Credit Supply and Corporate Social Responsibility
41 Pages Posted: 13 Dec 2019
Date Written: September 22, 2019
We exploit the staggered nature of interstate banking and branching deregulation of the U.S. to examine the causal impact of bank competition on corporate socially responsible (CSR) activities. We find strong and robust evidence that bank deregulation significantly and negatively affects the CSR activities. Firms operating in high margin industry with low market power, and financially constrained firms operating in external finance dependent industries tend to predominantly show such a negative relationship between deregulation and CSR activities. Overall, our findings imply that deregulation-led rising competition in the product market makes the non-financial firms more concerned about protecting the interests of shareholders than other stakeholders. Our results are robust to the use of alternative empirical specifications and CSR measures.
Keywords: Banking Competition, Product Market Competition, Social Responsibility, Access to Finance
JEL Classification: D43, G21, M14, O16
Suggested Citation: Suggested Citation