Corporate Social Responsibility in the International Banking Industry

Abstract

This article aims at providing a framework to assess corporate social responsibility with international banks. Currently, it is mainly rating institutions like EIRIS and KLD that provide information about firms’ social conduct and performance. However, this is costly information and it is not clear how the rating institutions arrive at their conclusion. We develop a framework to assess the social responsibility of internationally operating banks. We apply this framework to more than 30 institutions and find significant differences among individual banks, countries, and regions. Furthermore, it appears that social responsibility of these banks has significantly improved between 2000 and 2005.

This is a preview of subscription content, log in to check access.

References

  1. Bauer, R., K. Koedijk and R. Otten: 2005, ‹International Evidence on Ethical Mutual Fund Performance and Investment Style’, Journal of Banking and Finance 29, 1751–1767. doi:10.1016/j.jbankfin.2004.06.035.

    Article  Google Scholar 

  2. Bello, Z. Y.: 2005, ‹Socially Responsible Investing and Portfolio Diversification’, Journal of Financial Research 28, 41–57. doi:10.1111/j.1475-6803.2005.00113.x.

    Article  Google Scholar 

  3. Boot, A. W. A. and A. V. Thakor: 1997, ‹Financial System Architecture’, Review of Financial Studies 10, 693–733. doi:10.1093/rfs/10.3.693.

    Article  Google Scholar 

  4. Denis, D. J.: 2004, ‹Entrepreneurial Finance: An Overview of the Issues and Evidence’, Journal of Corporate Finance 10, 301–326. doi:10.1016/S0929-1199(03)00059-2.

    Article  Google Scholar 

  5. Greenbaum, S. I. and A. V. Thakor: 2007, Contemporary Financial Intermediation, 2nd Edition (Elsevier, Amsterdam).

  6. Greenwood, J. and B. Jovanovic: 1990, ‹Financial Development, Growth, and the Distribution of Income’, Journal of Political Economy 98, 1076–1107. doi:10.1086/261720.

    Article  Google Scholar 

  7. Gylfason, T.: 2001, ‹Natural Resources, Education, and Economic Development’, European Economic Review 45, 847–859. doi:10.1016/S0014-2921(01)00127-1.

    Article  Google Scholar 

  8. Haupt, U. and U. Henrich: 2004, Sectoral Policy Paper on Financial System Development (German Federal Ministry for Economic Cooperation and Development, Bonn).

    Google Scholar 

  9. Heal, G. M.: 2005, ‹Corporate Social Responsibility? An Economic and Financial Framework’, Geneva Papers on Risk and Insurance: Issues and Practice 30, 387–409.

    Article  Google Scholar 

  10. Heinkel, R., A. Kraus and J. Zechner: 2001, ‹The Effect of Green Investment on Corporate Behavior’, Journal of Financial and Quantitative Analysis 36, 431–450. doi:10.2307/2676219.

    Article  Google Scholar 

  11. Hermes, N., R. Lensink and H. T. Mehrteab: 2005, ‹Peer Monitoring, Social Ties and Moral Hazard in Group Lending Programs: Evidence from Eritrea’, World Development 33, 149–169. doi:10.1016/j.worlddev.2004.09.001.

    Article  Google Scholar 

  12. International Finance Corporation: 2003, Towards Sustainable and Responsible Investment in Emerging Markets (IFC, Washington, D.C.).

  13. Jappelli, T. and M. Pagano: 2002, ‹Information Sharing, Lending and Defaults, Cross-Country Evidence’, Journal of Banking and Finance 26, 2017–2045. doi:10.1016/S0378-4266(01)00185-6.

    Article  Google Scholar 

  14. Jaworski, W.: 2007, Use of Extra-Financial Information by Research Analysts and Investment Managers (European Centre for Corporate Engagement, Maastricht and Rotterdam).

  15. Jeucken, M. H. A.: 2001, ‹Duurzaam Bankieren door Internationale Topbanken in de Praktijk’, Maandschrift Economie 65, 477–504.

    Google Scholar 

  16. Johnsen, D. B.: 2003, ‹Socially Responsible Investing, A Critical Appraisal’, Journal of Business Ethics 43, 219–222. doi:10.1023/A:1022998232503.

    Article  Google Scholar 

  17. King, R. G. and R. Levine: 1993, ‹Finance and Growth, Schumpeter Might Be Right’, Quarterly Journal of Economics 108, 717–737. doi:10.2307/2118406.

    Article  Google Scholar 

  18. La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R. W. Vishny: 1998, ‹Law and Finance’, Journal of Political Economy 106, 1113–1155. doi:10.1086/250042.

    Article  Google Scholar 

  19. Levine, R.: 2004, ‹Finance and Growth, Theory and Evidence’, NBER Working Paper 10766, Cambridge, Mass., NBER.

  20. Matthews, J. A.: 2002, Schumpeterian Competitive Dynamics and Economic Learning, an Economy-Wide Resource-Based View. Macquarie University, mimeograph.

  21. Murdoch, J.: 1999, ‹The Role of Subsidies in Microfinance: Evidence from the Grameen Bank’, Journal of Development Economics 60, 229–248. doi:10.1016/S0304-3878(99)00042-5.

    Article  Google Scholar 

  22. Saunders, A. and L. Allen: 2002, Credit Risk Measurement, 2nd Edition (John Wiley and Sons, New York)

  23. Scholtens, B.: 2006, ‹Finance as a Driver of Corporate Social Responsibility’, Journal of Business Ethics 68, 19–33. doi:10.1007/s10551-006-9037-1.

    Article  Google Scholar 

  24. Social Investment Forum (SIF): 2005, Mutual Funds, Proxy Voting, and Fiduciary Responsibility, How Do Funds Rate on Voting Their Proxies and Disclosure Practices? (SIF, Washington, D.C.).

  25. Social Investment Forum: 2006, 2006 Report on Socially Responsible Investing Trends in the United States (SIF, Washington, D.C.).

  26. Sparkes, R. and C. J. Cowton: 2004, ‹The Maturing of Socially Responsible Investment, A Review of the Developing Link with Corporate Social Responsibility’, Journal of Business Ethics 52, 45–57. doi:10.1023/B:BUSI.0000033106.43260.99.

    Article  Google Scholar 

  27. Statman, M.: 2005, Socially Responsible Indexes: Composition and Performance. Santa Clara University, Santa Clara, CA, mimeograph.

  28. Stiglitz, J. E. and A. Weiss: 1981, ‹Credit Rationing with Imperfect Information’, American Economic Review 71, 393–410.

    Google Scholar 

  29. World Commission on Environment and Development (WCED): 1987, Our Common Future (Oxford University Press, New York).

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Bert Scholtens.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Scholtens, B. Corporate Social Responsibility in the International Banking Industry. J Bus Ethics 86, 159–175 (2009). https://doi.org/10.1007/s10551-008-9841-x

Download citation

Keywords

  • Corporate Social Responsibility
  • Banking Industry
  • Performance

JEL

  • F210
  • G210
  • M140