CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE AND DUAL CHANNEL FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN SOUTH AFRICA

Abstract

Growing scrutiny of the ways financial institutions engage with stakeholders and disclose their corporate responsibility activities provides the basis for this study. The research investigates whether corporate social responsibility (CSR) disclosure is related to two distinct aspects of bank financial performance, namely accounting-based profitability and market-based performance. Instead of conceptualising the CSR–performance relationship as a unified outcome, the study advances a dual-channel value-creation perspective. From this standpoint, CSR disclosure can contribute to stronger stakeholder relationships and improved internal operating conditions while simultaneously communicating organisational legitimacy to external capital-market participants. This perspective is especially pertinent to South Africa, where integrated reporting practices and stakeholder-centred governance expectations shape the manner in which banks report their social and environmental initiatives. The analysis draws on panel data for South African commercial banks over the 2016–2025 period. CSR disclosure is operationalised through a 32-item index covering community engagement, environmental stewardship, workplace policies, and diversity. Bank financial performance is examined through two separate composite measures. The accounting-based profitability index incorporates return on assets, return on equity, and net profit, whereas the market-based performance index consists of stock returns and the price-to-earnings ratio. Factor analysis is employed to construct both indices. Subsequently, panel regression models are estimated to assess the association between CSR disclosure and each dimension of financial performance, while controlling for bank size, leverage, capital intensity, and age. The empirical evidence demonstrates a positive and statistically significant relationship between CSR disclosure and accounting-based profitability. In contrast, the relationship between CSR disclosure and market-based performance remains positive but is comparatively weaker in statistical terms. The findings therefore indicate that the financial benefits associated with CSR disclosure appear to be more strongly connected to internal stakeholder relationships and operational value creation than to short-term investor valuation. By providing a context-specific account of the CSR–performance relationship within South African banking, the study extends understanding of how responsible disclosure can generate value. It further recommends that banks incorporate CSR disclosure into broader stakeholder-oriented value-creation strategies rather than positioning it merely as a symbolic communication practice or a mechanism for enhancing corporate reputation.