Corporate social responsibility and bank value: evidence from bank capital

Grace Low and Qi Li

Meditari Accountancy Research, 2024, vol. 32, issue 4, 1324-1348

Abstract: Purpose - This study aims to examine the effect of corporate social responsibility (CSR) on banks’ capital, value and risk by investigating its impact on capital inflows and asset quality. The authors aim to investigate the value-protective characteristics of socially responsible performance. Design/methodology/approach - This study uses a two-stage least squares approach with instrumental variables, with bank and year fixed effects to address concerns regarding endogeneity, specifically reverse causality and unobservable factors. Findings - The results confirm a positive association of CSR with capital adequacy, including higher quality Tier 1 Capital. The authors find strong evidence that banks with higher CSR scores are associated with greater bank value and lower risk. The extended analyses find that the improvement in capital is from annual growth in capital and lower risky assets. Originality/value - The research advances the field by providing new empirical evidence of a positive association between CSR and capital, including high-quality Tier 1 Capital. This study complements the prior research by simultaneously examining the dynamic links between CSR and capital, bank risk and bank value. The findings are consistent with the view that there is a dynamic link in which CSR affects the operations of banks.

Keywords: Corporate social responsibility; Bank capital; Risk; Firm value; M14; M40; M41; M48 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:medarp:medar-10-2023-2197

DOI: 10.1108/MEDAR-10-2023-2197

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