Comparative analysis of the financial impact of the CSP in the Islamic, conventional and social banking model
Click to verify publication status
Authors
-
Eliesa D. Z.
a. Facultat d'Economia, Universitat de València, Avda. Tarongers s/n, 46021, Valencia, Spain
-
Izzeldin I
b. Department of Economics, Universidad Pontificia Comillas, Madrid, Spain
DOI:
Keywords:
Corporate Social Performance, Financial Performance, Islamic Banking, Conventional Banking, Social BankingAbstract
Objective; This research explores the financial implications of Corporate Social Performance (CSP) based on Islamic, Conventional, and Social Banking models. Through the lens of this Study, which explores the relationship between CSP and financial performance, this paper highlights the heterogeneity evident amongst these banking models: in terms of the way they integrate CSP; and in terms of the financial benefits they gain from CSP initiatives.
Methods; A regression between the Islamic, Conventional and Social Banking institutions using the Generalized method of moments (GMM). Methodology When it comes to the analysis, the methodology employed financial data retrieved from 120 banks, with a total number of 819 observations spanning over a certain time interval. The model risk assessment of CSP impact on financial performance based on ROAA, Size, CAR, and other financial values
Results; CSP has a positive effect on financial performance in both the Islamic and Conventional Banking models with the existence of a significant relation for models like Return on Assets (ROAA) financial performance. Although the results for the influence of CSP on Islamic and Conventional bank models seem more pronounced, this impact appears less significant in Social Banking models. Whereas it has been observed that in some of the results CSP, with some banking-specific variables (IBSP, SBSP, and CBSP), plays a significant role in the improvement of their financial indicators; therefore, it is proved that CSP is a crucial strategy for them and contributes significantly to financial prosperity.
Novelty; This study offers new comparative data on the financial consequences for CSP across differing banking models, substantiating how each adapts to and gains from these socially conscious undertakings. This provides insights that goes beyond general CSP analyses as it embeds the analysis in the particular contexts of Islamic, Conventional and Social Banking unlike prior studies.
Research Implications; The findings imply that banking institutions, including both Islamic and Conventional banks, should give more attention to CSP initiatives to improve their financial performance. Lawmakers and financial regulators might promote an environment conducive to socially responsible banking. Future studies can investigate long-term impacts of CSP, including interactions with financial aspects across several industries.
Downloads
References
Abubakar Siddique, M., Rashid, A., & Tahir, U. (2023). Factors affecting the credibility of islamic banking Sharī’ah approvals: Perception-based empirical study. Borsa Istanbul Review, 23(2), 426–442. https://doi.org/https://doi.org/10.1016/j.bir.2022.11.010 DOI: https://doi.org/10.1016/j.bir.2022.11.010
Al-mulali, U., & Lee, J. Y. M. (2013). Estimating the impact of the financial development on energy consumption: Evidence from the GCC (Gulf Cooperation Council) countries. Energy, 60, 215–221. https://doi.org/https://doi.org/10.1016/j.energy.2013.07.067 DOI: https://doi.org/10.1016/j.energy.2013.07.067
Al-Saidi, M. (2021). Cooperation or competition? State environmental relations and the SDGs agenda in the Gulf Cooperation Council (GCC) region. Environmental Development, 37, 100581. https://doi.org/https://doi.org/10.1016/j.envdev.2020.100581 DOI: https://doi.org/10.1016/j.envdev.2020.100581
