nach oben

Review of Quantitative Finance and Accounting

Erschienen in:

20.06.2016 | Original Research

Application of multi-level matching between financial performance and corporate social responsibility in the banking industry

verfasst von: Meng-Wen Wu, Chung-Hua Shen, Ting-Hsuan Chen

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 1/2017

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This study applies a new matching method to examine the old yet debatable idea that high corporate social responsibility (CSR) is associated with improved bank financial performance (FP). The conventional matching method focuses on one treatment effect. Thus, the old method is considered inappropriate when banks exhibit various degrees of CSR. To address this problem, we first apply the new multi-level matching method to multi-degree CSR and therefore contribute to studies that consider multi-degree CSR without adopting a multi-level matching method. We propose that “the more CSR, the better the FP,” which implies that banks engaged in more CSR exhibit better FP. Results before and after the matching significantly differ. CSR insignificantly influences bank FP before matching, but CSR has a strongly positive influence on bank FP after matching. Such effect on bank FP is further strengthened when banks increase their CSR activities, which supports our argument.

Vorheriger Artikel Surprises, sentiments, and the expectations hypothesis of the term structure of interest rates

Nächster Artikel On the relationship between the number of a broker’s real estate listings and transaction outcomes

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Friedman (1970) holds a different view and asserts that the social responsibility of firms aims to obtain maximum profits for shareholders.

Imbens (2004) suggests an intuitive manner of checking whether or not a treatment is effective for the lagged outcome. If the effect is zero, then the unconfoundedness assumption possibly holds. However, this test requires knowing the starting dates of the treatment event, and the exact dates of adopting the varying degrees of treatment in social science may not be available.

EIRIS is a company that administers questionnaires to more than 10,000 corporations to assess their level of CSR. EIRIS was founded in 1983 by churches and charities interested in making principled investment decisions. EIRIS is a global provider of survey data, and it analyzes surveys for clients, which include 80 major institutional investors and other socially responsible mutual funds.

Kinder, Lydenberg, and Domini is a company that compiles social responsibility rating indices. This database rates a wide range of firms in terms of various degrees of social responsibility, including community participation, diversity, employee interests, environmental considerations, and shareholder interests. Other firms adopt alternative CSR ratings, such as the Business in the Community-Corporate Responsibility Rating, Oekom-Corporate Responsibility Rating, and Vigeo-Corporate Social Responsibility Rating.

For example, Jehn et al. (1999) conducted surveys with the five-point Likert scale to explore the differential effects of social category diversity, value diversity, informational diversity, task type, and task interdependence on workgroup performance. Al-Hussami (2008) investigated the relationship of the job satisfaction of nurses with their organizational commitment and perceived organization by conducting surveys with the five-point Likert scale. Gil et al. (2005) administered surveys with the five-point Likert scale to analyze the effects of change-oriented leaders on group outcomes.

Previous empirical studies use the PSM method to investigate various issues. For example, Pana et al. (2015) use the PSM method to investigate the effect of the adoption of transactional websites by credit unions and find that transactional websites offer credit union members convenient services with no negative effect on the interest rate on deposits.

Similar to other studies, we consider ROE as the proxy for bank FP because for a high leveraged firm, such as a bank, investors are more concerned about ROE than other measures. Ackermann (2010) states that a low ROE can make investments in the banking sector unattractive relative to other business sectors. Mishkin (2013) states that a high capital induces a decrease in return on equity and increase in safety.

The former is English in origin, whereas the latter is derived from Roman law, which consists of French, German, and Scandinavian countries.

The net effect of CSR(s) = (coefficient + coefficient × GDP_PER) × CSR(s), where GDP_PER is inserted using the average of GDP per capita in each CSR regime. The averages of the GDP per capita in the four regimes are 27,450.7, 36,073.3, 38,523.6, and 43,746.1.

The net effect of CSR(s) = (coefficient + coefficient × GDP_GROWTH) × CSR(s), where GDP_GROWTH is inserted using average of GDP growth rate in each CSR regime. The averages of the GDP growth rate in the four regimes are 2.565, 0.791, 0.494, and 0.770 %.

We do not report the estimated results here, but the report is available upon request.

