Varrone, Nicola (2018) Determinants and Effects of Bank Social Responsibility. [Tesi di dottorato]

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Abstract

The thesis analyses the theme of corporate social responsibility (CSR) in the banking industry. In particular, drawing from the theoretical foundations of corporate social responsibility (CSR) and considering the peculiarities of the banking business model, the work provides empirical evidence on the determinants and effects of bank social responsibility (BSR). The work is organized in five chapters. The first chapter aims to frame the concept of CSR, providing an overview of its historical and theoretical evolution. In particular, the work discusses the conceptualizations and definitions that authors and institutions have proposed between the 1950s and the 2000s. Afterward, the chapter describes four of the most adopted theoretical foundations of CSR, namely agency theory, stakeholder theory, resource-based view, and social legitimacy theory. Moreover, chapter 1 discusses the potential benefits of CSR engagement. In particular, it analyses the positive effects that firm’s engagement in CSR has in terms of better relationships with customers and employees, eco-efficiency, risk reduction, lower cost of capital and better corporate reputation. Finally, the chapter refers to the concept of corporate social performance and its relation to financial performance. Chapter 2 focuses on the characteristics of the bank’s engagement in socially responsible initiatives. It describes the motives that make the investigation of bank social responsibility (BSR) a peculiar and relevant issue in the field of study on business sustainability. More in particular, in the first part the chapter discusses the role of BSR as a means to restore the bank’s reputation and stakeholder trust. In the second part, it analyses BSR in light of the role that banks assume for the socio-economic development of countries. Finally, in the last part, the chapter provides a review of the previous empirical investigations conducted in the field of study on CSR banking. Chapter 3, instead, describes the overall structure of the empirical analysis adopted in chapters 4 and 5. The chapter also describes the data collection method and the sample of 148 banks, adopted to perform the analysis. The purpose of Chapter 4 is to demonstrate the existence of a relationship between financial performance, bank’s corporate governance characteristics and BSR. In particular, drawing from slack of resource theory, the study argues that prior bank’s 5 financial performance positively affect the BSR. On the other hand, in light of the agency theory and stakeholder theory perspectives, the research aims to demonstrate that several characteristics of the bank’s board of directors affect the bank’s propensity to engage in CSR. The study adopts a panel data methodology for doubly censored variables to test the research hypotheses. The results show that the higher is the Net interest income and the Margin of interest, the higher is the bank’s propensity to engage in CSR. On the other hand, the study finds that the activity intensity, diversity, independence of the bank’s board of directors positively predict BSR. Finally, chapter 5 aims to verify the relationship between the banks' engagement in CSR activities and client loyalty (CL). The work considers several dimension of CSR engagement. In particular, in addition to an overall indicator of BSR, the empirical analysis evaluates the impact that the “community-related” dimension of CSR and the socially responsible profile of the bank’s product have on CL. In order to verify the research hypotheses, the chapter adopts a descriptive, univariate and multivariate analysis. With reference to this latter, the study applies a two-step Heckman model to treat the endogeneity bias. The results show the existence of a positive impact of CL on the overall measure of BSR and on the bank’s product responsibility, whilst no statistically significant relations are found with reference to the community dimension of CSR. The work also shows that the socially responsible profile of the bank’s products matters more for large banks rather than small banks.

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