Corporate Social Responsibility and Banks' Financial Performance

This studyanalyzes whether and how corporate social responsibility (CSR) affects the financial performance ofthe European banking industry. According to agency theory, CSR engagement should be negatively related tofinancial performance. By contrast, from the stakeholder p erspective and according to the resource based view,CSR should positively impact banks’ financial performance. Over a period of six years (2009 2015) followingthe explosion of the sub prime crisis, the econometric estimates of the current study confirm a positive effect ofCSR engagement on banks’ financial performance. Net interest income and profitability increase with theincrease in social performance. At the same time, CSR is negatively related to non performing loans. Therefore,in contrast to the t rade off model, our results support a win win vision of the relationship between the social and financial performance of banks.