Theoretical Analysis And Empirical Research On The Impact Of Corporate Social Responsibility (ESG) On The Cost Efficiency Of The World's Top 100 Bank

Corporate social responsibility(CSR)is a hot issue that governments and all sectors of society are paying close attention to.With the continuous development of economic society and human civilization,the concept of CSR of investors and the general public is also advancing with the times.Especially in recent years,environmental pollution,extreme weather,financial fraud,and lack of social ethics have become increasingly prominent,which have brought a huge impact on economic and social operations,and aroused widespread concern among scholars and the public on CSR issues.There are growing calls for companies to not only pay attention to profitability,but also fulfill their social responsibilities,mitigate and adapt to climate change,and focus on sustainable development capability.Banking industry has a greater social impact as a key component of a country’s financial industry.Its social responsibility is not only related to the bank’s own business development,but also to the behavior of its business clients and the sustainable development of the entire economy.Recently,there have been many initiatives and mandatory regulations related to corporate social responsibility and sustainable development related to the banking industry in the world.The purpose is to encourage banks to actively take corporate social responsibilities and to achieve sustainable development goals.For the management teams,their behavioral decisions are often driven by certain economic benefits,and fulfilling corporate social responsibilities first means incurring additional costs.Then,whether the performance of the bank’s social responsibility will have a positive impact on its own operations will have an important impact on the CSR disclosure and CSR performance.Therefore,studying the impact of banks’ social responsibility performance on their business development will help deepen the understanding of banks’ social responsibility,help banks optimize their strategic goals,and encourage them to fully take related responsibilities while achieving operational efficiency,and promote sustainable economic and social development.Currently the research on CSR mainly focuses on corporate social responsibility performance and its impact on corporate financial performance.The research objects are mostly concentrated in non-financial companies.There is a lack of research on CSR issues in the banking industry.The cost efficiency,the key indicator reflecting the operation ability of banks,is not paid enough attention by the researchers.Banking is the core industry of financial system,which plays an important role in supporting and guiding the real economy.The special status of the world’s top 100 banks in the global financial system determines their decisive influence on the economies and financial systems of all countries in the world.The steady development of the world’s top 100 banks plays an important role in the safety and sustainable development of the economic and financial system,and also has important guidance and reference for the social responsibilities of the entire banking industry.Meanwhile,as a commercial bank,its core competitiveness is mainly reflected in the improvement of operational efficiency.Therefore,an interesting research topic is,how does the CSR performance of the world’s top 100 banks affect their cost efficiency? Are there differences in the impact of different aspects of CSR performance on bank cost efficiency? Is this relationship heterogeneous among different groups?To answer the above questions,this research reviews and sorts out the existing literatures on CSR,and points out the direction of further research.In order to identify the cost efficiency of banks more accurately,this paper uses three models,the new cost efficiency DEA model(New-Cost-DEA),stochastic frontier analysis model(SFA)and stochastic metafrontier analysis model(SMF)to measure and identify the cost efficiency of banks.Meanwhile,in order to more comprehensively investigate the differential impacts of banks’ CSR performance on their cost efficiency,this research analyzes from three dimensions of environmental performance(E),social performance(S)and corporate governance performance(G).In addition,the comprehensive performance of CSR was used as the robustness test.These empirical results will help banks focus more on promoting and implementing corporate social responsibility from the perspective of ESG,and improve cost efficiency in multiple dimensions.Based on the above thinking,this research further uses the global top 100 banks released by the Standard & Poor’s Global Intelligence Agency in 2019 as the research object with the sample period from 2009 to 2018.Bloomberg’s environment(E),social(S),corporate governance(G)and CSR scores(total scores of E,S,and G)are used as proxy variables for banks’ CSR performance.Based on the bank’s cost efficiency values measured by three efficiency models,this paper explores the influence of E,S,G performance on bank’s cost efficiency.On this basis,this paper further analyzed different characteristics in CSR performance of banks in countries with different development levels among the world’s top 100 banks.According to the special performance of the national conditions and economic development of developed and developing countries,the samples were grouped according to developed and developing countries to test the group heterogeneity of the relationship between bank CSR and its cost efficiency.Furthermore,this paper also focuses on the impact of mandatory disclosure of CSR report regulation on the cost efficiency of banks in developed and developing countries.The empirical research results of this article are summarized as follows:(1)When measuring the cost efficiency of the world’s top 100 banks,this paper uses three models: New-Cost-DEA,SFA and SMF.Under the New-Cost-DEA model,banks with different input prices will be reflected into different cost efficiency values,which overcomes the shortcomings caused by the fact that the traditional DEA model does not take into account the fact that lowering the price of input factors can significantly reduce costs.In the SFA model,it defines the bank’s input and output indicators based on the intermediary method,and determine the influencing factors of bank cost efficiency.In the SMF model,a two-stage estimation method is used to estimate and compare the cost efficiency(CE),technology gap ratio(TGR)and metafrontier cost efficiency(MCE)of banks in developed and developing countries.In general,banks in developed countries have higher cost efficiency,technology gap ratio and metafrontier cost efficiency than banks in developing countries.However,in the10 years after the 2008 financial crisis,the efficiency of banks in developing countries has gradually improved,and the gap between banks in developed countries has been narrowing.(2)The empirical study shows that the environmental performance(E),social performance(S),corporate governance performance(G)and comprehensive social responsibility performance(CSR)of the world’s top 100 banks have a significant positive impact on their cost efficiency,whether using new cost DEA,SFA or SMF models to measure the cost efficiency.This indicates that the CSR performance of banks is helpful to the improvement of their own bank’s cost efficiency.(3)Based on the sub sample test of banks in developed and developing countries,it is found that the environmental performance(E),social performance(s),corporate governance performance(G)and comprehensive social responsibility(CSR)of the top100 banks in the world have a positive impact on their cost efficiency.At the same time,it is found that the mandatory issuance of CSR reporting regulations can improve the cost efficiency of developing countries in the world’s top 100 banks,but it has a negative impact on the cost efficiency of banks in developed countries.The innovations of this paper are as follows:(1)Innovation of research perspective.Research samples and classification innovation.In the past,research on the banking industry did not focus on the S&P 100 largest banks in the world.None of any research studies on the relationship between the world’s 100 largest banks’ corporate social responsibility and cost efficiency with the data from the last 10 years after the 2009-2018 financial crisis,which is obviously different from the existing research.(2)Innovation of research methods.In terms of measuring the cost efficiency of commercial banks,the previous literature mostly used a single model to measure.The three models of efficiency measurement are adopted to measure the efficiency of NewCost-DEA,SFA and SMF respectively,which ensure the accuracy and reliability of the cost and efficiency measurement of banks.(3)Innovation of in-depth research.This paper not only expands the research sample of bank’s CSR performance to the international level,but also compares the different consequences of CSR performance between developed and developing countries,expands and deepens the research content of social responsibility of commercial banks,and forms a beneficial supplement to the previous literature.