Ackermann J (2010) The new architecture of financial regulation: will it prevent another crisis?. LSE Financial Markets Group Paper Series. Special paper 194

Akanbi PA, Ofoegbu OO (2012) Impact of corporate social responsibility on bank performance in Nigeria. J US-China Public Adm 9(4):374–383

Al-Hussami M (2008) A study of nurses’ job satisfaction: the relationship to organizational commitment, perceived organizational support, transactional leadership, transformational leadership, and level of education. Eur J Sci Res 22(2):286–295

Aupperle KE, Carroll AB, Hatfield JD (1985) An empirical examination of the relationship between corporate social responsibility and profitability. Acad Manag J 28(2):446–463CrossRef

Barnett ML, Salomon RM (2006) Beyond dichotomy: the curvilinear relationship between social responsibility and financial performance. Strateg Manag J 27:1101–1122CrossRef

Baron D (2001) Private politics, corporate social responsibility and integrated strategy. J Econ Manag Strategy 10:7–45CrossRef

Baron D (2009) A positive theory of moral management, social pressure, and corporate social performance. J Econ Manag Strategy 18:7–43CrossRef

Barth JR, Caprio G, Levine R (2006) Rethinking bank regulation: till angels govern. Cambridge University Press, Cambridge

Barth JR, Caprio G, Levine R (2008) Bank regulations are changing: for better or worse? Comp Econ Stud 50(4):537–563CrossRef

Baser O (2006) Too much ado about propensity score models? Comparing methods of propensity score matching. Value Health 9(6):377–385CrossRef

Baser O (2013) Generalized propensity score matching with multilevel treatment options. JHEOR 1(1):1–13CrossRef

Beck T, Demirgüç-Kunt A, Levine R (1999) A new database on financial development and structure. The World Bank. Policy Research Working Paper Series 2146

Beck T, Demirgüç-Kunt A, Levine R (1999) A new database on financial development and structure. World Bank. Policy Research Working Paper. No. 2146

Beck T, Demirgüç-Kunt A, Levine R (2010) Financial institutions and markets across countries and over time: the updated financial development and structure database. World Bank Econ Rev 24(1):77–92CrossRef

Bénabou R, Tirole J (2010) Individual and corporate social responsibility. Economica 77(305):1–19CrossRef

Berger AN, Bouwman CHS (2013) How does capital affect bank performance during financial crises? J Financ Econ 109(1):146–176CrossRef

Boehe DM, Cruz LB (2010) Corporate social responsibility, product differentiation strategy and export performance. J Bus Ethics 91(2):325–346CrossRef

Bolton BJ (2013) Corporate social responsibility and bank performance. SSRN. http://ssrn.com/abstract=2277912

Borgatti SP, Foster P (2003) The network paradigm in organizational research: a review and typology. J Manag 29(6):991–1013

Brammer SJ, Pavelin S (2004) Building a good reputation. Eur Manag J 22(6):704–713CrossRef

Brammer SJ, Brooks C, Pavelin S (2006) Corporate social performance and stock returns: UK evidence from disaggregate measures. Financ Manag 35:97–116CrossRef

Bushman R, Wittenberg-Moerman R (2012) The role of bank reputation in “certifying” future performance implications of borrowers’ accounting numbers. J Account Res 50:883–930CrossRef

Chemmanur TJ, Fulghieri P (1994) Reputation, renegotiation, and the choice between bank loans and publicly traded debt. Rev Financ Stud Soc Financ Stud 7(3):475–506CrossRef

Chih HL, Shen CH, Kang FC (2008) Corporate social responsibility, investor protection, and earnings management: some international evidence. J Bus Ethics 79:179–198CrossRef

Cochran PL, Wood RA (1984) Corporate social responsibility and financial performance. Acad Manag J 27(1):42–56CrossRef

Cox P, Brammer S, Millington A (2004) An empirical examination of institutional investor preferences for corporate social performance. J Bus Ethics 52:27–43CrossRef

Cuesta-González M, Muñoz-Torres M, Fernández-Izquierdo MÁ (2006) Analysis of social performance in the Spanish financial industry through public data: a proposal. J Bus Ethics 69(3):289–304CrossRef

Dam L, Koetter M, Scholtens B (2009) Why do firms do good? Evidence from managerial efficiency, 4th CORE conference. Working paper series. 1

