Examining the Impact of Social Disclosures on the Profitability of
Jordanian Commercial Banks: A Comprehensive Study
LOONA SHAHEEN*, ABDULLAH ZAYTOUN
Accounting Department, Business School,
Al-Balqa Applied University,
JORDAN
*Corresponding Author
Abstract: - This study investigates the impact of social disclosures on the profitability of Jordanian commercial
banks, focusing on the relationship between social disclosures related to employee activities, societal benefits,
customer targeting, and financial performance indicators such as ROA, ROE, and EPS. Drawing upon existing
literature on social disclosures, sustainability reporting, and CSR practices, the study adopts a quantitative
research approach and collects data from financial reports and disclosure documents of all Jordanian
commercial banks listed on the Amman Stock Exchange between 2017 and 2021. Regression analysis is
employed to analyze the relationship, considering relevant variables. The findings reveal a significant influence
of social disclosures on bank profitability, with a positive correlation between social disclosures and financial
performance indicators. The study contributes to the literature by providing empirical evidence specific to
Jordanian commercial banks, highlighting practical implications for banking institutions, policymakers, and
regulators in integrating social disclosures to enhance financial performance and addressing the social
implications of such disclosures. The study's originality lies in its comprehensive inclusion of all Jordanian
commercial banks and its robust methodology, filling a research gap and providing unique insights into this
specific context.
Key-Words: - Social disclosures, Profitability, Jordanian commercial banks, CSR practices, Financial
performance indicators, Sustainability reporting, Banking institutions, Amman Stock
Exchange.
Received: September 2, 2023. Revised: April 4, 2024. Accepted: May 14, 2024. Published: May 31, 2024.
1 Introduction
Prior studies have been showing a rapid interest for
the link between social disclosure and banking
profitability. A plethora of research has investigated
this topic from various aspects with a special focus
on the sustainability impact. Therefore, we aim to
interpret the impacts of social disclosures on
financial performance as this topic remains crucial
for entities keen on enhance their sustainability
actions and securing a competitive edge in today's
ever-evolving commercial milieu.
The prevailing scholarly works invariably reveal
a beneficial linkage between social disclosures and
fiscal performance indicators like Return on Assets
(ROA), Earnings Per Share (EPS), and Return on
Equity (ROE), [1]. For example, research carried
out in India and several developing nations has
highlighted the affirmative connection between ESG
disclosures and ROA. this indicates the critical
function of sustainability reporting in enhancing
financial performance, [2]. Likewise, explorations
across diverse settings, including Brazil, Canada,
and the United Arab Emirates, have shown how
institutional variables, public visibility, and political
affiliations influence social disclosures and, by
extension, profitability, [3], [4].
Yet, despite the well-established ground for this
relation, there is lack of evidence to support this link
in Jordanian commercial banks. While numerous
studies have acknowledged a positive correlation
between social disclosures and profitability, there's a
noticeable scarcity of statistically substantive
evidence to back the influence of social disclosures
on banking profitability. Thus, the current study
aims to bridge this lacuna by meticulously
examining the interplay between social disclosures
and bank profitability among Jordanian commercial
banks.
Accordingly, the primary research question for
this study is whether there is an impact of social
disclosures on the profitability of Jordanian
commercial banks?
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DOI: 10.37394/23207.2024.21.113
Loona Shaheen, Abdullah Zaytoun
E-ISSN: 2224-2899
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The overarching the objective of this study, we
evaluate the relationship between social disclosures
and bank profitability. Moreover, we pay a
particular focus on activities directed toward
employees, activities benefitting society, and
activities targeting customers. To answer our quest,
we conduct an analysis of financial performance
indicators, namely ROA, EPS, and ROE, to furnish
empirical evidence regarding the influence of social
disclosures on the profitability of Jordanian
commercial banks.
In addition, the study conduct a quantitative
research approach utilizing a regression analysis to
explore the relationship between social disclosures
and bank profitability while controlling for pertinent
variables. Data is sourced from financial reports and
disclosure documents of Jordanian commercial
banks. The study population comprises 15 Jordanian
which represents all active banks in Jordan. This
approach ensures the availability of all requisite data
for measuring the dimensions and variables of the
study during the period from 2017 to 2021.
