Articlediamond2018

Corporate Social Responsibility and Banks’ Financial Performance

Francesco Gangi · Mario Mustilli · Nicola Varrone · Lucia Michela Daniele

63 citations0/0 files storedInternational Business Research

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Corporate Social Responsibility Reporting Banking Sector Performance and Management Corporate Governance and Financial Management

Abstract

This study analyzes whether and how corporate social responsibility (CSR) affects the financial performance of the European banking industry. According to agency theory, CSR engagement should be negatively related to financial performance. By contrast, from the stakeholder perspective and according to the resource-based view, CSR should positively impact banks’ financial performance. Over a period of six years (2009-2015) following the explosion of the sub-prime crisis, the econometric estimates of the current study confirm a positive effect of CSR engagement on banks’ financial performance. Net interest income and profitability increase with the increase in social performance. At the same time, CSR is negatively related to non-performing loans. Therefore, in contrast to the trade-off model, our results support a win-win vision of the relationship between the social and financial performance of banks.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1991Firm Resources and Sustained Competitive Advantage 2010Strategic management a stakeholder approach 2007The Social Responsibility of Business Is to Increase Its Profits 1991The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders 1993Finance and Growth: Schumpeter Might Be Right 2003Corporate Social and Financial Performance: A Meta-Analysis 1999Corporate Social Responsibility

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