Corporate social responsibility and firm performance of Ghanaian SMEs: The role of stakeholder engagement

Abstract

This paper aims to examine the influence of corporate social responsibility (CSR) on financial performance of small- and medium-sized enterprises (SMEs) in Ghana by using stakeholder engagement as a mediating variable. Primary data were collected from 423 SMEs within the Accra Metropolis. Partial least squares estimation technique was used to analyze the data. The study documented evidence for a mechanism through which CSR results in financial performance of firms: SMEs with improved CSR practices are better positioned to engage more with their stakeholders, which translates into improved financial performance. It was recommended that for SMEs to improve upon their CSR practices, which will eventually result in enhanced financial performance, stakeholder engagement should be a major part of their operations. The paper contributes to our knowledge on how CSR practices lead to financial performance of SMEs in developing countries. In addition, this is the first of its kind to establish the relationship between CSR practices and financial performance of SMEs in Ghana by using stakeholder engagement as a mediating factor.