Comprehending the impact of social disclosures
on bank profitability in Jordan holds crucial
implications for policymakers, regulators, and
banking institutions alike. It can inform strategic
decision-making processes and guide organizations
in implementing effective sustainability practices
that contribute to both financial performance and
societal well-being. Furthermore, this study
contributes to the academic literature by expanding
the knowledge base on the relationship between
social disclosures and bank profitability, specifically
within the context of Jordanian commercial banks.
In the forthcoming sections, we present the
methodology employed, the data analysis
conducted, and the resultant findings of the study.
The conclusion delves into the implications of the
obtained results and their alignment with existing
literature. Additionally, the study acknowledges its
limitations and suggests avenues for future research,
with the aim of advancing the understanding of
social disclosures and their impact on bank
profitability.
2 Literature Review
The relationship between corporate social
responsibility (CSR) and financial performance in
the banking sector have revealed a complex
interactions and outcomes. In [5], the authors argued
that CSR activities and the expertise of Sharia
Supervisory Boards in Islamic banking play a
crucial role in diminishing earnings management
and promoting financial transparency. This finding
is supported by [6], who found a a clear connection
between CSR engagement and reduced earnings
management in Indonesiaian and Malaysiaian
banks. This suggest that ethical corporate behavior
and strong investor protection are ample in
enhancing financial performance.
In a related vein, the authors in [7], found that
firm's strong environmental, social, and governance
(ESG) performance generally leads to less earnings
management. However, this relationship is
influenced by the legal environment, particularly in
civil law countries with strong creditor rights.
Additionally, in [8], the authors examined how
different CSR activities and bank characteristics
such as size and leverage can significantly affect
financial performance. Their research supports the
idea that effective CSR can improve stakeholder
satisfaction and enhances banks a competitive
advantage. The authors in [9], took a broader view
by looking at CSR in the Middle East and its
integration with business practices in a variety of
institutional contexts. Finally, the authors in [10],
conducted a meta-analysis that revealed a positive
impact of CSR on earnings quality in areas with
strict investor protection and banking regulations.
Collectively, these studies advocate for the strategic
incorporation of CSR in banking and its ability to
enhance financial outcomes while promoting ethical
governance and building stakeholder trust.
In [2], the authors found a significant positive
relationship between environmental, social, and
governance (ESG) disclosures and financial
performance in indian context by measuring the
ROA and return on capital employed (ROCE) as a
proxy for financial performance. Similarly, the
authors in [11], explored sustainability reporting in
developing countries and reaveled a positive
impoact of social disclosure on the ROA. Hence,
eviedence suggests that sustainability reporting
playsan important role in enhancing financial
performance within developing economies.
In a countries comparison, the authors in [4],
studied the impact of institutional elements on the
disclosure of social and environmental practices in
Brazil and Canada. There investigation showed a
significant variances between the two nations. From
one hand, Canada demonstrated more pronounced
levels of coercive and normative isomorphism,
while Brazil, showed a propensity towards greater
adaptability and innovation in its disclosure and
corporate social responsibility (CSR) initiatives on
the other. These variation should call for the
attention to the necessity of improving governance
and fortified relationships between employees and
employers in Brazil to refine disclosure practices.
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The study also streesed on the unique pressures and
challenges that countries with institutional distance
encounter in securing and encouraging the
legitimacy of their CSR activities. In a similar
fashion, the authors in [12], found a positive and
significant impact of corporate social performance
(CSP) on financial performance (CFP) within
Brazilian organizations. Nonetheless, the research
did not support the moderating role of disclosure in
this relationship. It concluded that disclosure
through Global Reporting Initiative (GRI) reports
does not alter the relationship between social and
financial performance. These outcomes suggest that
organizations with superior financial performance
have better opportunities to invest in social
performance regardless of their disclosure protocols.
In a study [13], researchers explored how the
disclosure of social and governance (ESG) factors
impacts the performance of companies, in the FTSE
350. The findings revealed a relationship between
ESG disclosure and firm performance. Additionally,
they identified ownership concentration, gender
diversity and board size as factors influencing this
connection. The research also suggests that primary
stakeholders consider ESG disclosure as a tool to
enhance firms image and reputation while
promoting long term value creation.
