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Journal ArticleDOI

Corporate social responsibility in the banking industry: Motives and financial performance

01 Sep 2013-Journal of Banking and Finance (North-Holland)-Vol. 37, Iss: 9, pp 3529-3547
TL;DR: In this article, the authors investigated the association between corporate social responsibility and financial performance and discussed the driving motives of banks to engage in CSR, concluding that strategic choices, altruism, and greenwashing are the primary motivations for banks to adopt CSR.
Abstract: The current study investigates the association between corporate social responsibility (CSR) and financial performance (FP), and discusses the driving motives of banks to engage in CSR. Three motives, namely, strategic choices, altruism, and greenwashing, suggest that the relationship between CSR and FP is positive, non-negative, and non-existent, respectively. We obtained our sample, which covered 2003–2009, from the Ethical Investment Research Service (EIRIS) databank and Bankscope database. The data consists of 162 banks in 22 countries. We then classified the banks into four types based on their degree of engagement in CSR. This study proposes the use of an extended version of the Heckman two-step regression, in which the first step adopts a multinomial logit model, and the second step estimates the performance equation with the inverse Mills ratio generated by the first step. The empirical results show that CSR positively associates with FP in terms of return on assets, return on equity, net interest income, and non-interest income. In contrast, CSR negatively associates with non-performing loans. Hence, strategic choice is the primary motive of banks to engage in CSR.

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Citations
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Journal ArticleDOI
TL;DR: Greenwash: Greenwash is communication that misleads people into forming overly positive opinions about environmental performance as discussed by the authors. But, greenwash is a form of communication that encourages people to form overly positive beliefs about environmental outcomes.
Abstract: Corporate claims about environmental performance have increased rapidly in recent years, as has the incidence of greenwash, that is, communication that misleads people into forming overly positive ...

399 citations


Cites background from "Corporate social responsibility in ..."

  • ...A study of 162 banks in 22 countries identifies three motives for banks participating in CSR activities—strategic choice, altruism, and greenwash (Wu & Shen, 2013)....

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Journal ArticleDOI
TL;DR: In this paper, a meta-study of sustainability business practices and economic performance is presented, showing that companies with robust sustainability practices demonstrate better operational performance, which ultimately translates into cashflows.
Abstract: In this enhanced meta-study we categorize more than 200 different sources. Within it, we find a remarkable correlation between diligent sustainability business practices and economic performance. The first part of the report explores this thesis from a strategic management perspective, with remarkable results: 88% of reviewed sources find that companies with robust sustainability practices demonstrate better operational performance, which ultimately translates into cashflows. The second part of the report builds on this, where 80% of the reviewed studies demonstrate that prudent sustainability practices have a positive influence on investment performance. This report ultimately demonstrates that responsibility and profitability are not incompatible, but in fact wholly complementary. When investors and asset owners replace the question “how much return?” with “how much sustainable return?”, then they have evolved from a stockholder to a stakeholder.

221 citations


Cites background from "Corporate social responsibility in ..."

  • ...Wu and Shen (2013) find that CSR is positively related to financial performance; measured by accounting-based measures for 162 banks from 22 different countries....

    [...]

Journal ArticleDOI
TL;DR: In this article, the authors analyzed the nature, extent and trend of corporate social responsibility reporting in Turkish banking industry under five sub-themes, namely, environment, energy, human resources, products and customers and community involvement.
Abstract: Purpose – The aim of this study is twofold. The first is to analyze the nature, extent and trend of corporate social responsibility (CSR) reporting in the Turkish banking industry under five sub-themes, namely, environment, energy, human resources, products and customers and community involvement. The second is to investigate the impact of ownership and board structure on CSR reporting by the banks. Design/methodology/approach – The annual reports of the banks were examined for the period between 2008 and 2012 to analyze the CSR reporting of the banks, using content analysis and panel data analysis. Findings – The results show that CSR reporting of the banks improved during that period of time. The findings of the study also revealed that there is a significant positive effect of size, ownership diffusion, board composition and board diversity on the CSR disclosure of the banks. Originality/value – This study contributes significantly to the existing literature because the banking industry is generally ex...

