Determinants of bank social responsibility: case of Croatia

117 2, XVIII, 2015 Finance DOI: 10.15240/ ul/001/2015-2-009 In oduc ion Recen fi nancial u moil, unce ain and uns able wo ld and inc easing public p essu e ha e pu fi nancial sec o and i s esponsibili ies unde g ea sc u iny. This has led o pu ing mo e emphasis on social esponsibili y o fi nancial ins i u ions, p ima ily banks, due o a powe ul and infl uen ial posi ion hey ha e. Indeed, bank manage s a e becoming mo e conce ned wi h social esponsibili y [72], esul ing in a widesp ead adop ion o social esponsibili y by he global banking communi y [64]. The conside able emphasis placed nowadays on he socie al ole o business is in acco dance wi h he sp eading belie ha measu es o company success mus go beyond p ofi and should also ela e o he needs o s akeholde s and socie y a la ge [68]. Ca oll [12] an icipa ed ha he social aspec o company’s esponsibili y in he 21s cen u y will be mo e impo an han e e . Co po a e social esponsibili y (CSR) is becoming he defi ning business issue o ou ime, a ec ing co po a e p ofi s and c edibili y, as well as pe sonal secu i y and sus ainabili y o he global economy (see [18], ci ed in [12]). F om a pe spec i e o companies, social esponsibili y has become a powe ul ool o gaining mo e a ou able a i udes among hei s akeholde s [73], esul ing in a ious benefi s o companies hemsel es. Business e hics and communi y suppo play an impo an ole in a ious indus ies, including he banking sec o [25]. This ole is emphasized e en mo e conside ing he ac ha bank ac i i ies ha e signifi can and b oad, no only economic, bu also social implica ions. Social esponsibili y o banks and o he fi nancial ins i u ions has al eady been ecognised as necessa y (e.g. [23], [10], [76], [81], [15]). The ma e ha a ises is how he banking sec o has and will con inue o e ol e in his espec . Howe e , social esponsibili y o banks has been dominan ly in es iga ed in de eloped coun ies, wi h lack o esea ch in less de eloped and ansi ion coun ies. While CSR is ela i ely well es ablished in Wes e n Eu ope, USA and Aus alia [5], [69], limi ed unde s anding o CSR and only ecen adop ion o CSR p ac ices cha ac e ise less de eloped coun ies. Al hough many au ho s poin ou on he impo ance o CSR esea ch in de eloping coun y con ex s ([5], [32], [58], [59]), he e is a lack o empi ical fi ndings. This s udy ex ends esea ch in Cen al and Eas e n Eu opean (CEE) con ex , con ibu ing o sca ce li e a u e on CSR in hese coun ies (e.g. [42], [40], [47], [94]). I p esen s a b eak- h ough a emp o in es iga e de e minan s o CSR in C oa ian banking indus y. In spi e o ele ance and imeliness o he issue, esea ch in C oa ia has been lagging behind ecen li e a u e on his opic, wi h he excep ion o only ew no able s udies. Some o hem p o ide a concep ual amewo k o social esponsibili y (e.g. [89]), while mos o he s udies conduc ed ocus on specifi c CSR issues (e.g. [50], [37], [24]). Some s udies in es iga e social esponsibili y o companies om di e en indus ies ([90], [34], [94]), and social esponsibili y o he banking indus y in pa icula has been somewha add essed by Leko and S ojano ic [56], [57], Dujmo ic, e al. [28] and Kundid and Rogosic [52], howe e he e s ill exis s a esea ch gap. The e o e, he pu pose o his pape is o assess social esponsibili y o C oa ian banks, and mo eo e , o in es iga e i s ela ion wi h selec ed ac o s in he banking indus y. This s udy links social esponsibili y o cha ac e is ic ac o s o indi idual banks and o he en i onmen in which hey ope a e, i.e. specifi c C oa ian con ex . In pa icula , he emphasis is pu on ac o s o bank size, DETERMINANTS OF BANK SOCIAL RESPONSIBILITY: CASE OF CROATIA Ana I anise ic He naus, Alen S ojano ic EM_2_2015.indd 117EM_2_2015.indd 117 3.6.2015 13:09:043.6.2015 13:09:04 118 2015, XVIII, 2 Finance owne ship s a us and fi nancial pe o mance a he indi idual le el, linking social esponsibili y o indi idual bank cha ac e is ics, while a he indus y le el o C oa ian banking sec o we c i ically efl ec on bank social esponsibili y by ocusing on he s uc u e o g an ed loans. The app oach aken di e s om mos p e ious s udies because he esea ch is conduc ed on bo h mic o and mac o le el, which po en ially o e s a b oade unde s anding o social esponsibili y in he banking indus y. Ou aim is o highligh holis ic pe spec i e o bank social esponsibili y in a pa icula CEE coun y. Resea ch fi ndings will p o ide addi ional unde s anding o wha social esponsibili y in banking means, which ac o s does i ela e o, and how i wo ks in a specifi c en i onmen . This pape is s uc u ed as ollows: o s a wi h, he nex pa p o ides a b ie li e a u e e iew abou he concep o social esponsibili y in he banking indus y. Then, hypo heses a e in oduced, ollowed by esea ch me hodology a e ha . To ollow, esea ch fi ndings a e p esen ed. Finally, he implica ions o ou fi ndings as well as p ac ical s andpoin s a e discussed, while he pape is concluded wi h a p esen a ion o he limi a ions and some u u e esea ch p oposals. 