EXPLORING THE RELATIONSHIP BETWEEN CORPORATE SOCIAL RESPONSIBILITY (CSR) AND FINANCIAL RISK MANAGEMENT: A STUDY OF MANUFACTURING FIRMS IN NIGERIA

Abstract

This study explores the relationship between Corporate Social Responsibility (CSR) and financial risk management among manufacturing firms in Nigeria, with a focus on how firm-level characteristics such as size and stakeholder engagement moderate this relationship. Using a quantitative research approach, secondary data were sourced from reliable institutions including the World Bank, IMF, and African Development Bank.  Findings indicate that employee training has a positive and significant effect on capital adequacy (β = 0.333, ρ = 0.009), while emission intensity, CSR expenses, and audit committee independence significantly reduce credit risk (β = -0.080, -0.101, and -0.063 respectively, all with ρ = 0.000). Firm size was found to positively moderate the impact of CSR on financial risk, especially in enhancing the effectiveness of employee training and governance-related CSR activities. The results suggest that while CSR has limited direct impact on capital adequacy, it plays a critical role in reducing short-term credit risk, particularly for larger firms with more resources to implement robust CSR strategies. The study concludes that CSR is a valuable tool for mitigating financial risk in the manufacturing sector and recommends increased investment in human capital development, governance structures, and formal CSR reporting practices. The research provides empirical support for policy frameworks that incentivize CSR as a strategic risk management mechanism in emerging economies.