Analyzing the impact of Corporate Social Responsibility on firm financial performance: Evidence from EU commercial banks
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The research undertakes into the existence of a relationship between Corporate Social Responsibility
(CSR) and the firm financial performance (FFP) to European Union (EU) commercial banks in the
continually changing sustainability regulatory environment of the Non-Financial Reporting Directive
(NFRD) and the Corporate Sustainability Reporting Directive (CSRD). Based on the Stakeholder Theory and
Legitimacy theory: the study analyzes the hypothesis of whether environmental responsibility, social
responsibility, and the quality of corporate governance help to enhance accounting-based performance
(Return on Assets - ROA) and market-based performance (Market-to-Book Ratio - MBR). The study will
utilize fixed and random effects regression models comprising country and year controls using panel data
of EU commercial banks acquired by the LSEG (Refinitiv) database in 2024. The results show that
profitability measures like Return on Equity (ROE), Net Interest Margin (NIM), and Earnings per Share (EPS)
are the significant means of improving accounting-based performance. Profitability and credit risk, in the
form of non-performing loans (NPL) have a positive and negative impact on market valuation, respectively.
Moreover, high standards of governance enhance the credibility and economic role of the CSR initiatives
, which prove that well-developed systems of oversight transform the sustainability promises into financial
results. In general, the findings indicate that the CSR of EU commercial banks is not only a regulatory
requirement but a strategic instrument that can help increase financial sustainability, stakeholder
relationship and value creation in the long-term. The research adds context-specific knowledge to the
CSR-FFP literature in a very regulated and sustainability-focused financial context.