To engage or not to engage in corporate social responsibility: Empirical evidence from global banking sector |
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| Institution: | 1. Department of Monetary Finance, The College of Finance and Statistics, Hunan University, China;2. Department of Finance and Banking, Shih Chien University, Taiwan, ROC;3. Department of Business Administration, National Taipei University, Taiwan, ROC;4. Department of Finance, National Taichung University of Science and Technology, Taiwan, ROC;5. Department of Assets and Property Management, Hwa Hsia University of Technology, Taiwan, ROC;1. European Parliament, ASP 15 E 240, Rue Wiertz 60, 1047 Brussels, Belgium;2. Department of Accounting, Finance and Economics, Bournemouth University, Executive Business Centre, 89 Holdenhurst Road, BH8 8EB, Bournemouth, UK;3. Economics and Finance Subject Group, Portsmouth Business School, University of Portsmouth, Richmond Building, Portland Street, Portsmouth, Hampshire, PO1 3DE, UK |
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| Abstract: | Whether or not banks should engage in corporate social responsibility (CSR) activities is controversial because of the concomitant high cost even if banks could enjoy the benefits of a higher income as a result of their good reputation. Faced with this dilemma, bank managers are hesitant to engage in CSR. This study pursues this issue by examining whether or not banks engaging in CSR can bring profits and reduce non-performing loans. We apply three novel estimation methods to obtain the unbiased and full-blown CSR effect. The first two methods are matching methods, namely, conventional propensity score matching method and nearest-neighbor variance bias-corrected matching method (nn-VBC). The third method is Heckman's two-step method in switching regression. Regardless of the methods used, CSR banks overwhelmingly outperform non-CSR banks in terms of return on assets and return on equity. Our study offers policy suggestions for both government regulators and bank managers. |
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