The Joint Effect of Corporate Social Responsibility and Digital Transformation on Bank Performance: Evidence from Vietnam’S Banking Sector

Abstract

This study investigates the complex relationships among corporate social responsibility (CSR), digitalization, and bank performance in Vietnam from 2010-2022. Using a sample of 30 Vietnamese banks representing 97% of the banking sector's assets, we employ principal component analysis (PCA) to construct a comprehensive CSR index based on five stakeholder dimensions. Our findings reveal a U-shaped relationship between CSR and bank performance, with initial negative effects followed by positive impacts beyond a certain threshold. Digitalization investments show similar patterns, with short-term costs but long-term benefits when integrated with CSR initiatives. The study finds that large, state-owned, and listed banks benefit differently from CSR and digitalization investments. Additionally, bank characteristics such as size, credit risk, and ownership structure significantly moderate these relationships. The COVID-19 pandemic's impact on these relationships is also examined. Our findings contribute to stakeholder theory and provide practical implications for bank managers and regulators in emerging markets regarding optimal CSR and digital transformation strategies.