Socially Responsible Lending

Abstract

This paper studies socially responsible lending (SRL) by examining a unique sample of Chinese commercial banks. We define SRL as loans that are issued to promote social welfare, preserve the environment, develop agriculture, or support small business. We find that state-controlled banks issue less SRL than private banks, which rely on SRL to build credibility and enhance corporate image. Among state-owned banks, central-government-controlled ones respond to SRL-related polices more actively than others. The public sector experience of board directors is associated with more SRL. Finally, board independence and better-educated directors are found to increase SRL.

Keywords: Socially responsible lending; corporate social responsibility; bank; state ownership; ownership structure; China

JEL Classification: G20; G30; G32