Das S, Sy ANR (2012) How risky are banks’ risk weighted assets? Evidence from the financial crisis. IMF working paper No. 12/36. Available at SSRN. http://ssrn.com/abstract=1997749

Dehejia R, Wahba S (2002) Propensity score matching methods for nonexperimental causal studies. Rev Econ Stat 84(1):151–161CrossRef

Demirgüç-Kunt A, Levine R (1999) Bank-based and market-based financial systems: cross-country comparisons. Policy Research Working Paper. No. 2143. World Bank

Djankov S, LaPorta R, Lopez-de-Silanes F, Shleifer A (2008) The law and economics of self-dealing. J Financ Econ 88:430–465CrossRef

Flammer C (2013) Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Manag Sci 61(11):2549–2568CrossRef

Flavian C, Guinaliu M, Torres E (2005) The influence of corporate image on consumer trust: a comparative analysis in traditional versus internet banking. Internet Res 15(4):447–470CrossRef

Foster EM (2003) Propensity score matching: an illustrative analysis of dose response. Med Care 41(10):1183–1192CrossRef

Friedman M (1970) The social responsibility of business is to increase its profits. The New York Times Magazine, New York

Garcia-Castro R, Ariño MA, Canela MA (2010) Does social performance really lead to financial performance? accounting for endogeneity. J Bus Ethics 92(1):107–126CrossRef

Gil F, Rico R, Alcover CM, Barrasa A (2005) Change-oriented leadership, satisfaction and performance in work groups: effects of team climate and group potency. J Manag Psychol 20(3/4):312–328CrossRef

Gray R, Owen D, Maunders K (1987) Corporate social reporting: accounting and accountability. Prentice-Hall, Hemel Hempstead

Groeneveld JM (2011) Morality and integrity in cooperative banking. Ethical Perspect 18(4):515–540

Haan JD, Vlahu R (2016) Corporate governance of banks: a survey. J Econ Surv 30(2):228–277CrossRef

Harjoto MA, Jo H (2008) Corporate social responsibility and operating performance. J Acad Bus Econ 18(1):59–71

Hirano K, Imbens GW (2002) Estimation of causal effects using propensity score weighting: an application to data on right heart catheterization. Health Serv Outcomes Res Methodol 2:259–278CrossRef

Hu V, Scholtens B (2014) Corporate social responsibility policies of commercial banks in developing countries. Sustain Dev 22(4):276–288CrossRef

Imbens GW (2000) The role of the propensity score in estimating dose-response function. Biometrika 87(3):706–710CrossRef

Imbens GW (2004) Nonparametric estimation of average treatment effects under exogeneity: a review. Rev Econ Stat 86(1):4–29CrossRef

Imbens GW, Wooldridge JM (2009) Recent developments in the econometrics of program evaluation. J Econ Lit 47(1):5–86CrossRef

Jehn KA, Northcraft GB, Neale MA (1999) Why differences make a difference: a field study of diversity, conflict, and performance in workgroups. Adm Sci Q 44(4):741–763CrossRef

Kaufmann D, Kraay A, Mastruzzi M (2009) Governance matters VIII: aggregate and individual governance indicators 1996–2008. Policy Research Working Paper Series 4978. The World Bank

La Porta RL, Lopez-de-Silanes F, Shleifer A, Vishny R (1998) Law and finance. J Polit Econ 106:1113–1154CrossRef

Lechner M (1999) Nonparametric bounds on employment and income effects of continuous vocational training in East Germany. Econom J R Econ Soc 2(1):1–28

Llewellyn DT (2005) Competition and profitability in european banking: why are British banks so profitable? Econ Notes 34(3):279–311CrossRef

Macey JR, O’Hara M (2003) The corporate governance of Banks. Federal Reserve Bank N Y Econ Policy Rev 9(1):91–107

Makni R, Francoeur C, Bellavance F (2009) Causality between corporate social performance and financial performance: evidence from Canadian firms. J Bus Ethics 89(3):409–422CrossRef

Margolis JD, Walsh JP (2003) Misery loves companies: rethinking social initiatives by business. Adm Sci Q 48(2):263–305CrossRef

Margolis J, Elfenbein H, Walsh J (2007) Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Harvard Business School. Working Paper

McWilliams A, Siegel D (2000) Corporate social responsibility and financial performance: correlation or misspecification? Strateg Manag J 21(5):603–609CrossRef

