Reputation, Corporate Social Responsibility, and Financial Performance of Banks
AbstractThis paper investigates the effects of reputation and corporate social responsibility (CSR) on the financial performance of a global sample of banks. Firstly, reputation and CSR are found to be complements rather than substitutes. Reputation is found to increase return on equity, return on invested capital, and return on assets. CSR is found to be positively related to the above, as well as net interest income. Its relationship with the share price remains unclear. These relations are more pronounced for less reputable and less socially responsible banks, indicating a curvilinear relationship. It is further argued that investing in CSR poses a better opportunity for extracting economic value than reputation. The findings suggest that profits are earned on CSR and reputation, and thereby provide continued incentives for banks to maintain their status.
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