1. Social Responsibili y in he Banking Indus y CSR has ne e been mo e p ominen on he co po a e agenda han i is oday ([85], ci ed in [41]). I has become a ocal poin o policy make s and he public, who demand ha companies assume esponsibili y owa ds socie y, he en i onmen , o he s akeholde s in gene al [77]. Companies do ha e social esponsibili y and a e no p o ec ed by limi ed liabili y om he consequences o hei ac ions (see [38]). They ha e he esponsibili y o hei impac s on socie y, comp ising a ious en i onmen al, social and economic obliga ions. As a as i ega ds he banking indus y, social esponsibili y p ac ices ha e been emb aced by he global banking communi y, e idenced by banks pou ing millions o dolla s in o his pu pose, signing in e na ional ag eemen s ha suppo socially esponsible de elopmen [64] and inc easingly epo ing on hei social esponsibili y. Banks a e beginning o ecognize ha hey do ha e a social esponsibili y o ulfi l [6] and ha only socially esponsible banking is sus ainable in he long un. A numbe o ac o s ha e con ibu ed o a mo e socially esponsible o ien a ion in banking. The inc eased economic and public p essu e has o ced banks o analyse hei ole in socie y and hei con ibu ion o ob aining mo e sus ainable de elopmen [23]. In pa icula , he ecen economic c isis and i s social consequences ha e o some ex en damaged consume confi dence and he le el o us in fi nancial ins i u ions. Demons a ing (and no only claiming) esponsibili y owa ds socie y is c ucial o egaining us , and banks a e inc easingly ecognizing i . Fu he mo e, banks hemsel es a e becoming inc easingly awa e o he isk associa ed wi h fi nancing en i onmen ally o socially sensi i e p ojec s. The e o e, in hei lending ac i i ies hey analyse how o ai ly balance he isk and in e es s o a ious pa ies a ec ed by hei business. A a ie y o indus y ends and ac o s a e also leading o in ensi ying he mo e owa d socially esponsible banking. The ma ke place in which banks ope a e oday demands new solu ions and se ice o e ings. Some o hese can be deli e ed h ough socially esponsible p oduc s, whe e ecen ly much o he ocus has been pu on en i onmen ally-o ien ed p oduc s. The p essu e is pu on majo in e na ional banks o fi nd new a eas o g ow h. O he ac o s, such as consolida ion and heigh ened compe i ion in adi ional ma ke s, and echnology inno a ions in banking p oduc s and p ocesses, ha e been con ibu ing as well. Due o he na u e o hei ac i i ies and hei size, bank social esponsibili y is expec ed o be mo e complex in compa ison o o he companies. A bank’s esponsibili y ex ends o go e nmen , cus ome s, sha eholde s, employees and he communi y [38]. Banks ha e a key ole in go e nmen ’s aim o s ewa dship o he economy. As he mos impo an fi nancie s hey uniquely pe o m unc ions o collec ing deposi s om wide public, g an ing loans, and unning he paymen sys em simul aneously. Addi ionally, hey mus ake ca e o he e hical aspec s o cus ome ela ionships, as people’s asse s a e a s ake [25]. Banks a e answe able o hei sha eholde s because hey ha e in es ed hei money in he business, a e en i led o see i p o ec ed and ewa ded by a ai e u n, and hey also wan o see hei ins i u ion beha ing in an e hically sa is ac o y EM_2_2015.indd 118EM_2_2015.indd 118 3.6.2015 13:09:043.6.2015 13:09:04 119 2, XVIII, 2015 Finance ashion. Banks depend on people o un hei business and o efl ec hei e hical s anda ds, who ha e o know wha is expec ed o hem. Finally, h ough hei business ac i i ies banks in es in he well-being o he communi ies hey se e and hei e e yday decisions ha e a long e m impac on hose communi ies [38]. The ad an ages and disad an ages o social esponsibili y in he banking indus y ha e been a gued a leng h in p e ious esea ch. Nume ous publica ions ha e shown ha being socially esponsible can benefi banks subs an ially [82]. Howe e , as CSR is impossible o measu e di ec ly, i was la gely measu ed and assessed h ough co po a e social pe o mance (CSP). CSP is a mul idimensional cons uc ha measu es he ex en o which fi ms a e ac ing (o no ac ing) in a socially esponsible manne [26] and he e o e i is used as a means o assess CSR policies and p ac ices [80]. Va ious CSP measu es a e used, om one-dimensional (e.g. en i onmen al pollu ion, co po a e philan h