Shifting focus to the context, [14] scholars
discussed how sustainability accounting disclosure
affects the performance of banks in Jordan
positively. Their findings indicated a effect of
sustainability accounting disclosure on financial
performance emphasizing the significant influence
of economic and social aspects on Return on Equity
(ROE).
Moving forward to another study, [15],
researchers delved into the correlation between
value relevance and financial performance by
examining societal performance integration with
corporate performance. They observed that
environmental commitment has an impact on market
value boosting competitiveness and profitability.
Moreover companies with levels of disclosure
tended to have greater market value.
Lastly in an examination detailed in [16],
authors investigated how political connections
influence ESG information disclosure, among listed
companies.The research discovered that having ties
has a positive influence, on the extent of voluntary
information disclosure suggesting that companies,
with connections tend to have better resource
accessibility and enhanced financial outcomes.
In conclusion, existing studies consistently
demonstrate a positive association between social
disclosures and financial performance measures
such as ROA, ROCE, and ROE. This suggests that
better ESG disclosures contribute to improved
profitability. Institutional factors play a crucial role
in shaping social and environmental disclosure
practices, with distinct pressures and challenges
faced by different countries. Moreover, the
relationship between social performance and
financial performance remains significant regardless
of the level of disclosure. Sustainability accounting
disclosure and ESG reporting have been shown to
positively impact financial performance in the
banking sector, while public visibility and political
connections influence corporate social disclosure
practices and voluntary ESG disclosures,
respectively.
2.1 Social Disclosures
Engaging in activities concerning employees, like
recruitment, training and compensation significantly
impacts the well being and productivity of
employees. Therefore it's crucial to have a organized
recruitment process and communicate about social
responsibility (CSR) initiatives during this phase to
ensure fairness and equality. Additionally
companies bear the responsibility of meeting their
employees needs by offering benefits such as health
insurance, social security and other being related
perks. It's no surprise that businesses with CSR
practices often attract employees due to their
reputation, [17], [18]. Furthermore, revealing
information about training programs and
investments in employee development demonstrates
the organizations commitment to fostering
employee growth. Transparency, in sharing salary
details in reports also recognizes employees
contributions and fosters a sense of security among
them, [19]. Overall it is imperative for organizations
to adopt CSR practices maintain transparency in all
employee related affairs and fulfill their
responsibilities for business advancement.
Social activities contribute to societal well-
being, cultural development, and individual
satisfaction. They include opportunities for student
training, community nurseries, healthcare support,
and assistance to charitable organizations. These
activities aim to enhance the community's economic
welfare and address its concerns, [20], [21]. Social
responsibility extends to various contributions, such
as disease prevention, employment opportunities,
infrastructure development, urban planning, and
affordable housing. These efforts benefit humanity,
housing, healthcare, transportation, and public
utilities, [22]. Establishing a positive relationship
with the community and cultivating a favorable
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reputation positively impact organizational
profitability, [20].
Activities focused on customer engagement,
specifically product enhancement, play a crucial
role in building strong customer relationships. These
activities involve understanding customer needs,
designing tailored products, ensuring quality,
providing clear packaging information, and
implementing targeted advertising. Service
enhancement efforts encompass responsiveness,
credibility, and risk reduction. Prioritizing customer
satisfaction demonstrates social responsibility,
fosters loyalty, and contributes to long-term
organizational success, [20], [23], [24].
The reviewed studies provide evidence of a
positive association between social disclosure and
financial performance, indicating that better
disclosure practices lead to improved profitability.
However, specific to the Jordanian context, the
literature does not provide statistically significant
evidence supporting the impact of social disclosures
on bank profitability as measured by ROA.
Therefore, we hypothesize the following
H01: There is no statistically significant effect of
social disclosures on bank profitability measured by
ROA, specifically in terms of (activities provided to
employees, activities benefiting society, and
activities targeting customers).
H02: There is no statistically significant effect of
social disclosures, including disclosures related to
activities provided to employees, activities
benefiting society, and activities targeting
customers, on the profitability of Jordanian
commercial banks measured by EPS.
H03: There is no statistically significant effect of
social disclosures, including disclosures related to
activities provided to employees, activities
benefiting society, and activities targeting
customers, on the profitability of Jordanian
commercial banks measured by ROE.
