying method is quite a bias since it represents the performance of a business entity. It does not fit with the ways the study quantifies the independent variables. In other words, the study uses the perceptual statement of individual respondents as the unit analysis for independent variables, while for the dependent variable, the unit analysis is business entities. What if the individual respondents who work for a similar business entity have and provide different data for the financial performance of the one company? The case would be acceptable if the study explicitly mentions that the respondents represent one business entity. Under this circumstance, the unit of analysis will be business units. The author/s should explicitly confirm what the unit of analysis is. The manuscript provides a pretty clear explanation of how the study was done. However, the study still needs to state some minor points explicitly (for example, what is the unit of analysis). Generally, the study is reproducible based on the explanation. The tables are appropriate and have supported providing a more straightforward explanation of the methods and results. The study applied linear regression analysis to answer the hypotheses. It also employed the Durbin Watson test to determine whether autocorrelation exists among variables. Interestingly, the constant in the regression model is found to be not significant. However, the author/s do/es not explore this issue and its possible contribution to enriching discussion and finding potential novelty since the study is conducted in a developing country. What is the meaning of the insignificant constant in doing ethical activities in financial institutions in Kenya? The Conclusion section contains straight answers to the research questions, consistent with the study results presented in the Results and Discussion section. However, the study lacks contribution to developing the existing theories on corporate social responsibilities studies. How do theories on corporate social responsibility explain that committing to ethical, charitable, and gender mainstreaming activities significantly impact the business's financial performance? One suggestion is that doing corporate social responsibility study from the perspective of individual staff is exceptional since many previous studies use secondary data and content analysis methods to gather and quantify firms' engagement in ethical activities. Using the data and exploring it under behavioral theories may fruitfully create new perspectives on how staffs perceive firms' commitment to do ethical activities. Although the quality and integrity of the study seem to be acceptable, the Turnitin test (not being stored in the repository) shows that the manuscript has a similarity level of 31%.

No	Comments	Corrections
1	The Literature Review section contains descriptions of three theories: slack resource theory, agency theory, and relational theory. Unfortunately, there is no sufficient explanation of how the study uses these theories to develop the hypotheses.	We thank the reviewers for the thorough comments given for this manuscript. We have diligently reviewed all the raised comments and concerns and have taken actions to correct and improve this paper. The revised sections are highlighted in yellow. Added more explanations on how the theories inform the study hypothesis. Some paragraphs were also removed to make the relationship clearer.
2	The manuscript cites 92 references. Although all the references are mainly relevant to provide frameworks for the topic studied, around 50 of them were written and published by previous scholars from 1963 to 2016.	We removed some of the old citations and added newer citations that help in the development of the study topic.
3	The manuscript does not explain the process of measuring financial performance (dependent variable) in the Research Methodology section.	Thank you for this comment. An explanation is added in the manuscript under the methodology section.
4	From the reviewer's point of view, the quantifying method is quite a bias since it represents the performance of a business entity. It does not fit with the ways the study quantifies the independent variables. In other words, the study uses the perceptual statement of individual respondents as the unit analysis for independent variables, while for the dependent variable, the unit analysis is business entities. What if the individual respondents who work for a similar business entity have and provide different data for the financial performance of the one company? The case would be acceptable if the study explicitly mentions that the respondents represent one business entity. Under this circumstance, the unit of analysis will be business units. The author/s should explicitly confirm what the unit of analysis is.	Thank you for this kind comment. Our understanding of the unit of analysis is that it is the entities that we seek to say something about at the end of the study. In this case, our focus was financial institutions within kirinyaga county. The unit of analysis for both the independent and dependent variables was the business entities. On the side of independent variables, CSR was measured based on the ethical, charitable, and gender mainstreaming activities from the business entity perspective while the financial performance was measured in terms of the provided ranges on annual average net profits. The researchers opted for this approach due to the challenges of accessing the actual information on CSR budgetary allocations given that most of the financial institutions are small or medium-sized. However, we really appreciate your perspective and will take it into consideration for future related studies.
5	Interestingly, the constant in the regression model is found to be not significant. However, the author/s do/es not explore this issue and its possible contribution to enriching discussion and finding potential novelty since the study is conducted in a developing country. What is the meaning of the insignificant constant in doing ethical activities in financial institutions in Kenya?	Thank you very much for this comment. We added sufficient explanation on the implication of the insignificant constant under the hypothesis testing results discussion.
6	The Conclusion section contains straight answers to the research questions, consistent with the study results presented in the Results and Discussion section. However, the study lacks contribution to developing the existing theories on corporate social responsibilities studies. How do theories on corporate social responsibility explain that committing to ethical, charitable, and gender mainstreaming activities significantly impact the business's financial performance? One suggestion is that doing corporate social responsibility study from the perspective of individual staff is exceptional since many previous studies use secondary data and content analysis methods to gather and quantify firms' engagement in ethical activities. Using the data and exploring it under behavioral theories may fruitfully create new perspectives on how staffs perceive firms' commitment to do ethical activities.	Thank you very much for this insight. We included this contribution in the recommendation section. It was very insightful.
7	Although the quality and integrity of the study seem to be acceptable, the Turnitin test (not being stored in the repository) shows that the manuscript has a similarity level of 31%.	Thank you for this comment. We rephrased the similar parts, cited and added the relevant references.
30	Suggested references · Tulcanaza-Prieto, A.B.; Shin, H.; Lee, Y.; Lee, C.W. Relationship among CSR Initiatives and Financial and Non-Financial Corporate Performance in the Ecuadorian Banking Environment. Sustainability 2020, 12, 1621. doi: 10.3390/su12041621 · Tsai, C.-H.; Mutuc, E.B. Evidence in Asian Food Industry: Intellectual Capital, Corporate Financial Performance, and Corporate Social Responsibility. Int. J. Environ. Res. Public Health 2020, 17, 663. doi: 10.3390/ijerph17020663 · Atmeh, M.; Shaban, M.; Alsharairi, M. Corporate Social Responsibility: Motives and Financial Performance. Int. J. Financial Stud. 2020, 8, 76. doi: 10.3390/ijfs8040076 · Suttipun, M.; Lakkanawanit, P.; Swatdikun, T.; Dungtripop, W. The Impact of Corporate Social Responsibility on the Financial Performance of Listed Companies in Thailand. Sustainability 2021, 13, 8920. doi: 10.3390/su13168920 · Szegedi, K.; Khan, Y.; Lentner, C. Corporate Social Responsibility and Financial Performance: Evidence from Pakistani Listed Banks. Sustainability 2020, 12, 4080. doi: 10.3390/su12104080	Thank you for this very good suggestions of articles. We have reviewed all these works and have cited them accordingly in this revised paper.