opy) o mul idimensional measu es, i.e. indices o a ious CSR indica o s such as KLD index o Fo une a ings da a, as well as ques ionnai e based su eys. Con en analysis o co po a e disclosu es has been also used in a numbe o academic s udies (e.g. [1], [97], [32], [65], [91]). F om banks’ poin o iew, social esponsibili y in i s comp ehensi e unde s anding is he way o c ea ing long- e m alue. I enables banks o ecognize business oppo uni ies and o manage isk mo e e fi cien ly. I imp o es hei epu a ion and b anding, by infl uencing us and cus ome pe cep ions (e.g. [73], [66]). Awa eness o esponsibili y owa ds socie y and en i onmen gua an ees compliance wi h go e nmen egula ions. Finally, i o e s as po en ial o imp o e and de elop banks’ own se ices, e.g. in as -g owing a eas o sus ainable ene gy, cleane p oduc ion, biodi e si y conse a ion and banking se ices o low-income and unde se ed g oups [43]. 2. Resea ch Goal and Hypo heses The aim o he esea ch is o assess o wha ex en a e C oa ian banks socially esponsible and o in es iga e se e al key ac o s ha po en ially ela e o hei social esponsibili y. In o de o achie e he esea ch goal, ou hypo heses a e p oposed. Fi s h ee hypo heses ocus on de e mining he ela ion be ween bank social esponsibili y and i s indi idual ac o s, in o de o disco e which banks a e mo e likely o be socially esponsible. In pa icula , we ocus on ac o s o bank size, owne ship s a us and fi nancial pe o mance. While ac o s o size and fi nancial pe o mance ha e al eady been se as impo an and in es iga ed in p e ious esea ch on social esponsibili y, we fi nd he ac o o owne ship s a us in e es ing, aking in o conside a ion specifi c owne ship s uc u e o C oa ian banking sec o . Fou h hypo hesis s i es owa ds es ing he ela ion o social esponsibili y and he s uc u e o g an ed loans in C oa ian banking sec o , a he indus y le el. The easoning behind including he ac o o he loan s uc u e in he analysis is ha i is po en ially e y indica i e o indus y’s social (i ) esponsibili y, because some impo an conclusions can be d awn om he ocus o bank lending ac i i y. Among a ious bank-le el a ibu es ha a e likely o be ela ed o i s social esponsibili y, one o he key issues is fi m size, iden ifi ed as bo h i al and ela i ely unexamined [59], [97]. Majo i y o exis ing li e a u e indica es a posi i e link be ween fi m size and le el o social esponsibili y (e.g. [87], [14], [67], [88], [54]), and only some e e s specifi cally o he banking indus y (e.g. [81], [65]). In gene al, la ge fi ms a e associa ed wi h mo e esou ces ound o posi i ely a ec hei CSR commi men [96], [45]. They also end o be mo e isible, implying acing mo e p essu es and highe le el o a en ion om he gene al public (see [92]), o pa icipa e in olun a y p og ammes (e.g. [7]) and make dona ions (e.g. [2]). La ge o ganisa ions may also ha e mo e ad anced in e nal sys ems o dealing wi h he managemen o issues, leading o g ea e esponsi eness o social issues as well ([8], ci ed in [92]). Because o nume ous ex e nal and in e nal easons, a posi i e ela ion be ween bank size and social esponsibili y is expec ed. The ques ion a ises whe he his is also ue in C oa ian case. The poin o iew aken is ha la ge banks ha e mo e esou ces o ain employees abou social and en i onmen al issues, o in es in assessmen and echnological solu ions o minimize en i onmen al impac and p o ec wo ke sa e y, and o implemen ele an social and en i onmen al managemen p ocedu es. La ge banks ha e also mo e esponsibili y o beha e esponsibly due o hei isibili y EM_2_2015.indd 119EM_2_2015.indd 119 3.6.2015 13:09:043.6.2015 13:09:04 120 2015, XVIII, 2 Finance and b and image. They will disclose mo e in o ma ion on social esponsibili y han smalle banks [39]. We adop his iew and based on i we p esen ou fi s hypo hesis: H1: Bank size and social esponsibili y a e posi i ely ela ed. Al hough nume ous s udies ha e ecen ly been published examining de e minan s o CSR, a ela i ely small numbe o hem conside owne ship as an independen a iable. Mos o hem examine ela ions be ween social esponsibili y and ins i u ional owne ship, manage ial owne ship, owne ship s uc u e dispe sion o ins i u ional in es o ypes (e.g. [93], [16], [99], [36], [45], [59], [48]). Howe e , e y ew ake in o conside a ion owne ship s a us. In his ega d Lee [55] ocuses on public and p i a e owne ship s a us, while Qu [74] and Oh, e al. [69] in oduce a a iable o o eign owne ship. Qu [74] assumes ha he e ec does exis , while esea ch esul s o Oh e al. [69] indica e a signifi can , posi i e ela ionship be ween o eign owne ship and CSR, sugges ing ha di e en owne s may also ha e di e en o ien a ions and