What Is the Relationship between Corporate Social Responsibility and Financial Performance in the UK Banking Sector?

George Giannopoulos (), Nicholas Pilcher and Ioannis Salmon
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George Giannopoulos: Kingston Business School, Kingston University, Kingston Hill, Kingston Upon Thames, London KT2 7LB, UK
Nicholas Pilcher: Kingston Business School, Kingston University, Kingston Hill, Kingston Upon Thames, London KT2 7LB, UK
Ioannis Salmon: Department of Business Administration, University of West Attica, 12243 Athens, Greece

JRFM, 2024, vol. 17, issue 5, 1-21

Abstract: This study rigorously investigates the intricate dynamics between Corporate Social Responsibility (CSR), quantified through Environmental, Social, and Governance (ESG) scores, and financial performance (FP), measured via the return on assets (ROA) and return on equity (ROE), within the UK banking sector. Our analysis is based on a comprehensive dataset from Bloomberg. This research encapsulates data from 32 banks publicly listed on the London Stock Exchange over a six-year span from 2017 to 2022. Employing panel data regression models while controlling leverage and bank size, we delve into the relationship between banks’ CSR engagements, as reflected in their ESG scores, and their financial outcomes. Our findings indicate a negative correlation between the ESG score and both the ROA and ROE, suggesting that elevated CSR commitments may inversely impact short-term financial returns. This finding not only challenges prevailing narratives within the sector but also fosters a crucial discourse on the balance between ethical banking practices and profitability. The implications of this research study are manifold, extending to policymakers, banking executives, and investors, suggesting a revaluation of CSR strategies in alignment with long-term value creation and sustainable banking. This study not only enriches academic discourse on CSR within the financial sector but also serves as a beacon for future inquiries into the evolving landscape of responsible banking, advocating for a nuanced understanding of CSR’s role in shaping the financial and ethical contours of the banking industry.

Keywords: CSR; ESG; financial performance; UK listed banks (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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