Does being a responsible bank pay off? Evidence from the COVID-19 pandemic

Alper Kara, Steven Ongena and Yilmaz Yildiz

Journal of Financial Stability, 2024, vol. 74, issue C

Abstract: We investigate whether banks’ initial responses during the first wave of the COVID-19 pandemic in supporting their customers, communities, and governments were perceived as value-enhancing by investors. Using a unique responsible banking measure for a sample of the largest US and European commercial banks, we find a negative relationship between responsible bank behavior and stock market performance, particularly in the first wave of the pandemic. We also find that riskier banks were affected more negatively if they behaved responsibly. Overall, our findings show that banks’ responsible behavior during a crisis reduces, or at best is not relevant to, shareholder value.

Keywords: Responsible banking; Market performance; Corporate social responsibility; ESG; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: G21 G32 M14 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Does being a responsible bank pay off? Evidence from the COVID-19 pandemic (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:74:y:2024:i:c:s1572308924001025

DOI: 10.1016/j.jfs.2024.101317

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