p e e ences ega ding he fi m’s CSR. This esea ch gap calls o u he esea ch on he ela ionship be ween di e en s a us o owne ship and fi m’s social esponsibili y. In spi e o he ac ha exis ing li e a u e indica es ha o eign owne ship is associa ed wi h sus ainabili y [51] and wi h highe le el o CSR, Oh e al. [69] clea ly indica e ha all o eign in es o s a e no always in a ou o CSR. Howe e , we can ag ee wi h Hinson e al. [39] ha in e na ional banks a e expec ed o disclose mo e o hei social esponsibili y in o ma ion han local banks, due o hei in e na ional p esence and image, due o being subjec o in e na ional con en ions, as well as o egula ions ha make hei disclosu es mo e manda o y. This is u he ein o ced by he na u e o hei ac i i ies, o in e na ionaliza ion, which equi es hem o communica e such esponsibili ies o socie y [9]. In C oa ia, almos 50% o banks in e ms o hei numbe a e o eign-owned, and in e ms o o al banking indus y asse s, mo e han 90% is in o eign owne ship. C oa ian banks which a e owned by la ge in e na ional bank g oups a e expec ed o disclose mo e o hei socially esponsible p ac ices and in ha espec o be mo e socially esponsible han local banks. This is due no only o men ioned easons, bu also o a know-how hey ecei e om hei o eign pa en companies, which al eady p o ed o be a mo e ad anced in demons a ing hei social esponsibili y han banks ope a ing only on C oa ian ma ke . In his con ex we s ipula e ou second hypo hesis as ollows: H2: Fo eign-owned banks a e cha ac e ized by highe le els o social esponsibili y in compa ison o domes ically owned banks. A majo s eam o esea ch has esul ed om e o s o unde s and he ela ionship be ween social pe o mance and fi nancial pe o mance ha exis s o companies [3], esul ing in posi i e (e.g. [96], [79], [94]), nega i e (e.g. [44], [46], [61]) and mixed e idence (e.g. [17], [16], [4]). Mos o he s udies o he banking indus y documen a posi i e link be ween hese wo cons uc s (e.g. [84], [42], [81], [65]). The ela ionship be ween co po a e social and fi nancial pe o mance emains one o he mos a ac i e esea ch opics [35]. Tha his collec i e esea ch is la ge and impo an is e idenced in pa by se e al majo s udies aimed a e iewing and analyzing he esul s o his accumula ing esea ch (e.g. [71], [62], [95], [70]). Besides he impo ance o empi ical in es iga ions o his ela ionship, Callan and Thomas [11] s ongly emphasize i s imeliness, because oday, pe haps mo e han e e , fi ms a e expec ed o dedica e esou ces o socially esponsible ac i i ies. Undoub edly, a g owing body o empi ical e idence sugges s ha co po a e social and fi nancial pe o mance a e posi i ely ela ed. Despi e a la ge and g owing li e a u e on CSR, he e is e y li le e idence o fi ms ac ually sac ifi cing p ofi s in he social in e es [75]. And his is pa icula ly ue o he banking indus y. In o de o de e mine he exis ing social esponsibili y o C oa ian banks, we es he ollowing hypo hesis by app oxima ing fi nancial pe o mance wi h p ofi abili y: H3: Bank p ofi abili y and social esponsibili y a e posi i ely ela ed. Finally, a mo e comple e unde s anding o bank social esponsibili y can be ob ained by pu ing i in o specifi c con ex . This is possible by aking in o conside a ion cha ac e is ic EM_2_2015.indd 120EM_2_2015.indd 120 3.6.2015 13:09:043.6.2015 13:09:04 121 2, XVIII, 2015 Finance ac o s o C oa ian banking indus y, whe e we pa icula ly ocus on dedica ed s uc u e o g an ed loans. Specifi c s uc u e o g an ed bank loans is efl ec ed in a ela i ely high sha e o non-p oduc i e loans o fi nal consump ion in o al g an ed loans o he mos impo an ins i u ional sec o , i.e. households. As Snoy [86] a gued, e hical issues ha fi nancial in e media ies, especially comme cial banks, in he in e na ional sphe e ace a e o whom does one lend and o wha pu pose does one lend. Issues in C oa ian banking sec o , due o a high pe cen age sha e o o eign owne ship, can be much associa ed wi h issues o in e na ional banking. In hei in e na ional loans, banks equen ly and legi ima ely aim a suppo ing na ional expo s o equipmen s and enginee ing se ices. Howe e , his does no exemp hem om esponsibili y on he pa o he bo owing coun y o impo hese goods and se ices, nei he on he pa o fi nal consume s, i.e. bank cus ome s o buy o e - sized fi nancial se ices poo ly adap ed o local condi ions. While mos o he academic s udies ocus on o he de e minan s o social esponsibili y such as p ofi abili y, size o owne ship (e.g. [53]), he e is a g ea lack o li e a u e which would ela e he s uc u e o g an ed loans o social esponsibili y o a bank. The eason o his migh be he ac ha mos o he s udies on CSR in he banking