The Mediating Role Of Corporate Social Responsibility On The Relationship Between Corporate Governance And Financial Performance Of Indian Banks

Abstract

Previous studies on the relationship between corporate social responsibility (CSR) and economic achievement have yielded results that are inconsistent. As a result, there has been a growing need for studies to explore mediators and moderators to better explain these varied findings. The relationship between corporate governance (CG) and financial performance (FP) is analysed in this study, with a focus on the mediating effect of CSR outcomes. Based on a sample of 26 banks listed on the Bombay Stock Exchange (BSE) in India, covering a ten-year period from 2014 to 2023 and consisting of 255 observations, our research demonstrates that CSR mediates the relationship between corporate governance and financial performance. The financial data were sourced from the Prowess database, while the CSR and corporate governance data were obtained through content analysis of the banks’ annual reports. The outcomes demonstrate that CSR plays a critical role in enhancing profitability, efficiency, and market valuation, with CG directly influencing only market valuation (Tobin's Q). These findings contribute to the CSR literature by shedding light on the mediating role of CSR outcomes, helping to explain the previously inconsistent results in studies examining CSR and financial performance.