Mishkin FS (2013) The economics of money and financial markets, Business School edition, 3rd edn. Pearson, London

Nelling E, Webb E (2009) Corporate social responsibility and financial performance: the “virtuous circle” revisited. Rev Quant Financ Acc 32(2):197–209CrossRef

Pana E, Vitzthum S, Willis D (2015) The impact of internet-based services on credit unions: a propensity score matching approach. Rev Quant Financ Acc 44:329–352CrossRef

Ramiah V, Pichelli J, Moosa I (2015) The effects of environmental regulation on corporate performance: a chinese perspective. Rev Pac Basin Financ Mark Polic 18(4):1550026-01–1550026-31

Rose P, Hudgins S (2012) Bank management and financial services. McGraw-Hill/Irwin, New York

Rosenbaum P, Rubin D (1983) The central role of the propensity score in observational studies for causal effects. Biometrika 70(1):41–55CrossRef

Rubin DB (1976a) Multivariate matching methods that are equal percent bias reducing, I: some examples. Biometrics 32:109–120CrossRef

Rubin DB (1976b) Multivariate matching methods that are equal percent bias reducing, II: maximums on bias reduction. Biometrics 32:121–132CrossRef

Scholtens B (2008) A note on the interaction between corporate social responsibility and financial performance. Ecol Econ 68:46–55CrossRef

Scholtens B, Dam L (2007) Banking on the equator. Are banks that adopted the Equator Principles different from non-adopters? World Dev 35(8):1307–1328CrossRef

Shen CH, Chang Y (2009) Ambition versus conscience, does corporate social responsibility pay off? The application of matching methods. J Bus Ethics 88(1):133–153CrossRef

Shen CH, Chang Y (2011) Corporate social responsibility, financial performance and selection bias—evidence from TWSE-listed banks of Taiwan. In: Barth JR, Lin C, Wihlborg C (eds) Chapter 28 at international research handbook for banking and governance. Edward Elgar Publishing, London/Northampton, MA

Shen CH, Lee CC (2005) Same financial development yet different economic growth—and why? J Money Credit Bank 38:1907–1944CrossRef

Simpson W, Kohers T (2002) The link between social and financial performance: evidence from the banking industry. J Bus Ethics 35:97–109CrossRef

Thompson P, Cowton CJ (2004) Bringing the environment into bank lending: implications for environmental accounting. Br Account Rev 36(2):197–218CrossRef

Tirole J (2001) Corporate governance. Econometrica 69(1):1–35CrossRef

Tsoutsoura M (2004) Corporate social responsibility and financial performance. University of California, Berkeley. Working Paper. March 2004

Van der Laan G, Van Ees H, Van Witteloostuijn A (2008) Corporate social and financial performance: an extended stakeholder theory and empirical test with accounting measures. J Bus Ethics 79(3):299–310CrossRef

Waddock SA, Graves SB (1997) The corporate social performance-financial performance link. Strateg Manag J 18(4):303–319CrossRef

Wang J, Donnan PT, Steinke D, MacDonald TM (2001) The multiple propensity score for analysis of dose response relationships in drug safety studies. Pharmacoepidemiol Drug Saf 10:105–111CrossRef

Wu MW, Shen CH (2013) Corporate social responsibility in the banking industry: motives and financial performance. J Bank Financ 37(9):3529–3547CrossRef

Yen TTH (2014) CSR in banking sector a literature review and new research directions. Int J Econ Commer Manag UK 2(11):1–22

Titel: Application of multi-level matching between financial performance and corporate social responsibility in the banking industry
verfasst von: Meng-Wen Wu
Chung-Hua Shen
Ting-Hsuan Chen
Publikationsdatum: 20.06.2016
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 1/2017
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-016-0582-0

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 1/2017

Is there an optimally diversified conglomerate? Gleaning answers from capital markets

Modelling optimal asset allocation when households experience health shocks

Does the requirement of an engagement partner signature improve financial analysts’ information environment in the United Kingdom?

Institutional ownership stability and real earnings management

Is the accuracy of stock value forecasting relevant to industry factors or firm-specific factors? An empirical study of the Ohlson model

On the relationship between the number of a broker’s real estate listings and transaction outcomes