indus y we e conduc ed in he mos de eloped coun ies, whose banking sys ems do no ace such issues. Fo example, banks in CEE coun ies a e cha ac e ised by a ela i ely la ge sha e o o eign owne ship in compa ison o mos de eloped coun ies, which in he Cen al Eu ope (CE) sub- egion s ands, on a e age, a 75% and in he Sou heas e n Eu ope (SEE) sub- egion a a e y high 85% o o al banking sec o asse s [27]. So ce ain issues occu exac ly now, when s udies on CSR in less de eloped and ansi ion coun ies ha e eme ged and consequen ly addi ional, specifi c ac o s gain on ele ance, such as, o example, he sha e o loans o fi nal consump ion in o al bank loans g an ed o ins i u ional sec o o households. Taking in o conside a ion all men ioned abo e, we ecognize his ac o as impo an and we ela e i o bank social esponsibili y. As he g an ed loan s uc u e in C oa ia has been ex emely un a ou able o a numbe o yea s, because o i s o ien a ion on pe sonal consump ion, while la gely neglec ing p oduc ion and de elopmen , we p opose he ollowing hypo hesis: H4: Sha e o loans o fi nal consump ion in o al bank loans g an ed o households is nega i ely ela ed o social esponsibili y in he banking indus y. 3. Resea ch Me hodology This pa desc ibes he esea ch done a wo di e en le els, da a collec ion on bank social esponsibili y, how he CSP measu e is calcula ed and esea ch me hods used o es hypo heses. Due o a mul i-le el na u e o he planned esea ch, we ha e o clea ly de e mine wo di e en le els o analysis – indi idual and indus y. In o de o es he fi s h ee hypo heses, we need o add ess indi idual bank social esponsibili y. The o h hypo hesis is ela ed o he agg ega e, banking indus y social esponsibili y in a specifi c C oa ian con ex . I is ocused on he s uc u e o g an ed loans, whe e he eu o a ea a e age is used as a benchma k. As epo ing on social esponsibili y is no ye s anda dized, indi idual-le el da a o banks was collec ed du ing Oc obe 2011 by de ailed insigh in all publicly a ailable in o ma ion and documen s on banks’ web si es such as bank’s sus ainabili y, CSR o social epo s, epo s on p og ess, pe iodical epo s on pe o mance, codes o conduc and o he web-based in o ma ion, as well as in o ma ion om na ional (C oa ian Na ional Bank, C oa ian Banking Associa ion, C oa ian Business Council o Sus ainable De elopmen , C oa ian Banking and Finance Employees T ade Union) and in e na ional o ganiza ions and NGOs (Global Compac ). This me hod o da a collec ion is jus ifi ed because nowadays he in e ne is used as a medium o co po a e in o ma ion disclosu e o he public [39]. Necessa y addi ional in o ma ion was collec ed ia elephone in e iews wi h bank ep esen a i es. Con en analysis is used o measu e he le el o social esponsibili y in acco dance wi h p esen ed amewo k. Defi ned as a echnique o ga he ing da a ha consis s o codi ying quali a i e in o ma ion in anecdo al and li e a y o m in o ca ego ies in o de o de i e quan i a i e scales o a ying le els o complexi y [1], i is ound o be he app op ia e me hod o iden i ying hemes in he aw da a EM_2_2015.indd 121EM_2_2015.indd 121 3.6.2015 13:09:043.6.2015 13:09:04 122 2015, XVIII, 2 Finance [13]. A he banking indus y le el, he main sou ce o in o ma ion we e publica ions issued by he C oa ian Na ional Bank. In o de o assess social esponsibili y o indi idual banks, we e alua e banks wi h espec o a ious indica o s, enabling a holis ic s akeholde app oach, e iden in ecen de elopmen s in CSR p ac ice [63]. The amewo k o assessing bank social esponsibili y is de i ed and adap ed om p e ious esea ch conduc ed by Cues a- Gonzalez, e al. [23] and Schol ens [81]. The main eason why hese s udies a e aken as a e e ence poin is ha hei me hodology, con a y o some o he a ailable app oaches, is anspa en and easily measu able. The e a e fi e g oups o indica o s: 1) sus ainabili y epo ing and ne wo king, 2) co po a e go e nance, 3) en i onmen al managemen , 4) esponsible fi nancial p oduc s and 5) s akeholde issues. These g oups efl ec di e en aspec s o social esponsibili y and al oge he p o ide a comp ehensi e iew o bank social esponsibili y. By epo ing and ne wo king, which migh also equi e compliance wi h ce ain s anda ds on epo ing (e.g. UN Global Compac ), we conclude ha a bank commi s i sel o socially esponsible beha iou . Co po a e go e nance gi es an indica ion o policies and p ocedu es p omo ed by he bank and communica ed o all employees. T anspa ency abou en i onmen al pe o mance allows us o assess how a bank ope a es in his espec [81], analysed h ough indica o s o en i onmen al isk managemen in lending policy and exclusion o specifi c sec o s in bank fi nancing ac