3 Research Methodology
The study population consists of Jordanian
commercial banks, totaling 15 banks, and the
sample for the study includes all Jordanian
commercial banks (comprehensive inclusion) to
ensure the availability of all necessary data for
measuring the current dimensions and variables of
the study during the period from 2017 to 2021. The
study relies on official financial data of Jordanian
commercial banks listed on the Amman Stock
Exchange during the period from 2017 to 2021. This
enables the measurement of the independent
variable, which is social disclosure, through three
indicators: social disclosure related to activities for
employees, social disclosure related to activities for
the community, and social disclosure related to
activities for customers. Additionally, it allows for
the measurement of the dependent variable, which is
the profitability of commercial banks, through three
indicators: (ROA), (ROE), and (EPS). Table 2
provides an overview of how each variable is
measured and the sources relied upon for
measurement.
Variable
Type
Measurement Method
Social
Disclosure
Independent
Variable
Adoption of (5)
disclosure items related
to employee activities,
assigned a value of (1) if
disclosed
(related to
employees)
and (0) otherwise.
Average value is
calculated.
Social
Disclosure
Independent
Variable
Adoption of (4)
disclosure items related
to community activities,
assigned a value of (1) if
disclosed
(related to
the
community)
and (0) otherwise. The
average value is
calculated.
Social
Disclosure
Independent
Variable
Adoption of (4)
disclosure items related
to customer activities,
assigned a value of (1) if
disclosed
(related to
customers)
and (0) otherwise. The
average value is
calculated.
ROA
Dependent
Variable
ROA is calculated by
dividing the net profit
by the average total
assets
ROE
Dependent
Variable
ROE is calculated by
dividing the net profit
by the average equity
EPS
Dependent
Variable
EPS is calculated by
dividing the net profit
after preference share
dividends
(if any) by the number
of outstanding shares
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4 Data Analysis
Table 1. Descriptive Analysis
Variable
Obs
Mean
Std.
Dev.
Min
Max
ROA
75
.009
.005
-.002
.018
ROE
75
.078
.04
-.01
.217
EPS
75
.181
.132
-.03
.68
SD_EM
75
.096
.093
.1
.45
SD_CUS
75
.258
.071
.12
.41
SD_COM
75
.545
.082
.37
.703
Table 1 presents the descriptive analysis of the
variables: ROA, ROE, EPS, Employee-related
activities (SD_EM), Customer engagement
activities (SD_CUS), and Social activities
(SD_COM).
The analysis includes 75 observations. The
mean values for ROA, ROE, and EPS are 0.009,
0.078, and 0.181, respectively. The standard
deviations for these variables are 0.005, 0.04, and
0.132, indicating the degree of variability in their
values. The minimum and maximum values for
ROA are -0.002 and 0.018, for ROE are -0.01 and
0.217, and for EPS are -0.03 and 0.68.
Regarding the employee-related activities
(SD_EM), the mean value is 0.096, with a standard
deviation of 0.093. The minimum and maximum
values for this variable are 0.1 and 0.45,
respectively. For customer engagement activities
(SD_CUS), the mean value is 0.258, with a standard
deviation of 0.071. The range of values for this
variable ranges from 0.12 to 0.41. Lastly, social
activities (SD_COM) have a mean value of 0.545,
with a standard deviation of 0.082. The minimum
and maximum values for SD_COM are 0.37 and
0.703.
Table 2. Variance inflation factor
VIF
1/VIF
EPS
2.722
.367
ROE
2.262
.442
SD_CUS
1.644
.608
SD_EM
1.563
.64
SD_COM
1.212
.825
Mean VIF
1.881
.
Table 2 presents the variance inflation factor
(VIF) used to assess multicollinearity in the
regression analysis. The VIF values in the table
indicate the level of multicollinearity among the
variables. Generally, a VIF value greater than 1
suggests the presence of some correlation among the
predictor variables. In our analysis, the VIF values
for EPS, ROE, SD_CUS, SD_EM, and SD_COM
range from 1.212 to 2.722. These values suggest
that there is some degree of multicollinearity among
these variables, but the level of correlation is not
excessively high, [26]. Moreover, In our analysis,
the 1/VIF values range from 0.367 to 0.825. This
suggests that each variable contributes to the overall
multicollinearity to some extent, but the
contribution is relatively low.