Alawattage, C., Jayathileka, C., Hitibandara, R., & Withanage, S. (2023). Moral economy, performative materialism, and political rhetorics of sustainability accounting. Critical Perspectives on Accounting, 95, 102507. https://doi.org/https://doi.org/10.1016/j.cpa.2022.102507 DOI: https://doi.org/10.1016/j.cpa.2022.102507
Alghafes, R., Karim, S., Aliani, K., Qureishi, N., & Alkayed, L. (2024). Influence of key ESG factors on Islamic banks’ financial performance: Evidence from GCC countries. International Review of Economics & Finance, 96, 103629. https://doi.org/https://doi.org/10.1016/j.iref.2024.103629 DOI: https://doi.org/10.1016/j.iref.2024.103629
Almashayekhi, A. (2024). A cross-cultural longitudinal analysis of the effect of corporate social performance on corporate financial performance: an Asian perspective. Journal of Asia Business Studies, ahead-of-print(ahead-of-print). https://doi.org/10.1108/JABS-03-2024-0143 DOI: https://doi.org/10.1108/JABS-03-2024-0143
Avdukic, A., & Asutay, M. (2024). Testing the Development Impact of Islamic Banking: Islamic Moral Economy Approach to Development. Economic Systems, 101229. https://doi.org/https://doi.org/10.1016/j.ecosys.2024.101229 DOI: https://doi.org/10.1016/j.ecosys.2024.101229
Buallay, A. (2021). Corporate Governance, Sharia’ah Governance and Performance: A Cross-Country Comparison in the MENA Region. Al Qasimia University Journal of Islamic Economics, 1(1), 189–215. https://doi.org/10.52747/aqujie.1.1.26 DOI: https://doi.org/10.52747/aqujie.1.1.26
Dikau, S., & Volz, U. (2021). Central bank mandates, sustainability objectives and the promotion of green finance. Ecological Economics, 184, 107022. https://doi.org/https://doi.org/10.1016/j.ecolecon.2021.107022 DOI: https://doi.org/10.1016/j.ecolecon.2021.107022
Endrikat, J., Guenther, E., & Hoppe, H. (2014). Making sense of conflicting empirical findings: A meta-analytic review of the relationship between corporate environmental and financial performance. European Management Journal, 32(5), 735–751. https://doi.org/https://doi.org/10.1016/j.emj.2013.12.004 DOI: https://doi.org/10.1016/j.emj.2013.12.004
Esteban-Sanchez, P., de la Cuesta-Gonzalez, M., & Paredes-Gazquez, J. D. (2017). Corporate social performance and its relation with corporate financial performance: International evidence in the banking industry. Journal of Cleaner Production, 162, 1102–1110. https://doi.org/https://doi.org/10.1016/j.jclepro.2017.06.127 DOI: https://doi.org/10.1016/j.jclepro.2017.06.127
Farrar, S., & Uddin, T. (2020). Building Islamic Ethics into Development: Exploring the Role and Limitations of “Islamic” Microfinance in Poverty Alleviation—An Indonesian Case Study. 13(2), 371–406. https://doi.org/doi:10.1515/ldr-2020-0047 DOI: https://doi.org/10.1515/ldr-2020-0047
Freeman, R. E., & David, L. R. (1983). Stockholders and Stakeholders: A New Perspective on Corporate Governance. California Management Review, 25(3), 88–106. https://doi.org/10.2307/41165018 DOI: https://doi.org/10.2307/41165018
Freeman, R. E., & Phillips, R. (2018). Tensions in Stakeholder Theory. 1–19. https://doi.org/10.1177/0007650318773750 DOI: https://doi.org/10.1177/0007650318773750
Gabriel, K. P., & Aguinis, H. (2022). How to prevent and combat employee burnout and create healthier workplaces during crises and beyond. Business Horizons, 65(2), 183–192. https://doi.org/https://doi.org/10.1016/j.bushor.2021.02.037 DOI: https://doi.org/10.1016/j.bushor.2021.02.037