i i ies (e.g. p oduc ion causing ecological damages). The supply and de elopmen o “g een” o socially esponsible p oduc s is ano he means by which a bank can signal i s commi men o social esponsibili y (see [81]). Finally, s akeholde issues comp ising ela ionships wi h employees and he communi y efl ec social conduc o a bank, bo h in e nally and ex e nally. We made ce ain adap a ions o Cues a- Gonzalez e al. [23] and Schol ens’ [81] assessmen amewo k. On he basis o in e iews wi h subjec ma e expe s, we selec ed 18 indica o s ele an o desc ibing socially esponsible p ac ices o C oa ian banks. Some o he o iginal indica o s a e no e en a ailable in banks’ published documen s, as social awa eness o C oa ian banks is s ill in he ea ly s age o de elopmen . In o de o es he alidi y o in e iews’ esul s, p elimina y con en analysis o banks’ publica ions was conduc ed. I confi med he selec ed 18 indica o s, which we e hen analysed o each bank. Table 1 shows which indica o s a e used o assess indi idual bank social esponsibili y. G oup Indica o Ope a ionaliza ion Sus ainabili y epo ing and ne wo king 1 Sus ainabili y epo / CSR epo / Social epo Yes (1) o No (0) 2 Global Repo ing Ini ia i e Adop ed (Yes/No) 3 UN Global Compac C oa ia Adop ed (Yes/No) 4 C oa ian Business Council o Sus ainable De elopmen Membe (Yes/No) 5 C oa ian Banking Associa ion Membe (Yes/No) 6 CSR Index Pa icipan (Yes/No) Co po a e go e nance 7 Code o E hics / Code od Conduc Adop ed (Yes/No) 8 Code o Co po a e Go e nance Adop ed (Yes/No) 9 Di e si y Women on boa d (Yes/No) En i onmen al managemen 10 En i onmen al isk managemen in lending policy Yes/No 11 Exclusion o specifi c sec o s Yes/No Responsible fi nancial p oduc s 12 Socially esponsible in es ing Yes/No Tab. 1: Bank social esponsibili y amewo k – Pa 1 Sou ce: Adop ed om Cues a-Gonzalez, e al. [23] and Schol ens [81] EM_2_2015.indd 122EM_2_2015.indd 122 3.6.2015 13:09:053.6.2015 13:09:05 123 2, XVIII, 2015 Finance Ope a ionaliza ion o he indica o s is he ollowing: i he bank pe o ms o complies, i ecei es a posi i e sco e (1), o he wise ze o (0). Such me hodology is used in o he academic s udies as well (e.g. [81], [49], [78]). When banks do no epo o be ac i e wi h espec o some issue, we assume hey a e no , because i is exac ly he anspa ency abou social and en i onmen al pe o mance ha allows us o assess how a bank ope a es in his espec (see [81]). The easoning behind his is ha i is becoming clea he e ough o be a anspa en and e ifi able commi men o adop ion o socially esponsible p ac ices. Gene ally, a p inciple o anspa ency is a cons i uen pa o e hics applied in managemen and in economic decision-making [83]. And his is accomplished by explici e e ence o social esponsibili y wo k banks a e engaged in ia epo ing and publishing web-based in o ma ion [29]. Communica ing ac i i ies and esul s is especially impo an o banks, because hei business depends on hei c edibili y, and on he us hei s akeholde s ha e in hem [43]. In o he wo ds, clea , open and ho ough communica ion is an in eg al pa o a bank social esponsibili y. The de eloped amewo k is applied o a popula ion o 32 C oa ian banks. As hese banks make he whole C oa ian banking sec o , hey a e he bes possible ep esen a ion o a banking indus y in a pa icula coun y. Six la ge banks, h ee medium-sized and wen y- h ee small banks a e included in he s udy. La ge bank in C oa ia is a bank wi h indi idual asse s la ge han 5% o o al banking indus y asse s, medium bank is a bank wi h indi idual asse s la ge han 1% and smalle han 5% o o al banking indus y asse s, and small bank is a bank wi h indi idual asse s smalle han 1% o o al banking indus y asse s (amoun ing o EUR 53.00 billion in 2010). Fi een o he banks a e in o eign, while se en een a e in domes ic owne ship. Social esponsibili y o he obse ed banks is assessed and empi ically ela ed fi s ly o indi idual, bank-le el ac o s (size, owne ship s a us and fi nancial pe o mance) by using co ela ion analysis, and hen o indus y- le el ac o (dedica ed g an ed loan s uc u e) quali a i ely. 4. Resea ch Findings Some gene al conclusions ha can be d awn om desc ip i e s a is ics (see Tab. 2) a e ha C oa ian banks accomplish he highes sco es o social esponsibili y in co po a e go e nance ( ela i e a e age sco e o 53.1%) and s akeholde issues (51.3%) among all g oups o indica o s. In oducing G oup Indica o Ope a ionaliza ion 13 Sus ainabili y p oduc s („G een loans“, „Ene gy e fi ciency loans“) Yes/No S akeholde issues Employee issues 14 T aining and educa ion Yes/No 15 T ade unions Ac i i ies o CBFETU (Yes/No) 16 Feedback om employees Anonimous, including all employees (Yes/No) In