CORPORATE SOCIAL PERFORMANCE AND FINANCIAL STABILITY: EVIDENCE FROM ISLAMIC, SOCIAL AND CONVENTIONAL BANKING MODELS

Syed Alwi Bin Mohamed Sultan (), Wan Marhaini Binti Wan Ahmad (), Obiyathulla Ismath Bacha () and Roslily Ramlee ()
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Syed Alwi Bin Mohamed Sultan: Universiti Malaya, Malaysia
Wan Marhaini Binti Wan Ahmad: Universiti Malaya, Malaysia
Obiyathulla Ismath Bacha: INCEIF University, Malaysia
Roslily Ramlee: International Islamic University Malaysia, Malaysia

Journal of Islamic Monetary Economics and Finance, 2024, vol. 10, issue 4, 811-840

Abstract: This paper addresses two key issues in Corporate Social Performance (CSP) research. First, it investigates the impact of CSP on Financial Stability (FS), and second, it examines the influence of different banking models on the relationship between CSP and FS. Using a cross-country sample of 117 financial institutions from 36 countries over an 8-year period (2013-2020) and the System Generalized Method of Moments (GMM) estimation method, it finds that banking models significantly affect the CSP-FS relationship. This is attributed to diminishing marginal benefits of economic growth beyond a certain level of financial intermediation, which increases financial risk. The results give new insights into the synergies and divergences between different banking models and the overarching goals of social performance and financial stability. This research contributes novel insights that can inform policymakers, regulators, and industry stakeholders in their quest for a more resilient and sustainable banking sector.

Keywords: Corporate social performance; CSP index; Financial stability; Islamic banking; Social banking; Values-based banking (search for similar items in EconPapers)
JEL-codes: G10 G21 G32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:10:y:2024:i:4g:p:811-840

DOI: 10.21098/jimf.v10i4.2273

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