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Do social and environmental capabilities improve bank stability? Evidence from transition countries

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  • Khurshid Djalilov
  • Christopher Hartwell

Abstract

Financial institutions have embraced the idea of corporate social responsibility (CSR) over the past decade, particularly in the banking sector, even as they have faced challenges in their core business model and an uncertain economic environment. Has the addition of CSR helped banks in their effort to become more stable via diversification, or has it squandered resources which could be utilised elsewhere? Using a sample of 319 commercial banks from 21 transition countries in Central and Eastern Europe and the former Soviet Union from 2002 to 2014, we find that there is a heterogeneous effect of CSR on bank stability, with total commitment to CSR contributing to the stability the most. Environmental capabilities, on the other hand, appear to influence stability only for those firms which are already the highest performing. We conjecture that, for financial sector firms in a transition environment, CSR is a further commitment for firms which have attained a certain level of stability but can be destabilising for weaker banks.

Suggested Citation

  • Khurshid Djalilov & Christopher Hartwell, 2022. "Do social and environmental capabilities improve bank stability? Evidence from transition countries," Post-Communist Economies, Taylor & Francis Journals, vol. 34(5), pages 624-646, July.
    • Handle: RePEc:taf:pocoec:v:34:y:2022:i:5:p:624-646
    DOI: 10.1080/14631377.2021.1965359
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    Cited by:

    1. Nadezhda Filimonova & Anastassia Obydenkova & Vinicius G. Rodrigues Vieira, 2023. "Geopolitical and economic interests in environmental governance: explaining observer state status in the Arctic Council," Climatic Change, Springer, vol. 176(5), pages 1-25, May.
    2. Anastassia Obydenkova, 2024. "Arctic environmental governance: challenges of sustainable development," Climatic Change, Springer, vol. 177(7), pages 1-17, July.

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