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Are corporate social responsibility reports informative? Evidence from textual analysis of banks in China

Are corporate social responsibility reports informative? Evidence from textual analysis of banks... The authors investigate the association of the constructed corporate social responsibility (CSR) measures with the banks’ profitability, social contributions and CSR spending as well as the market reaction to CSR spending.Design/methodology/approachUsing textual analysis of the CSR reports of banks listed on the Chinese market, the authors construct CSR measures in six domains: business, environment, human rights, corporate governance, charity and social capital. Our textual-based CSR measures contain substantial and valuable information beyond what Rankins CSR ratings offer.FindingsThe findings suggest that banks with stronger engagements and interests in the business-related CSR domain experience higher profitability, while those that are more committed to the corporate governance and charity-related domains create larger social contributions. Banks tend to incur higher CSR spending when they are more active in corporate governance. Although the stock market reacts positively to CSR expenditures, the reaction is less favorable for banks with CSR expenditures above the industry norm.Practical implicationsThis study offers insights to policymakers of the regulatory bodies and the banks in China. To enhance the financial safety and soundness of the banking system, the regulatory bodies should encourage banks to strategically allocate corporate resources to achieve higher CSR ratings and engage more business-related CSR activities. To create larger social values, bank management should invest more in philanthropic CSR initiatives such as corporate governance and charity activities. To pursue higher corporate profits, they should engage more in self-centered business-related CSR activities. However, according to the reaction of the market, they should not over-invest in CSR activities.Originality/valueWhile the use of textual analysis to evaluate CSR disclosure has recently emerged in the literature, few studies focus on banks in China. Using the term frequency–inverse data frequency (TF-IDF) method, the authors constructed a score for each of the six CSR domains: business (BUS), environment (ENV), human rights (HR), corporate governance (GOV), charity (CHY) and social capital (SCAP). To the best of our knowledge, no studies have adopted the textual approach to evaluate social reporting quality and CSR activities in the context of the banking industry in China. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Finance Review International Emerald Publishing

Are corporate social responsibility reports informative? Evidence from textual analysis of banks in China

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2044-1398
DOI
10.1108/cfri-04-2021-0081
Publisher site
See Article on Publisher Site

Abstract

The authors investigate the association of the constructed corporate social responsibility (CSR) measures with the banks’ profitability, social contributions and CSR spending as well as the market reaction to CSR spending.Design/methodology/approachUsing textual analysis of the CSR reports of banks listed on the Chinese market, the authors construct CSR measures in six domains: business, environment, human rights, corporate governance, charity and social capital. Our textual-based CSR measures contain substantial and valuable information beyond what Rankins CSR ratings offer.FindingsThe findings suggest that banks with stronger engagements and interests in the business-related CSR domain experience higher profitability, while those that are more committed to the corporate governance and charity-related domains create larger social contributions. Banks tend to incur higher CSR spending when they are more active in corporate governance. Although the stock market reacts positively to CSR expenditures, the reaction is less favorable for banks with CSR expenditures above the industry norm.Practical implicationsThis study offers insights to policymakers of the regulatory bodies and the banks in China. To enhance the financial safety and soundness of the banking system, the regulatory bodies should encourage banks to strategically allocate corporate resources to achieve higher CSR ratings and engage more business-related CSR activities. To create larger social values, bank management should invest more in philanthropic CSR initiatives such as corporate governance and charity activities. To pursue higher corporate profits, they should engage more in self-centered business-related CSR activities. However, according to the reaction of the market, they should not over-invest in CSR activities.Originality/valueWhile the use of textual analysis to evaluate CSR disclosure has recently emerged in the literature, few studies focus on banks in China. Using the term frequency–inverse data frequency (TF-IDF) method, the authors constructed a score for each of the six CSR domains: business (BUS), environment (ENV), human rights (HR), corporate governance (GOV), charity (CHY) and social capital (SCAP). To the best of our knowledge, no studies have adopted the textual approach to evaluate social reporting quality and CSR activities in the context of the banking industry in China.

Journal

China Finance Review InternationalEmerald Publishing

Published: Feb 1, 2022

Keywords: Corporate social responsibility; Textual analysis; Chinese banks; Corporate governance; G21; M14

References