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Firm Characteristics, Corporate Social Responsibility, Operating Environment and Firm Performance FIRM CHARACTERISTICS, CORPORATE SOCIAL RESPONSIBILITY, OPERATING ENVIRONMENT AND PERFORMANCE OF FINANCIAL INSTITUTIONS IN KENYA BY SAMWEL OMONDI NYAOKE A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF DOCTOR OF PHILOSOPHY IN BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI 2016 DECLARATION This doctoral thesis is my original work and has not been presented in any other college, institution or university other than the University of Nairobi. Signed:………………………………………… Date: ………………………… Samwel Omondi Nyaoke REG. NO. D80/60697/2011 School of Business, University of Nairobi This thesis has been submitted for examination with our approval as the university supervisors. Signed:………………………………………… Date: ………………………… Dr. Machuki V.N., PhD Department of Business Administration School of Business, University of Nairobi. Signed:………………………………………… Date: ………………………… Prof. Martin Ogutu, PhD Department of Business Administration School of Business, University of Nairobi Signed:………………………………………… Date: ………………………… Prof. Gituro Wainaina, PhD Department of Management Science School of Business, University of Nairobi. ii COPYRIGHT All rights reserved. No part of this thesis may be reproduced either in part or whole without prior written permission from the author or the University of Nairobi except in the case of brief quotations embodied in review articles and research papers. Making copies of any part of this thesis for any purpose other than personal use is a violation of the Kenyan and international copyright laws. For information, contact Samwel Omondi Nyaoke at the following address: P.O. Box 10234 00100 Nairobi, Kenya. Telephone No. 254722808198 email – [email protected] or [email protected] iii DEDICATION This thesis is dedicated to my late father Joshua Nyaoke Nunda. Your leadership and people skills give me pride. I will forever remember your zeal for education and industriousness. Rest in peace “Jacameo.” iv ACKNOWLEDGEMENTS It suffices to acknowledge that the doctoral journey is full of meanders, bumpy rides, and challenges. The end game is exciting and makes one imagine that it is worth the sweat. To achieve this milestone is no mean feat. Consequently, I first wish to thank my God for giving me the strength to believe and be awake late in the night as I wrote this thesis. The writing of this thesis could not have been possible had it not been for the efforts and support of various people whom I am forever indebted. To my lead supervisor Dr. Vincent Machuki, I say thank you for your passion and well-versed knowledge which guided my thinking. I appreciate your command of English too which enabled me synthesize many literature materials and come up with such an excellent write-up. To Prof. Martin Ogutu, your wisdom and patience has taught me a lot in life and I forever will keep remembering your cool demeanor. To Prof. Gituro Wainaina, you are one in a million. I admire the way you look at issues in life and will always thank you for your statistical prowess. This piece of writing would not have been complete without the support I received from the School of Business - University of Nairobi. I wish to single out Dr. Iraya for his help in expanding the population of study. Dr. Yabs, Dr. Elly and Prof. B. Ndemo, I thank you all for your advice and assistance in shaping up my proposal. More importantly, I am indebted to the members of departmental, open forum and doctoral committee for their credible criticism which shaped the proposal. To the most important stakeholders in this study – the respondents who played a wonderful role in completing the questionnaires and returning the same, I say thank you. You have shaped my thesis for without you; I would not have completed this work. Am particularly touched by the respondents who were not resident in Nairobi but took their time to respond to my questionnaire and cooperate with my research assistants. I wish also to thank the staff of NIC Bank and KCB Bank for their encouragement during my study. My gratitude goes to my colleagues Bruce, Dr. Kosure, Dr. Ombaka and Dr. Kasomi for their encouragements. To my brothers and sisters; Maxwell, John, Richard, Alice, Charles, Eunice and Anne, I thank God for your individual efforts in one way or the other. Your encouragements and the pressure you put on me to deliver even when I was feeling tired and exhausted. It is my hope that these v efforts you showed can become a mirror and reflect back to you to take up the challenge yourselves. Lastly, I wish to thank my wife Hilda Ndunge for standing beside me through this tiresome journey. You are a good friend and companion in whom I am pleased. Thank you for your understanding for this mission meant that you had to step in and be mum and dad at the same time occasionally while I was away in search of knowledge. Sweetheart, I thank you for being there for me at the time of need. My children would not be wished away in this journey too. My son Adrian Kelly and daughter Elsa Imani this far I have come. I have fought a hard fight and completed this journey. I hope that this will be an encouragement to you on whatever you set your sight on in future. Always know that it is possible however difficult things may seem. Thank you for being there for daddy during the difficult times. vi TABLE OF CONTENTS DECLARATION...................................................................................................................... ii COPYRIGHT .......................................................................................................................... iii DEDICATION......................................................................................................................... iv ACKNOWLEDGEMENTS .................................................................................................... v LIST OF TABLES ................................................................................................................... x LIST OF FIGURES .............................................................................................................. xiii ABBREVIATIONS AND ACRONYMS ............................................................................. xiv ABSTRACT ........................................................................................................................... xvi CHAPTER ONE: INTRODUCTION .................................................................................... 1 1.1 Background of the Study ............................................................................................... 1 1.1.1 Firm Performance .............................................................................................. 2 1.1.2 Firm Characteristics ........................................................................................... 4 1.1.3 Corporate Social Responsibility ........................................................................ 5 1.1.4 Operating Environment ...................................................................................... 7 1.1.5 Financial Institutions in Kenya .......................................................................... 7 1.2 Research Problem .......................................................................................................... 8 1.3 Research Objectives ..................................................................................................... 11 1.4 Value of the Study ....................................................................................................... 11 1.5 Structure of the Thesis ................................................................................................. 12 CHAPTER TWO: LITERATURE REVIEW ..................................................................... 13 2.1 Introduction .................................................................................................................. 13 2.2 Theoretical Underpinnings of the Study ...................................................................... 13 2.2.1 Stakeholders Theory ........................................................................................ 14 2.2.2 Open System Theory........................................................................................ 15 2.2.3 Institutional Theory .......................................................................................... 16 2.2.4 Contingency Theory......................................................................................... 16 2.3 Firm Characteristics and Firm Performance ................................................................ 17 2.4 Firm Characteristics and Corporate Social Responsibility .......................................... 18 2.5 Corporate Social Responsibility and Firm Performance ............................................. 18 2.6 Firm Characteristics, Corporate Social Responsibility and Firm Performance ........... 19 2.7 Corporate Social Responsibility, Operating Environment and Firm Performance...... 20 vii 2.8 Firm Characteristics, Corporate Social Responsibility, Operating Environment and Firm Performance ........................................................................................................ 22 2.9 Summary of Literature Review .................................................................................... 23 2.10 Conceptual Framework ................................................................................................ 28 2.11 Conceptual Hypotheses ...............................................................................................
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