Linking Financial Performance to Corporate Social Responsibility Initiatives of Banks in Bangladesh: A Panel Data Analysis

Abstract

The paper examines the relationship between financial performance and Corporate Social Responsibility (CSR) initiatives of banks in Bangladesh. Profit is obvious but unrealistic profit is unethical and marginal profit is a part of CSR. Out of 47 banks, data were collected from 37 (78.72%) for four years. Panel data with Random-Effect Generalized Least Square Regression Model was used for data analysis. Four major financial performance indicators- Size of business, Return on Equity (ROE) and Asset Quality (AstQt) and Capital Adequacy Ratio (CAR)-were used for the study. Variance Inflation Factor for multicolinearity, White test for heteroskedasticity and Wooldridge test for serial correlation were used for data processing. The study finds that CSR initiatives represented by CSR expenditure of banks are positively connected with the Size of business, ROE and AstQt, and negatively with CAR. The policy implication of the study recommends that better regulatory requirements will foster more CSR initiatives.

Key Words: Corporate Social Responsibility (CSR), CSR Initiatives, and Financial Performance of Banks