Ghafran, C., O’Sullivan, N., & Yasmin, S. (2022). When does audit committee busyness influence earnings management in the UK? Evidence on the role of the financial crisis and company size. Journal of International Accounting, Auditing and Taxation, 47, 100467. https://doi.org/https://doi.org/10.1016/j.intaccaudtax.2022.100467 DOI: https://doi.org/10.1016/j.intaccaudtax.2022.100467
Ghafran, C., & Yasmin, S. (2020). Ethical Governance: Insight from the Islamic Perspective and an Empirical Enquiry. Journal of Business Ethics, 167(3), 513–533. https://doi.org/10.1007/s10551-019-04170-3 DOI: https://doi.org/10.1007/s10551-019-04170-3
Iyer-Raniga, U., & Kashyap, K. (2021). Green Building BT - Industry, Innovation and Infrastructure (W. Leal Filho, A. M. Azul, L. Brandli, A. Lange Salvia, & T. Wall (eds.); pp. 403–414). Springer International Publishing. https://doi.org/10.1007/978-3-319-95873-6_20 DOI: https://doi.org/10.1007/978-3-319-95873-6_20
La Torre, M., Cardi, M., Leo, S., & Schettini Gherardini, J. (2023). ESG Ratings, Scores, and Opinions: The State of the Art in Literature BT - Contemporary Issues in Sustainable Finance: Exploring Performance, Impact Measurement and Financial Inclusion (M. La Torre & S. Leo (eds.); pp. 61–102). Springer International Publishing. https://doi.org/10.1007/978-3-031-22539-0_4 DOI: https://doi.org/10.1007/978-3-031-22539-0_4
Lévy, B. (2007). The interface between globalization, trade and development: Theoretical issues for international business studies. International Business Review, 16(5), 594–612. https://doi.org/https://doi.org/10.1016/j.ibusrev.2007.06.004 DOI: https://doi.org/10.1016/j.ibusrev.2007.06.004
Liao, P.-C., Shih, Y.-N., Wu, C.-L., Zhang, X.-L., & Wang, Y. (2018). Does corporate social performance pay back quickly? A longitudinal content analysis on international contractors. Journal of Cleaner Production, 170, 1328–1337. https://doi.org/https://doi.org/10.1016/j.jclepro.2017.09.230 DOI: https://doi.org/10.1016/j.jclepro.2017.09.230
Meng, Y., Shen, Z., Štreimikienė, D., Baležentis, T., Wang, S., & Zhang, Y. (2024). Investigating the impact of agricultural informatization on the carbon shadow price. Journal of Cleaner Production, 445, 141330. https://doi.org/https://doi.org/10.1016/j.jclepro.2024.141330 DOI: https://doi.org/10.1016/j.jclepro.2024.141330
Menne, F., Surya, B., Yusuf, M., Suriani, S., Ruslan, M., & Iskandar, I. (2022). Optimizing the Financial Performance of SMEs Based on Sharia Economy: Perspective of Economic Business Sustainability and Open Innovation. Journal of Open Innovation: Technology, Market, and Complexity, 8(1), 18. https://doi.org/https://doi.org/10.3390/joitmc8010018 DOI: https://doi.org/10.3390/joitmc8010018
Mergaliyev, A., Asutay, M., Avdukic, A., & Karbhari, Y. (2021). Higher Ethical Objective (Maqasid al-Shari’ah) Augmented Framework for Islamic Banks: Assessing Ethical Performance and Exploring Its Determinants. Journal of Business Ethics, 170(4), 797–834. https://doi.org/10.1007/s10551-019-04331-4 DOI: https://doi.org/10.1007/s10551-019-04331-4
Nizam, E., Ng, A., Dewandaru, G., Nagayev, R., & Nkoba, M. A. (2019). The impact of social and environmental sustainability on financial performance: A global analysis of the banking sector. Journal of Multinational Financial Management, 49, 35–53. https://doi.org/https://doi.org/10.1016/j.mulfin.2019.01.002 DOI: https://doi.org/10.1016/j.mulfin.2019.01.002
Nollet, J., Filis, G., & Mitrokostas, E. (2016). Corporate social responsibility and financial performance: A non-linear and disaggregated approach. Economic Modelling, 52, 400–407. https://doi.org/https://doi.org/10.1016/j.econmod.2015.09.019 DOI: https://doi.org/10.1016/j.econmod.2015.09.019
