Does it pay to be socially responsible? Evidence from Spanish retail banking sector

Francisco Callado-Muñoz and Natalia Utrero-González

No 16, Working Papers of the Department of Economics, University of Girona from Department of Economics, University of Girona

Abstract: This paper presents a theoretical and empirical analysis of strategic competition in retail banking when some of the financial firms are non-profit organisations that invest in social activities. Banking literature about competition is fairly large, but the strategic interaction between profit maximizing and non profit maximizers has not been extensively analysed except for Purroy and Salas (1999). In this paper, a completely different approach is taken. An adaptation of Hotelling’s two stage model of spatial competition is developed to take into account consumer perceptions respect to the two different types of financial institutions. The empirical analysis confirms that consumers take into account other features different from the price, such as social contribution or closer service to make a deposit or mortgage decision. These conclusions are of interest in the debate about a firm’s social or ethical activities. It is shown that if consumers value social activities, firms can improve their results by behaving socially responsible.

Keywords: Strategic competition; Hotelling´s model; Spanish banking; Corporate social responsibility (search for similar items in EconPapers)
JEL-codes: D21 D83 G21 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-mic, nep-mkt, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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