Do social and environmental capabilities improve bank stability? Evidence from transition countries

Financial institutions have embraced the idea of corporate social responsibility (CSR) over the past decade, particularly in the banking sector, even as they have faced challenges in their core business model and an uncertain economic environment. Has the addition of CSR helped banks in their effort...

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Bibliographic Details
Published in:Post-communist economies 2022-07, Vol.34 (5), p.624-646
Main Authors: Djalilov, Khurshid, Hartwell, Christopher
Format: Article
Language:English
Subjects:
Banks
Commercial banks
Companies
corporate social responsibility
Diversification
Environmental protection
Financial institutions
financial sector stability
Social responsibility
Trade
transition
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Summary:Financial institutions have embraced the idea of corporate social responsibility (CSR) over the past decade, particularly in the banking sector, even as they have faced challenges in their core business model and an uncertain economic environment. Has the addition of CSR helped banks in their effort to become more stable via diversification, or has it squandered resources which could be utilised elsewhere? Using a sample of 319 commercial banks from 21 transition countries in Central and Eastern Europe and the former Soviet Union from 2002 to 2014, we find that there is a heterogeneous effect of CSR on bank stability, with total commitment to CSR contributing to the stability the most. Environmental capabilities, on the other hand, appear to influence stability only for those firms which are already the highest performing. We conjecture that, for financial sector firms in a transition environment, CSR is a further commitment for firms which have attained a certain level of stability but can be destabilising for weaker banks.
ISSN:1463-1377
1465-3958
DOI:10.1080/14631377.2021.1965359