Reviewer 2 Report

The introduction should be focused on a summary of the motivation, research question, definitions of key terms, arguments, data used, contributions, and perhaps an outline of the remainder of the paper. It will be clearer to build the hypothesis development within the literature review. It is unusual that different hypotheses suddenly pop up in a separate section.

The research methodology section is too plain and does not communicate much. A deeper econometric investigation is required, also including significant control variables in the baseline regression to prevent omitted variable issues. Causality is always an issue. The VIF test is needed to strengthen the finding about the non-presence of multicollinearity. It can hardly believe that the estimation is consistent for the baseline specification. The authors should provide robustness check to support their results.

Overall, the authors need to do a better job in discussing the results, in a separate “discussion section”. As the paper stands the findings provide us no insights. The authors should delineate how and why their results differ from other studies. The final section should clearly identify as to why the implications are interesting, considering the stream of literature of CSR and its relation with CFP.

Author Response

Cover page with Errata Sheet: Responses to Reviewers’ Comments and Corrections

Article Title: “Effect of Corporate Social Responsibility on the Financial Performance of Financial Institutions in Kenya”.

Reviewer #2

No	Comments	Corrections
1	The introduction should be focused on a summary of the motivation, research question, definitions of key terms, arguments, data used, contributions, and perhaps an outline of the remainder of the paper. It will be clearer to build the hypothesis development within the literature review. It is unusual that different hypotheses suddenly pop up in a separate section.	Thank you for this comment. We re-organized the introduction from general to specific ideas as follows: The re-organized parts are highlighted in red. Paragraph 1 focuses on the definition of key CSR concepts. Paragraph 2 focuses on the definition of key CSR aspects used in the development of research hypothesis. Paragraph 3,4 and 5 focuses on sumary of key research motivation and arguments. Paragraph 6,7 and 8 narrows down to bringing up the global, local CSR perspective in the context of financial institutions. Paragraph 9, 10 and 11 focuses on bringing up the research gap and developing the research hypothesis. The paper outline is also included in paragraph 11 which is the last paragraph of the introduction section.
2	The research methodology section is too plain and does not communicate much. A deeper econometric investigation is required, also including significant control variables in the baseline regression to prevent omitted variable issues. Causality is always an issue. The VIF test is needed to strengthen the finding about the non-presence of multicollinearity. It can hardly believe that the estimation is consistent for the baseline specification. The authors should provide robustness check to support their results.	VIF test for multicollinearity added in table 9.
3	Overall, the authors need to do a better job in discussing the results, in a separate “discussion section”. As the paper stands the findings provide us no insights. The authors should delineate how and why their results differ from other studies. The final section should clearly identify as to why the implications are interesting, considering the stream of literature of CSR and its relation with CFP.	Thank you for these comments. A discussion section dedicated for each variable is included under 4.5 Summary and Discussion. New information on how this study differs from others is also included the last part of the section 4.5.

