Impact of Corporate Social Responsibility Expenditure on Profitability: A Case Study on Mercantile Bank Limited

In Bangladesh, the banking sector has a glorious history of getting engaged themselves in different kinds of social activities which is formally known as CSR (Corporate Social Responsibilities). Banking is a business which runs on the confidence and the trust of people that enables the bank to mobilize funds from various sources. The profitability of a bank always depends on the efficient management of fund and exploring the genuine avenues in which its resources are invested to produce the maximum income. The purpose of the study is to discover the impact of Corporate Social Responsibility (CSR) expenditure on the profitability of Mercantile Bank Ltd (MBL) which indicates the fundamental picture of the overall banking industry of Bangladesh. MBL is one of the non-government commercial banks in Bangladesh, for this study purpose CSR expenditure is taken as the independent variable and profit after tax (PAT) as the dependent variable. The study used annual reports of MBL for the year 2011 to 2016. Ordinary least square (OLS) model of regression was analyzed using SPSS 17. to assess the impact as well as test the hypothesis of the study whether there is a relationship and the extent of the relationship between the independent variable (corporate social responsibility expenditure) and the dependent variable (profit after tax). Above all, the analysis revealed that 16.3 % of the variance of profit after tax of MBL has been explained by the benefit accrued from corporate social responsibility. The hypothesis that was formulated was tested and the result shows that there is positive relationship between corporate social responsibility and profitability in case of MBL.