Drivers of Global Banking Stability in Times of Crisis: The Role of Corporate Social Responsibility

Abstract

This study examines the effect of environmental and social (ES) activities on global banking stability in the shadow of the COVID-19 pandemic. Using a sample of 244 commercial banks across 52 countries from 2002 to 2020, we provide evidence that during the global health crisis, banks with higher levels of ES activities are more financially stable (i.e. lower credit and liquidity risk exposures). Drawing on social capital and stakeholder theories, we find that ES activities increase firm-level social capital and establish a stakeholder-centred culture within a bank, strengthening social trust and public confidence in the bank's risk oversight. Accordingly, ES activities constrain excessive and aggressive bank risk-taking during turbulent times when short-termism prevails. Our additional analysis reveals that investors value such beneficial effects of ES activities. The findings offer new insights into the increasingly significant roles of social capital creation and stakeholder-centred culture in maintaining banks' financial stability.

Disrupting Management Research? Critical Reflections on British Journal of Management COVID‐19 Research and an Agenda for the Future

“…, 2022 ), secondary financial databases (Ataullah, Le and Wood, 2022 ; Ghobadian et al. , 2022 ; Li, Trinh and Elnahass, 2022 ), and survey data (Calabrese, Cowling and Liu, 2022 ; Liu, Shahab and Hoque, 2022 ).…”

“…Their analysis draws upon stock market reactions to COVID‐19, and suggests that prior disaster experience partly ‘immunized’ those firms with that experience to a different disaster two decades later. Relatedly, Li, Trinh and Elnahass ( 2022 ) examine the role of firms’ environmental and social (ES) activities on financial stability, in the context of a global sample of 244 commercial banks from 52 countries. Li, Trinh and Elnahass ( 2022 ) find that banks with higher levels of ES activities are more financially stable because they have stronger social capital, improved stakeholder relations, and less aggressive bank risk‐taking.…”

“…Seven out of the 14 are wholly or primarily qualitative in approach (Adisa et al, 2022;Ashman et al, 2022;Branicki, Kalfa and Brammer, 2022;Nayani et al, 2022;Puthusserry et al, 2022;Sahasranamam and Soundararajan, 2022;Wulandhari et al, 2022). The other seven studies use quantitative approaches including experiments or quasiexperiments (Kakarika et al, 2022;Papagiannidis et al, 2022), secondary financial databases (Ataullah, Le and Wood, 2022;Ghobadian et al, 2022;Li, Trinh and Elnahass, 2022), and survey data (Calabrese, Cowling and Liu, 2022;Liu, Shahab and Hoque, 2022).…”

Social responsibility and modern business during the global crisis: Threat or opportunity for the GUAM member countries

“…In recent decades, the topic of CSR has become one of the most discussed scientific studies on the sustainable development of society. Numerous debates unfolded, which, despite conceptual differences, consolidated the consensus of a fundamental understanding of the need for the active participation of businesses in solving society's problems (Li, Trinh & Elnahass, 2022;Okafor, Adeleye & Adusei, 2021). First, those related to social justice, environmental and economic sustainability.…”

“…Over the past decade, CSR has become a traditional business practice in advanced economies. All parties reap long-term benefits: increased business profitability and a qualitative improvement in the external environment (Li, Trinh & Elnahass, 2022;Okafor, Adeleye & Adusei, 2021). CSR successfully solves social problems by reducing poverty and social tension by reducing financial pressure on the state budget through business initiatives, etc.…”