Table 3. Pairwise correlations
Variables
(1)
(2)
(3)
(4)
(5)
(6)
(1) ROA
1.000
(2) ROE
0.828*
1.000
(3) EPS
0.732*
0.707*
1.000
(4)
SD_CUS
0.381*
0.321*
0.549*
1.000
(5)
SD_EM
0.482*
0.416*
0.521*
0.461*
1.000
(6)
SD_COM
0.150
0.271*
0.122
0.038
0.169
1.000
To observe the interrelations among the study’s
variables, Table 3 describes the pairwise
correlations among them. The emergent patterns
from the data are significant. A robust positive
correlation is observed (ROA) and (ROE), with a
correlation coefficient (r) of 0.828, which is
statistically significant at the 1% level (p < 0.01).
This suggests that entities with superior ROA
concurrently exhibit enhanced ROE, indicating a
synergistic relationship between profitability and
shareholders' equity efficiency. This correlation is
not expected to interfere with the study’s adopted
models as each dependent variable will be measured
in a separate model. Additionally, (EPS)
demonstrates a moderately strong positive
correlation with both ROA (r = 0.732, p < 0.01) and
ROE (r = 0.707, p < 0.01), indicating that firms with
higher EPS are likely to report increased (ROA) and
(ROE). This infers that an uptick in earnings is
reflective of an overall improvement in financial
performance metrics.
Examining the independent variables, the
correlation between (SD_CUS) and financial
performance metrics is positive, even if relatively
weaker. There is a statistically significant positive
correlation between SD_CUS and ROA (r = 0.381,
p < 0.05), with similar trends observed with ROE
and EPS. This denotes that corporate activities
aimed at bolstering customer satisfaction and
engagement are associated with an uptick in
financial performance, though the strength of this
association is comparatively subdued vis-à-vis the
correlations with profitability measures.
Employee-related activities (SD_EM) are found
to have moderate positive correlations with financial
performance indicators. SD_EM exhibits a positive
correlation with ROA (r = 0.482, p < 0.01), as well
as with ROE and EPS. This implies that firms
investing in their workforce through initiatives like
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training, motivation, and development are likely to
witness improved financial outcomes. Conversely,
community-focused social activities (SD_COM)
display only weak positive correlations with
financial performance indicators, and these
correlations do not reach statistical significance.
This suggests that the influence of community
engagement activities on financial performance is
relatively marginal when contrasted with the other
variables in question.
Table 4. Regression Analysis for HI, H2 and H3
ROA
Coef.
St.Err.
t-
value
p-
value
[95%
Conf
Interval]
Sig
SD_COM
.008
.005
1.66
.098
-.002
.018
*
SD_EMP
.023
.008
2.72
.007
.006
.039
***
SD_CUS
.014
.008
1.83
.068
-.001
.029
*
Constant
-.005
.005
-0.99
.324
-.015
.005
Mean dependent
var
0.009
SD dependent var
0.005
Overall r-squared
0.303
Number of obs
75
Chi-square
16.065
Prob > chi2
0.001
R-squared within
0.539
R-squared between
0.549
ROE
Coef.
St.Err.
t-
value
p-
value
[95%
Conf
Interval]
Sig
SD_COM
.053
.043
1.23
.217
-.031
.137
SD_EMP
.172
.076
2.27
.023
.023
.321
**
SD_CUS
.176
.074
2.38
.017
.031
.321
**
Constant
-.067
.048
-1.39
.164
-.162
.027
Mean dependent
var
0.078
SD dependent var
0.040
Overall r-squared
0.291
Number of obs
75
Chi-square
12.961
Prob > chi2
0.005
R-squared within
0.433
R-squared between
0.481
EPS
Coef.
St.Err.
t-
value
p-
value
[95%
Conf
Interval]
Sig
SD_COM
.521
.146
3.57
0
.235
.807
***
SD_EMP
.713
.195
3.66
0
.331
1.094
***
SD_CUS
.278
.149
1.87
.062
-.014
.571
*
Constant
-.205
.101
-2.03
.042
-.403
-.007
**
Mean dependent
var
0.181
SD dependent var
0.132
Overall r-squared
0.421
Number of obs
75
Chi-square
51.567
Prob > chi2
0.000
R-squared within
0.844
R-squared between
0.833
*** p<.01, ** p<.05, * p<.1
Table 4 presents the regression results for three
dependent variables: ROA, ROE, and EPS. The
coefficients, standard errors, t-values, p-values, and
confidence intervals are reported for the
independent variables: SD_COM (Social activities),
SD_EMP (Employee-related activities), and
SD_CUS (Activities focused on customer
engagement). The constant term is also included in
the regression models.
