Exporting corporate social responsibility: Evidence from foreign bank entry

• Published in: The British accounting review Vol. 56; no. 5; p. 101236
• Main Authors: Shen, Yanyan, Zheng, Xiaojia
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.09.2024
• Subjects: Corporate risk; Corporate social responsibility; CSR awareness; Financial constraints; Foreign bank entry; M14; Corporate social responsibility; CSR awareness; G30; Corporate risk; G21; Financial constraints; Foreign bank entry
• ISSN: 0890-8389
• DOI: 10.1016/j.bar.2023.101236

This paper examines the effect of foreign bank entry on local firms' social performance. We find that foreign bank entry is associated with better performance of local firms in regard to corporate social responsibility (CSR). The effect is more pronounced when firms face less favorable financial conditions and when corporate governance is weaker. Meanwhile, the role of foreign banks in promoting CSR is stronger in firms subject to environmental concerns but weaker in firms with foreign institutional investors or CEOs with overseas experiences in place. Further analyses show that foreign bank entry significantly releases firms' financial constraints, reduces corporate risk, and improves CSR awareness, further verifying the three channels of how foreign banks increase firms’ CSR performance. These findings provide valuable insights into the consequence of financial liberalization by highlighting the important role of foreign banks as intermediaries in facilitating CSR practice globally. •Foreign bank entry is associated with better performance of local firms regarding corporate social responsibility.•The effect is more pronounced when firms face less favorable financial conditions and when corporate governance is weaker.•The effect is stronger in firms subject to environmental concerns.•The effect is weaker in firms with foreign institutional investors and firms led by CEOs with overseas experiences.•The channels are that foreign bank entry releases firms' financial constraints, reducesrisk, and improves CSR awareness.