Parker, C. (2006). The “Compliance” Trap: The Moral Message in Responsive Regulatory Enforcement. Law & Society Review, 40(3), 591–622. https://doi.org/DOI: 10.1111/j.1540-5893.2006.00274.x DOI: https://doi.org/10.1111/j.1540-5893.2006.00274.x
Pätäri, S., Arminen, H., Tuppura, A., & Jantunen, A. (2014). Competitive and responsible? The relationship between corporate social and financial performance in the energy sector. Renewable and Sustainable Energy Reviews, 37, 142–154. https://doi.org/https://doi.org/10.1016/j.rser.2014.05.012 DOI: https://doi.org/10.1016/j.rser.2014.05.012
Roberts, P. W., & Dowling, G. R. (2002). Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23(12), 1077–1093. https://doi.org/10.1002/smj.274 DOI: https://doi.org/10.1002/smj.274
Samha, A. K. (2024). Strategies for efficient resource management in federated cloud environments supporting Infrastructure as a Service (IaaS). Journal of Engineering Research, 12(2), 101–114. https://doi.org/https://doi.org/10.1016/j.jer.2023.10.031 DOI: https://doi.org/10.1016/j.jer.2023.10.031
Santos, M. (2024). ‘If you believe in a platform world…’ – Corporate banking and digital transformation in investor relations discourse. Geoforum, 151, 103695. https://doi.org/https://doi.org/10.1016/j.geoforum.2023.103695 DOI: https://doi.org/10.1016/j.geoforum.2023.103695
Saudagaran, S. M., & Diga, J. G. (1998). Accounting harmonization in ASEAN: Benefits, models and policy issues. Journal of International Accounting, Auditing and Taxation, 7(1), 21–45. https://doi.org/https://doi.org/10.1016/S1061-9518(98)90004-0 DOI: https://doi.org/10.1016/S1061-9518(98)90004-0
Sovacool, B. K., Burke, M., Baker, L., Kotikalapudi, C. K., & Wlokas, H. (2017). New frontiers and conceptual frameworks for energy justice. Energy Policy, 105, 677–691. https://doi.org/https://doi.org/10.1016/j.enpol.2017.03.005 DOI: https://doi.org/10.1016/j.enpol.2017.03.005
Stubbs, W. (2017). Characterising B Corps as a sustainable business model: An exploratory study of B Corps in Australia. Journal of Cleaner Production, 144, 299–312. https://doi.org/https://doi.org/10.1016/j.jclepro.2016.12.093 DOI: https://doi.org/10.1016/j.jclepro.2016.12.093
Stubbs, W., & Higgins, C. (2018). Stakeholders’ Perspectives on the Role of Regulatory Reform in Integrated Reporting. Journal of Business Ethics, 147(3), 489–508. https://doi.org/10.1007/s10551-015-2954-0 DOI: https://doi.org/10.1007/s10551-015-2954-0
Wang, H., Lu, W., Ye, M., Chau, K. W., & Zhang, X. (2016). The curvilinear relationship between corporate social performance and corporate financial performance: Evidence from the international construction industry. Journal of Cleaner Production, 137, 1313–1322. https://doi.org/https://doi.org/10.1016/j.jclepro.2016.07.184 DOI: https://doi.org/10.1016/j.jclepro.2016.07.184
Zhang, W., Bakhsh, S., Ali, K., & Anas, M. (2024). Fostering environmental sustainability: An analysis of green investment and digital financial inclusion in China using quantile-on-quantile regression and wavelet coherence approach. Gondwana Research, 128, 69–85. https://doi.org/https://doi.org/10.1016/j.gr.2023.10.014 DOI: https://doi.org/10.1016/j.gr.2023.10.014
Zhao, S., Peerally, J. A., De Fuentes, C., & Gonzalez-Perez, M. A. (2024). The determinants of multinational enterprises’ sustainable innovations. International Business Review, 33(5), 102318. https://doi.org/https://doi.org/10.1016/j.ibusrev.2024.102318 DOI: https://doi.org/10.1016/j.ibusrev.2024.102318
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Eliesa D. Z., Izzeldin I (Author)
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Journal International Economic Sharia (JIES) © 2024 by Inovasi Analisis Data is licensed under CC BY-SA 4.0
How to Cite