For ROA, the results indicate that SD_COM has
a positive coefficient (Coef. = 0.008, p < 0.1),
suggesting that social activities have a slightly
positive effect on ROAs, although this effect is not
statistically significant at the conventional level.
SD_EMP, representing employee-related activities,
has a significant positive coefficient (Coef. = 0.023,
p < 0.01), indicating that investing in employee-
related activities is associated with higher ROAs.
Similarly, SD_CUS, representing activities focused
on customer engagement, has a positive coefficient
(Coef. = 0.014, p < 0.1), suggesting a positive
relationship with ROAs. The constant term is not
statistically significant.
For ROE, the results reveal that SD_COM and
SD_EMP do not have statistically significant effects
on ROE. However, SD_CUS shows a positive
coefficient (Coef. = 0.176, p < 0.05), indicating a
significant positive relationship with ROE. The
constant term is also not statistically significant.
Regarding EPS, the results demonstrate that all
three independent variables have significant positive
coefficients. SD_COM (Coef. = 0.521, p < 0.01),
SD_EMP (Coef. = 0.713, p < 0.01), and SD_CUS
(Coef. = 0.278, p < 0.1) all show positive
relationships with EPS. The constant term has a
negative coefficient, indicating a negative impact on
EPS.
Overall, the regression models explain a
significant proportion of the variation in the
dependent variables, as indicated by the R-squared
values. For ROA, the model explains approximately
30% of the variation (Overall r-squared = 0.303),
while for ROE and EPS, the models explain around
29% (Overall r-squared = 0.291) and 42% (Overall
r-squared = 0.421) of the variation, respectively.
The chi-square tests suggest that the regression
models are statistically significant (p < 0.01),
indicating that the independent variables
collectively have a significant impact on the
dependent variables. The R-squared within and
between values indicates the proportion of variation
explained within each model and between different
models.
5 Discussion
The results of this study show the complex
relationship between (CSR) initiatives and key
financial performance ; (ROA), (ROE), and (EPS)
within the Jordanian banking sector. This
investigation's outcomes are in harmony with the
prevailing scholarly consensus, which has
consistently highlighted a positive linkage between
the adoption of CSR and the enhancement of
financial performance.
The research identifies a marginally positive
influence of social activities (SD_COM) on ROA,
which, despite not reaching statistical significance at
conventional thresholds, corresponds with findings
from studies, [5], [6]. These studies have
demonstrated that within the realm of Islamic
banking, CSR endeavors are instrumental in
strengthening financial transparency and limiting
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DOI: 10.37394/23207.2024.21.113
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Volume 21, 2024
earnings management. This suggests that the
immediate financial consequences of such social
activities may be subtle, yet their contribution to
promoting a reputable corporate persona is
significant, potentially yielding long-term fiscal
advantages.
The pronounced positive effect of employee-
centric activities (SD_EMP) on ROA lends
empirical support to the propositions of literature,
particularly, [17], [18], which argue that
investments in human capital—encompassing
recruitment, training, and equitable remuneration—
are critical for bolstering employee efficacy and,
consequently, the financial solidity of the institution.
The current study supports that these CSR practices
go beyond ethical obligations, representing strategic
investments with proven economic returns.
Moreover, the study reveals a positive
relationship between customer engagement
activities (SD_CUS) and ROA, with a more clear
association with ROE. This confirms the insights
from [20], [23], [24], which emphasize the
fundamental role of customer-oriented strategies in
fostering loyalty and driving organizational
profitability. The significant coefficients attributed
to SD_CUS in relation to both ROA and ROE
furnish solid evidence for the strategic need to
embed customer engagement within business
practices.
The regression models demonstrate substantial
explanatory power, thereby presenting statistical
validity upon the hypothesized interconnections.
This is particularly noticeable with respect to EPS,
where all three CSR dimensions display significant
positive coefficients, echoing the assertions of [16],
that robust CSR practices not only reflect a firm's
ethical compass but also amplify its market
valuation and profitability.