ol emen in he communi y and commi emen o cha i able wo k 17 Sponso ing and dona ions Yes/No 18 C oa ian Banking Associa ion wo kshops Pa icipan (Yes/No) CSR Index = a p ojec o assessmen o C oa ian companies’ social esponsibili y, ini ia ed by C oa ian Chambe o Eco- nomy and C oa ian Business Council o Sus ainable De elopmen , whe e a company’s social esponsibili y is assessed acco ding o me hodology o UK’s leading benchma k o co po a e esponsibili y – Business in he Communi y Index; CBFETU = C oa ian Banking and Finance Employees T ade Union Sou ce: Adop ed om Cues a-Gonzalez, e al. [23] and Schol ens [81] Tab. 1: Bank social esponsibili y amewo k – Pa 2 EM_2_2015.indd 123EM_2_2015.indd 123 3.6.2015 13:09:053.6.2015 13:09:05 124 2015, XVIII, 2 Finance esponsible fi nancial p oduc s (12.5%) is leas common among hem. Possible explana ion o his could be ha he banks ha e al eady ecognized po en ial ma e iali y o ce ain social, en i onmen al and go e nance issues, while hey s ill do no use, a fi s sigh less ob ious, benefi s a ising om o he issues. Fo example, benefi s om sus ainabili y epo ing and ne wo king may a ise in a medium- o long- e m, o , he banks a e simply s ill no awa e o a necessa y expansion o fi nancial p oduc s’ o e , imposed no only by new indus y ends bu also by egula ion (i.e. egula ion ega ding en i onmen p o ec ion and ene gy e fi ciency). Nex , he na u e o ela ion be ween bank- le el ac o s and i s social esponsibili y was in es iga ed by using co ela ion analysis. Table 3 shows co ela ion coe i cien s () o social esponsibili y o C oa ian banks and ac o s o size, owne ship and p o i abili y. No su p isingly, ou esea ch i ndings suppo he i s hypo hesis as i is clea ha a high posi i e co ela ion be ween bank size and social esponsibili y is es ablished ( = .640, p = .000, N = 32), leading o a conclusion ha la ge banks, in e ms o hei asse s, a e associa ed wi h highe le els o social esponsibili y. A mo e de ailed analysis shows ha medium-sized banks closely ollow la ge banks, and in some aspec s o social esponsibili y, like sus ainabili y epo ing and ne wo king and co po a e go e nance, e en sligh ly Bank 1234567891011121314151617181920212223242526272829303132 Social esponsibili y 111000011000010000000000000000000 210000000000010000000000000000000 301000010000010000000000000000000 410000000000010000000000000000000 511111111111011110001001011000000 601100001000010010000000000000000 711001111001011000000000001100001 811100011011111110001111101000110 911111111110101110101110000001000 1011001111001010000000100000100101 1111001101001010000000100000000101 1201000000000000000000000000000000 1311100001000011100000000000000000 1411111111111111110000000111100111 1510110111011101011001010010101000 1611100101000010000000000000100000 1711111111111111010000100110100111 1811111111101001010000000010000000 T 83835633445661782833502878502244 6 6 0 2228171117282233 0 11281728 Social esponsibili y: numbe ela es o indica o defi ned in Table 1; Bank: numbe ela es o each o he 32 banks; T = o al sco e (pe cen age), calcula ed as a ela i e numbe o indica o s on which a bank sco es posi i e, e.g. he bank assigned numbe 1 ecei es a sco e o 83% because T=15/18=0.83. Sou ce: au ho s Tab. 2: Indi idual bank social esponsibili y esul s EM_2_2015.indd 124EM_2_2015.indd 124 3.6.2015 13:09:053.6.2015 13:09:05 125 2, XVIII, 2015 Finance su pass hem. On he o he hand, small banks a e e iden ly lagging behind al hough hei ela i ely lowe a e age sco es in ce ain aspec s o social esponsibili y can be easonably expec ed. Fo ins ance, small banks in hei e e yday business, in compa ison o la ge banks, do no ace challenges o fi nancing la ge, en i onmen ally o socially sensi i e p ojec s. This may explain hei a e age sco e in en i onmen al managemen o only 23.9%. Fu he mo e, hey a e o ien ed on e ail business and se ing local communi y, p ima ily by fi nancing consume loans and liquidi y o small and medium en e p ises. The e o e, he s uc u e o hei o e is di e en om he one a la ge banks, wha possibly explains hei a e age sco e o only 6.5% o esponsible fi nancial p oduc s. Howe e , hei bad pe o mance in o he aspec s o social esponsibili y, indica ed by low a e age sco es in o he g oups o indica o s, canno be so easily jus ifi ed. Fu he mo e, owne ship s a us and social esponsibili y o obse ed banks a e ai ly co ela ed ( = -.480, p = .005, N = 32). (In o de o quan i a i ely analyse a iable owne ship s a us, o eign-owned banks we e assigned gene ic numbe 1, banks in domes ic p i a e owne ship numbe 2, and banks in domes ic public owne ship numbe 3.) The medium and nega i e co ela ion be ween hese a