The Impact of Internal Corporate Governance Mechanisms on Corporate Social Performance in the Banking Industry

Abstract

The purpose of this chapter is to explore the relationship between corporate governance (CG) and corporate social responsibility (CSR) by analysing the effect of internal governance and monitoring mechanisms on the corporate social performance (CSP) of banks. To carry out our analysis, we propose to regress both a fixed-effects and a random-effects model using an unbalanced panel composed of 118 banks from 19 countries. The overall period of analysis runs from 2002 to 2014, although it has been divided into two different sub-periods before and after the banking system crisis: period 1 (2002–2007) and period 2 (2008–2014), in order to analyse the existence of a structural change with different impacts on the CG-CSR relationship. This research shows that some internal governance and monitoring mechanisms, namely, those related to controlling ownership and the structure of the board of directors, have an important influence on the social performance of banks, although these mechanisms were only relevant during the crisis period (2008–2014).