In the context of Jordan, the affirmative impact
of sustainability accounting disclosure on financial
performance, as highlighted in [14], is reflected in
the findings of this study. The notable positive
influence on ROE underscores the paramount role
of CSR disclosures, especially those related to
economic and social aspects, in securing positive
financial outcomes.
The study also observes the non-moderating
role of disclosure in the CSR-financial performance
nexus, as posited by [12]. This suggests that while
disclosure practices are required to ensure
transparency and accountability, the inherent value
of CSR activities in enhancing financial
performance is independent of the level of
disclosure.
In summation, the present investigation supports
the existing body of literature by endorsing the
strategic significance of CSR within the banking
sector. It emphasizes that CSR activities,
particularly those directed towards community,
employee, and customer welfare, are not merely
ethical mandates but are central to driving financial
performance. The findings advocate for the strategic
integration of CSR into corporate frameworks,
positing that such consolidation can yield improved
financial results while simultaneously promoting
ethical governance and bolstering stakeholder
confidence.
6 Conclusion and Future Research
This investigation has illustrated the complex
dynamics between (CSR) activities and financial
performance within the banking sector. The
empirical evidence presented underscores a positive
association between CSR engagements—
specifically social activities, employee-related
initiatives, and customer engagement—and financial
metrics such as ROA, ROE, and EPS. These
findings lend credence to the notion that CSR
practices are not merely ethical undertakings but are
integral to the financial vitality of organizations,
substantiating the strategic value of CSR integration
into business operations.
Nonetheless, this study is not without its
limitations. The reliance on cross-sectional data
constrains the scope to assume causality between
CSR activities and financial outcomes. Additionally,
the limited focus on the banking sector may impede
the extrapolation of these results to other sectors.
The use of self-reported social disclosures also
introduces the possibility of bias or inaccuracies,
suggesting that future research could benefit from
incorporating more objective measures, such as
external audits, to validate the CSR activities
reported.
Future research could extend this study's
findings in several meaningful ways. A longitudinal
approach could be employed to better understand
the causal relationships between CSR activities and
financial performance. Delving into the specific
mechanisms by which employee and customer-
focused initiatives translate into financial gains
would offer a richer understanding of the strategic
benefits of CSR.
Moreover, examining the influence of various
stakeholders—including investors, customers,
employees, and regulators—on the CSR-financial
performance nexus could provide a holistic view of
the CSR impact. Such an analysis would contribute
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DOI: 10.37394/23207.2024.21.113
Loona Shaheen, Abdullah Zaytoun
E-ISSN: 2224-2899
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Volume 21, 2024
to a more nuanced understanding of how social
disclosures are perceived and valued across different
stakeholder groups.
Finally, incorporating contextual factors such as
national culture, regulatory environments, and
market conditions would enhance our understanding
of the multifaceted nature of social disclosures.
Comparative studies across diverse geographical
and regulatory landscapes could elucidate the
contextual variables that influence the efficacy of
CSR activities and their financial implications.
In conclusion, while this study has advanced the
understanding of CSR's role in financial
performance, it also highlights the need for
continued exploration into the complex interplay
between social responsibility and financial success.
The strategic incorporation of CSR remains a
promising avenue for organizations seeking to
achieve financial robustness while upholding ethical
standards and fostering stakeholder trust.
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Contribution of Individual Authors to the
Creation of a Scientific Article (Ghostwriting
Policy)
- Loona Shaheen has conceptualized the study,
formulated the research hypotheses, and oversaw
the overall research design. As the corresponding
author, she led the drafting and revision of the
manuscript and supervised the state of work.
- Abdullah Zaytoun collected the data, conducted
detailed statistical analyses, and applied the
regression models. Zaytoun also reviewed the
literature and formulated the main conclusions.
Sources of Funding for Research Presented in a
Scientific Article or Scientific Article Itself
No funding was received for conducting this study.
Conflict of Interest
The authors have no conflicts of interest to declare.
Creative Commons Attribution License 4.0
(Attribution 4.0 International, CC BY 4.0)
This article is published under the terms of the
Creative Commons Attribution License 4.0
https://creativecommons.org/licenses/by/4.0/deed.en
_US
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2024.21.113
Loona Shaheen, Abdullah Zaytoun
E-ISSN: 2224-2899
1391
Volume 21, 2024