iables poin s ou ha o eign-owned banks ope a ing in C oa ia in e ms o hei le els o social esponsibili y a e in ad ance o banks owned by domes ic pa ies. This is in acco dance wi h he second hypo hesis, p oposing ha o eign- owned banks a e cha ac e ized by highe le els o social esponsibili y in compa ison o domes ically owned banks. Resul s o an in-dep h analysis indica e ha o eign-owned banks, wi h hei a e age sco e o 48.9%, pe o m be e han domes ically owned banks (21.9%) in all aspec s o social esponsibili y. Mo eo e , a pa ial analysis o he wo g oups o domes ically owned banks was conduc ed, di e en ia ing be ween hose owned by p i a e pa ies and hose owned by he go e nmen . This analysis shows ha banks in domes ic p i a e owne ship (a e age sco e o only 20.4%), wi h he only excep ion o esponsible i nancial p oduc s o e , lag behind hei domes ic go e nmen -owned coun e pa s, indica ing ha he go e nmen , as a bank owne , is ela i ely mo e socially esponsible in compa ison o p i a e pa ies a he same unc ion. Howe e , as a as i ega ds banks in domes ic go e nmen owne ship, one has o ake in o conside a ion ha he e a e only wo such banks in he sample, wha makes social pe o mance o hese speci i c banks (33.3%) po en ially ha dly gene alisable in o he con ex s. The e o e, i is mo e ad isable o obse e hem as a speci i c g oup. Finally, he fi ndings indica e a e y weak and posi i e co ela ion be ween bank p ofi abili y and social esponsibili y, meaning ha he e is li le o almos no associa ion be ween bank p ofi abili y and i s le el o social esponsibili y. Howe e , he esul s a e no s a is ically signifi can , so hey canno be gene alized. Weak and non-signifi can co ela ion leads us o ejec he hi d hypo hesis, meaning ha he e is no empi ical e idence ha bank fi nancial and social pe o mance a e posi i ely ela ed. Social esponsibili y Size (Asse s) Owne ship s a us P ofi abili y (ROA) P ofi abili y (ROE) Social esponsibili y 1 Size (Asse s) .640** 1 Owne ship s a us -.480** -.410* 1 P ofi abili y (ROA) .228 .340 -.121 1 P ofi abili y (ROE) .218 .289 -.186 .923* 1 ROA = Re u n on asse s; ROE = Re u n on equi y **Co ela ion is signifi can a he 0.01 le el (2- ailed). *Co ela ion is signifi can a he 0.05 le el (2- ailed). 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Ana I anise ic He naus, PhD Uni e si y o Zag eb Facul y o Economics and Business Depa men o Finance ai anise[email p o ec ed] Alen S ojano ic, PhD Uni e si y o Zag eb Facul y o Economics and Business Depa men o Finance [email p o ec ed] EM_2_2015.indd 133EM_2_2015.indd 133 3.6.2015 13:09:063.6.2015 13:09:06 134 2015, XVIII, 2 Finance Abs ac DETERMINANTS OF BANK SOCIAL RESPONSIBILITY: CASE OF CROATIA Ana I anise ic He naus, Alen S ojano ic Recen ly i nancial sec o and i s esponsibili ies ha e come unde g ea sc u iny. This has led o pu ing mo e emphasis on social esponsibili y o i nancial ins i u ions, p ima ily banks, due o hei powe ul and in l uen ial posi ion. Banks ha e an impac no only on i nancial and economic sys em, bu on a wide communi y as well. Thei socially esponsible p ac ices in pa icula may ha e impo an social implica ions, wha is e en mo e emphasized wi hin bank-cen ic i nancial sys ems, ypical o CEE coun ies. Due o a lack o exis ing esea ch, he aim o he pape is o assess social esponsibili y o banks a indi idual and indus y le el in a speci i c CEE con ex . A bank indi idual le el, ocus is pu on ac o s o bank size, owne ship s a us and i nancial pe o mance, while a he bank indus y le el he s uc u e o g an ed loans is included in he analysis. The amewo k o assessing bank social esponsibili y is de i ed and adap ed om p e ious esea ch conduc ed by Cues a-Gonzalez, e al. [23] and Schol ens [81]. I is applied o C oa ian banking sec o , while he le el o social esponsibili y is empi ically ela ed o ac o s a bank indi idual and indus y le el. Resea ch i ndings o e an o e iew o social esponsibili y o C oa ian banks. The esul s demons a e ha bank social esponsibili y is ela ed o ac o s o bank size and owne ship s a us a he indi idual le el, and o he s uc u e o g an ed loans a he indus y le el. Howe e , he na u e o he link be ween bank social and i nancial pe o mance did no p o e signi i can . Such i ndings o e a wide lesson o wha ac o s a e associa ed wi h social pe o mance o i nancial sec o . Addi ionally, hey may se e as a use ul e e ence poin o u he in es iga ion o socially esponsible p ac ices in C oa ia and o he CEE coun ies. Key Wo ds: Banks, social esponsibili y, C oa ia. JEL Classi i ca ion: G21, M14. DOI: 10.15240/ ul/001/2015-2-009 EM_2_2015.indd 134EM_2_2015.indd 134 3.6.2015 13:09:063.6.2015 13:09:06