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6. Conclusion
This paper attempts to examine the effect of corporate social responsibility on efficiency by using the translog cost function. As the prevalence of CSR, there are many existing literatures reviewing the effect of CSR on financial performance. However, the lack of study regarding the correlation of CSR with efficiency gives us the opportunity to conduct the research. In the study, we use stochastic frontier approach to estimate a cost function in order to test the efficiency of banks that are engaging in CSR with different extent. The results we get from the empirical study give us some perspectives on CSR which are distinct from previous study. Firstly, CSR is not linearly correlated with efficiency.
Instead, it’s curvilinear relation to efficiency term which means the higher of CSR index. In attempt to analyze this paradoxical phenomenon, we add the squared term of CSR since the effect on efficiency might not be always linear. As we do partial derivative of the estimated cost function with respect to the term of CSR, we obtain the turning point at 11. This implies that banks would be benefited from the involvement of CSR only when their CSR scores exceed 11. Since the engagement of CRS takes time to implement, long-term engagement of CSR does help banks to boost cost efficiency. The consequence is as same as the research stated in Barnett and Salomon (2006).
When it comes to motive triggers, compared to Baron (2001) and Dam et al (2009), our results fail to support the greenwashing hypothesis, but partially support the altruistic and strategic hypotheses. In particular, a bank is said to be altruistic if it engages CSR activities with the score less than 11, while a bank is said to be strategic if it actively conduct CSR with the score above 11. Nonetheless, this paper sheds light on cost efficiency, it has its own limits. Since some of the effect of CSR will be reflected on profits due to stakeholder theory. This is the direction or field we and others can further endeavor in.
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area Conventional area Major nuclear area - No convictions Fines in lower half Fines in second
quartile
+ Advanced Good Intermediate Basic Limited Little
or no
improvement No improvement No data or
inadequate data 3 2 1 0 0
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Appendix2.1 CSR index cluster in Year of 2010
Appendix 2.2 CSR index cluster in Year of 2011
+ Has clear policy
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Appendix 2.3 CSR index cluster in Year of 2012
Appendix 2.4 CSR index cluster in Year of 2013
Appendix 2.5 CSR index cluster in Year of 2014 CSR Index
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Appendix 4 CSR, Efficiency combined with regions
Variable Parameter
estimates
Standard
errors Variable Parameter estimates
Standard errors Costant -3.10E+00 -9.36E-01 ln(Y3)ln(W3/W1) 4.22E-02 1.76E-02
ln(Y1) 1.21E+00 1.69E-01 t -1.12E-01 2.26E-01
ln(Y2) 5.85E-03 1.24E-01 0.5t^2 -4.53E-02 4.43E-02
ln(Y3) 5.09E-02 1.17E-01 t*ln(Y1) 1.26E-02 2.47E-02
0.5ln(Y1)ln(Y1) 4.80E-02 6.86E-03 t*ln(Y2) 4.19E-02 2.00E-02 0.5ln(Y2)ln(Y2) -4.50E-03 1.24E-02 t*ln(Y3) 6.91E-02 1.86E-02 0.5ln(Y3)ln(Y3) -1.10E-02 1.23E-02 t*ln(W2/W1) -5.31E-02 1.83E-02 ln(W2/W1) 1.86E+00 1.46E-01 t*ln(W3/W1) -2.85E-02 1.60E-02
ln(W3/W1) 2.43E-01 1.34E-01 Constant -1.46E+00 1.03E+00
0.5ln(W2/W1)ln(W2/W1) -1.01E-02 2.98E-03 ETA -4.82E+00 1.61E+00 0.5ln(W3/W1)ln(W3/W1) -1.84E-03 1.55E-03 NPL -3.21E+00 1.88E+00 ln(Y1)ln(W2/W1) -2.04E-01 2.50E-02 Loan/Asset -1.24E-03 6.79E-04
ln(Y1)ln(W3/W1) 2.11E-02 2.39E-02 ROA -1.10E-01 1.73E-01
ln(Y2)ln(W2/W1) -7.39E-03 1.75E-02 CSR -3.18E-04 7.10E-03
ln(Y2)ln(W3/W1) -6.48E-03 1.64E-02 CSR 3.60E-05 6.27E-05
ln(Y3)ln(W2/W1) -3.74E-02 1.90E-02 GDP growth rate 9.27E-02 3.83E-02
Log-likelohood -0.27E+03 ln(real GDP per
capita) 1.83E-01 9.92E-02
CSR 1-11 11-21 21-31 31-41 41-51 51-61 61-71 71-81 81-91 91-101 101-111 Total
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British 1 1 2
Middle East
Asia 1 1 2
North America 3 1 2 3 3 2 1 3 18
North Europe 5 1 1 1 8
South Europe 3 3
West Europe 2 1 1 1 5
0.906-1.0 1 1 2 4
Asia 1 1
Australia 1 1 2
North America 1 1
Total 15 92 75 39 59 52 45 34 31 14 1 457