219 citations

Journal ArticleDOI
TL;DR: In this article, the authors investigate whether the incentives for corporate social responsibility come from an altruistic inclination fostered by the social capital of the region in which the firm is headquartered, and find that a firm from a high social capital region exhibits higher CSR.
Abstract: When corporations make an effort to be socially responsible beyond what is required by the law, this effort is often described as strategic—made mainly for the shareholders’ or managers’ benefit. A large body of literature corroborates this belief. But, could the incentives for corporate social responsibility (CSR) come from an altruistic inclination fostered by the social capital of the region in which the firm is headquartered? We investigate whether this phenomenon exists by examining the association between the social capital in the region and the firm’s CSR. We find that a firm from a high social capital region exhibits higher CSR. This result suggests that the self-interest of shareholders or mangers does not explain all of the firm’s CSR, but the altruistic inclination from the region might also play a role.

218 citations

Journal ArticleDOI
TL;DR: In this article, the authors developed a valuation model of the firm that provides for the expenditure of corporate resources in support of community, social or environmental causes, and showed that under certain circumstances CSR expenditures create value for the firm.
Abstract: This paper develops a valuation model of the firm that provides for the expenditure of corporate resources in support of community, social or environmental causes. We show that under certain circumstances CSR expenditures create value for the firm. We also test our model by simulations and confirm that, at least under some conditions, CSR does pay off in the form of value creation.

211 citations


Cites background from "Corporate social responsibility in ..."

  • ...Wu and Shen (2013) find a significant relationship between a bank’s performance and its CSR activities and Schreck (2011) report a strong link between performance and (single stockholder-related issues of) CSR. 3 Examining the nature of CSR activities, as reported in the KLD database for the S&P…...

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References
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Journal ArticleDOI
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
Abstract: This paper presents a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic. This estimator does not depend on a formal model of the structure of the heteroskedasticity. By comparing the elements of the new estimator to those of the usual covariance estimator, one obtains a direct test for heteroskedasticity, since in the absence of heteroskedasticity, the two estimators will be approximately equal, but will generally diverge otherwise. The test has an appealing least squares interpretation.

25,689 citations

Book ChapterDOI
01 Mar 2010

18,472 citations

Book
01 Jan 1984
TL;DR: The Stakeholder Approach: 1. Managing in turbulent times 2. The stakeholder concept and strategic management 3. Strategic Management Processes: 4. Setting strategic direction 5. Formulating strategies for stakeholders 6. Implementing and monitoring stakeholder strategies 7. Conflict at the board level 8. The functional disciplines of management 9. The role of the executive as mentioned in this paper.
Abstract: Part I. The Stakeholder Approach: 1. Managing in turbulent times 2. The stakeholder concept and strategic management 3. Stakeholder management: framework and philosophy Part II. Strategic Management Processes: 4. Setting strategic direction 5. Formulating strategies for stakeholders 6. Implementing and monitoring stakeholder strategies Part III. Implications for Theory and Practice: 7. Conflict at the board level 8. The functional disciplines of management 9. The role of the executive.

17,404 citations

Journal ArticleDOI
TL;DR: In this paper, the authors examined a cross-section of about 80 countries for the period 1960-89 and found that various measures of financial development are strongly associated with both current and later rates of economic growth.
Abstract: Joseph Schumpeter argued in 1911 that the services provided by financial intermediaries - mobilizing savings, evaluating projects, managing risk, monitoring managers, and facilitating transactions -stimulate technological innovation and economic development. The authors present evidence that supports this view. Examining a cross-section of about 80 countries for the period 1960-89, they find that various measures of financial development are strongly associated with both current and later rates of economic growth. Each measure has shortcomings but all tell the same story: finance matters. They present three main findings, which are robust to many specification tests: The average level of financial development for 1960-89 is very strongly associated with growth for the period. Financial development precedes growth. For example, financial depth in 1960 (the ratio of broad money to GDP) is positively and significantly related to real per capita GDP growth over the next 30 years even after controlling for a variety of country-specific characteristics and policy indicators. Financial development is positively associated with both investment rate and the efficiency with which economies use capital. Much work remains to be done, but the data are consistent with Schumpeter's view that the services provided by financial intermediaries stimulate long-run growth.

8,204 citations

Journal ArticleDOI
TL;DR: In this article, the authors examine the different methods used in the literature and explain when the different approaches yield the same (and correct) standard errors and when they diverge, and give researchers guidance for their use.
Abstract: In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on clustered standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper examines the different methods used in the literature and explains when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use.

7,647 citations

Trending Questions (1)
Does non performing loan have any relationship with social responsibility?

The paper states that CSR negatively associates with non-performing loans, suggesting that there is a relationship between non-performing loans and social responsibility.