Unlocking Value: The Mediating Role of Corporate Governance on the CSR-Performance Link in the Banking Sector of Pakistan

Abstract

The main objective of this research manuscript is to examine the mediating role of corporate governance on the relationship between the corporate social responsibility on Islamic and conventional banks’ performance. The two performance indicators are analyzed in this study. The first one is financial stability, and the second one is profitability.  The data for this study is obtained from the financial statements of the banks for the period of 2010 to 2022. The research has used Principal Component Analysis (PCA) to construct a corporate governance index. We have applied descriptive statistic, correlation analysis, diagnostic analysis, and dynamic generalized method of moments (GMM) models to find and examine the relationships among variables. The findings show that corporate social responsibility has strong positive influence on the banks’ profitability and corporate governance mediates this links. The findings of the study are helpful for investors, academic researchers, regulators, and business practitioners who are interested in understanding the association between corporate governance, corporate investment, corporate social responsibility, and firm’s performance.

Keywords- Corporate Governance, Corporate Social Responsibility, Islamic Banks, Conventional banks, performance