Impact of Banks Specific Risk on the on the Banks Financial Stability and Profitability with Moderating Role of Corporate Social Responsibility Index in Pakistan

Abstract

The manuscript empirically investigates the banks' specific risks to financial stability and profitability, with corporate social responsibility acting as a moderator. The research study collected data from 20 listed banks in Pakistan. The data spans the years 2012–2022. A generalized method of moments was analyzed to check the relationships. GMM was controlling the problem of endogeneity. Financial stability was measured through the z-score index, and profitability was measured through the return on assets and return on equity. Bank risk was measured through the different risks of banks, and corporate social responsibility was measured through donations to society. The research found that bank risk has a negative association with both financial stability and profitability. The research also found that the corporate social responsibility index reduced the negative association. Future research should include more industries and communication channels. This study examines Pakistani banks' CSR disclosure in annual reports. This study expands the disclosure index and examines how corporate governance factors affect CSR disclosure in conventional and Islamic banking systems.