Corporate Social Responsibility and Bank Stability in Vietnam Novel Insights from a Method of Moments Quantile Regression Approach

Abstract

This study investigates the relationship between corporate social responsibility (CSR) adoption and bank stability in Vietnam from 2016 to 2022. We developed a novel CSR index using a mixed-methods. First, we conducted a survey to identify the important factors affecting the banks’ CSR activities. Then, we employed the entropy method to construct the CSR index for the sampled banks. Finally, the method of moment’s quantile regression (MMQR) is used to examine this relationship. The results show a U-shaped relationship between CSR and bank stability at location-based and across quantiles; however, mixed findings are obtained for different CSR components at different quantiles. Specifically, responsibilities to customers and the environment first mitigate but later improve bank stability. Contradictory, the findings indicate an inverted U-shaped relationship between product and service responsibility and bank stability, implying that aggressive pursuits of sustainable products may increase bank instability. Our findings still hold when running several robustness checks. Our study suggests that Vietnamese banks generally should focus more on their responsibility to society and the community to promote financial stability. State-owned commercial banks should approach managers’ responsibility in their plan cautiously and prudently to avoid quiet-life behaviours. Meanwhile, listed banks should emphasize their responsibility to customers, products and services, and employees in developing successful CSR strategies. This study would add more evidence to the existing literature on whether CSR may impact different levels of bank stability.