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Walking the Walk: CSR Disclosures and Bank Practices

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Title:Walking the Walk: CSR Disclosures and Bank Practices
Authors:Sudipta Basu
Justin Vitanza
Wei Wang
Keywords:environmental and social responsibility
voluntary disclosure
Democratic vote share
political contributions
Date Issued:30 Aug 2019
Abstract:Socially responsible banks portray themselves as community pillars, particularly for low-to-middle income neighborhoods. We examine the truthfulness of this portrayal by studying the implications of banks’ corporate social responsibility (CSR) disclosures for their product pricing and lending behavior. Using an instrumental variable approach that addresses selection bias, we find that high-CSR banks offer lower deposit rates, charge higher loan rates, and limit capital supply in poorer neighborhoods relative to their low-CSR peers. We also find high CSR banks attract more mortgage loan applications from females and disadvantaged minority groups. Collectively, our findings suggest that banks capitalize on CSR disclosures, obtaining product differentiation and pricing power.
Appears in Collections: 05 Financial: Debt Market Research (Including Credit Ratings/Debt Contracts)

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