An examination of the relationship between CSR disclosure and financial performance: The case of Polish banks

Abstract

Abstract:The purpose of this study is twofold. First, this study investigates the trends of corporate social responsibility (CSR) reporting and financial performance (FP) in commercial banks in Poland. Second, this study examines the impact of the CSR disclosure of the banks on their financial performance (ROA, ROE, NIM). Sample consists of 18 banks. The data from annual reports for the period of 8 years (2008 -2015) were both hand collected and obtained from Notoria Servis Database. A content analysis is used to measure the level of CSR disclosures and a panel data analysis is employed to examine the CSR-FP relationship. Software: GRETL. Two key findings: (1) Positive relationship between banks' CSR disclosures and their profitability measured by ROA and ROE. However, the relationship between banks' CSR disclosures and NIM is negative. Statistical analysis did not report any significant effect of CSR activities on ROA, ROE and NIM ratios. (2) Banks' CSR activities are not dominant predictor of their profitability as compared with control variables. To our best knowledge this research is the first quantitative analysis regarding banking sector in Poland. Further, this study was conducted in emerging market with different socio-economic context and regulations compared to developed market. The findings contribute to and increase the understanding of the relationship between CSR disclosures and FP. Finally, this study has important implications for policy makers, managers, investors, and others.

A Non-Linear and Disaggregated Approach to Studying the Impact of CSR on Accounting Profitability: Evidence from the Polish Banking Industry

“…No relationship between CSR and FP was also presented in Soana [22], based on a sample of Italian banks. Similar results were found in Matuszak and Różańska [51], based on a sample of Polish banks. In conflict with the social impact hypothesis, statistical analysis showed that CSR did not significantly predict accounting returns.…”

“…An individual investor should pay attention not only to his private social demands, but to those of other stakeholders as well. Previous studies regarding the CSR-FP link in the banking industry have adopted aggregated measures of the CSR construct, including reputation ratings such as the AEI Index [22], and other externally visible measures, such as ratings data from the MSCI ESG STATS database (formerly the KLD [53] or EIRIS Index [32]), as well as disclosure [51]. In this study, we employed content analysis of CSR information disclosed by banks, based on the multidimensional scale developed by Matuszak and Różańska [51].…”

“…Previous studies regarding the CSR-FP link in the banking industry have adopted aggregated measures of the CSR construct, including reputation ratings such as the AEI Index [22], and other externally visible measures, such as ratings data from the MSCI ESG STATS database (formerly the KLD [53] or EIRIS Index [32]), as well as disclosure [51]. In this study, we employed content analysis of CSR information disclosed by banks, based on the multidimensional scale developed by Matuszak and Różańska [51]. This scale contains a list of 29 items specific to the banks, assigned to more general dimensions (environment, employees, customers, and society), that correspond to the four key stakeholder groups in the banking sector (see Tables 1 and 2).…”

“…In contrast to previous studies [51], we disentangled the CSR performance into dimensions, namely, environment (ENV), human resources (HR), product and customers (PC), and community involvement (CI), instead of using the overall CSR composite index. The list of CSR dimension items is presented in Appendix A.…”

“…Moreover, the studies that have examined the banking industry adopted aggregated CSR measures, and failed to decompose the measures into their various components [15]. Previous studies within the banking industry also did not consider nonlinear relationships between CSR and FP [51]. This research analyses the issue in a more exhaustive way.…”