Effect of corporate social responsibility scores on bank efficiency: The moderating role of institutional context

This paper examines how corporate social responsibility (CSR) affects bank efficiency in a sample of large commercial banks across 22 countries over the 2013–2017 period. We used a one-step model of stochastic frontier analysis for panel data to estimate bank profit efficiency and found that the greater the activities in the social and environmental dimensions of CSR, the lower the level of efficiency, whereas activities in the corporate governance dimension are generally not relevant. This result supports the relevance of agent perspectives for these firms. However, we also found that institutional context moderates this baseline result. Specifically, all CSR activities have a positive impact on bank efficiency in common law countries and countries where the effectiveness of stakeholder protection is high. This supports the view that contexts that favor firms' sustainable behavior also increase bank efficiency.