Corporate social responsible behaviour in the financial industry

Abstract

The financial crisis of 2007-2008 incited many criticisms of financial institutions, especially their policies and ethics. In response, corporate social responsibility (CSR) has increased in European and American financial industries. This increase is stimulated by both consumer demand and regulatory pressure. However, there are major differences in CSR between European and American markets, differences which indicate important market trends but are little studied. This study examines the differences in CSR behaviour between the financial industries of those two regions, and investigates what relationship, if any, exists between CSR behaviour and financial performance. This research analyses different CSR rating methodologies. An analysis of CSR rating methodologies and studies reveals a significant difference in CSR behaviour between European and American markets. The European financial industry shows a faster increase in CSR behaviour in comparison to their counterparts in the United States of America (US), enlarging the difference in CSR behaviour between the two. The results demonstrate a transformation from a positive toward a negative correlation between CSR behaviour and financial performance for the years 2009-2012, inclusive. The CSR measurement framework described by Scholtens (2008) is found to have significant correlations with other CSR rating agencies, thereby restraining its added value. Ultimately, these results affirm the importance of measuring CSR behaviour to better understand differences in the influence of CSR in the financial industry and wider differences between European and American markets.