Application of multi-level matching between financial performance and corporate social responsibility in the banking industry

This study applies a new matching method to examine the old yet debatable idea that high corporate social responsibility (CSR) is associated with improved bank financial performance (FP). The conventional matching method focuses on one treatment effect. Thus, the old method is considered inappropriate when banks exhibit various degrees of CSR. To address this problem, we first apply the new multi-level matching method to multi-degree CSR and therefore contribute to studies that consider multi-degree CSR without adopting a multi-level matching method. We propose that “the more CSR, the better the FP,” which implies that banks engaged in more CSR exhibit better FP. Results before and after the matching significantly differ. CSR insignificantly influences bank FP before matching, but CSR has a strongly positive influence on bank FP after matching. Such effect on bank FP is further strengthened when banks increase their CSR activities, which supports our argument.