Reviewer 3 Report

The paper aims to explore the impact of CSR on financial performance of Kenyan financial institutions. It comprises many strengths. However, the following comments may be considered:

- There are unnecessary details is the abstract such those related to secondary data.

- The use of abbreviation CSR instead of Corporate social responsibility is preferred.

- The introduction should be reorganized from general to specific ideas

- The structure of the manuscript should be provided in the introduction

- It is not necessary to dedicate a paragraph to the research gap which can be presented in the introduction

- The hypotheses may be replaced after each development

- There is no a research model graph representing all hypotheses.

- The descriptive analysis should not be extensively presented

- The Structural Equation Modelling (SEM) may be employed instead of correlation analysis

- Limitations are not presented in the conclusion and recommendations part

- It is useless to repeat the main result in the last paragraph 5.3

Author Response

Reviewer 3#

The paper aims to explore the impact of CSR on the financial performance of Kenyan financial institutions. It comprises many strengths. However, the following comments may be considered:

No	Comments	Corrections
1	There are unnecessary details is the abstract such those related to secondary data.	We thank you very much for your kind comments. We removed information about secondary data from the abstract.
2	The use of abbreviation CSR instead of Corporate social responsibility is preferred	Thank you. Replaced Corporate Social Responsibility with (CSR).
3	The introduction should be reorganized from general to specific ideas	Thank you for this comment. We re-organized the introduction from general to specific ideas as follows: Paragraph 1 focuses on the definition of key CSR concepts. Paragraph 2 focuses on the definition of key CSR aspects used in the development of research hypothesis. Paragraph 3,4 and 5 focuses on key research motivation and arguments Paragraph 6,7 and 8 narrows down to bringing up the global, local CSR perspective in the context of financial institutions. Paragraph 9, 10 and 11 focuses on bringing up the research gap and developing the research hypothesis. The paper outline is also included in paragraph 11 which is the last paragraph of the introduction section.
4	The structure of the manuscript should be provided in the introduction	Thank you. Structure added as the last paragraph of the introduction.
5	It is not necessary to dedicate a paragraph to the research gap which can be presented in the introduction	Thank you. The paragraph is included in the introduction and not presented independently.
6	The hypotheses may be replaced after each development.	The evaluation of the hypotheses is presented in the final chapter of the paper.
7	The descriptive analysis should not be extensively presented.	Thank you very much for this comment. It is modified.
8	The Structural Equation Modelling (SEM) may be employed instead of correlation analysis.	Thank you very much for this guidance. We will consider the possibility of using the "Structural Equation Modelling (SEM)" procedure in future publications.
9	Limitations are not presented in the conclusion and recommendations part	Study limitations added under: 5.3. Limitations and scope for future research.
10	It is useless to repeat the main result in the last paragraph 5.3	Thank you for this comment. The main results are deleted from this paragraph.

Round 2

Reviewer 2 Report

Your paper is converging toward acceptance, with no more actionable comments. However, your paper needs further editorial review. You might consider a top copy service. Some of these issues are academic style issues not necessarily quick grammar fixes.

Please update references where needed, appropriate, or to establish greater relevance with our readership. This includes drawing comparison with other papers. You might find the following of interest...

Galletta, S., Mazzù, S., Naciti, V., & Vermiglio, C. (2022). Gender diversity and sustainability performance in the banking industry. Corporate Social Responsibility and Environmental Management, 29(1), 161-174.

Bihari, S. C., & Pradhan, S. (2011). CSR and performance: the story of banks in India. Journal of Transnational Management, 16(1), 20-35.

Esteban-Sanchez, P., de la Cuesta-Gonzalez, M., & Paredes-Gazquez, J. D. (2017). Corporate social performance and its relation with corporate financial performance: International evidence in the banking industry. Journal of cleaner production, 162, 1102-1110.

Author Response

Comments

Corrections

Please update references where needed, appropriate, or to establish greater relevance with our readership. This includes drawing comparison with other papers. You might find the following of interest...

Thank you for this guidance and for these great sources. I cited them and added them in the reference list to improve on the relevance of our readership and also to add further comparison to other studies.

We contacted a native English-speaking proofreader who made the necessary corrections.

Round 3

Reviewer 2 Report

Accept in present form