Impact of Corporate Social Responsibility on Islamic Banks' Profitability with the Moderating Role of Institutional Quality

Abstract

The main aim of this research is to examine the impact of corporate social responsibility on bank financial stability and profitability. Second, this research looks into the interactions of institutional quality. From 2012 to 2021, the research collected data from Islamic banks and a window of conventional Islamic banks. The study measured financial stability through the z-index score, and profitability was measured through ROA, RO1, and ROE. GMM was used to investigate the relationship and reduce the problem of endogeneity. The research found unique characteristics in the research data: first, corporate social responsibility has a positive and significant relationship with all three models and the financial stability of the banks. The research also found that institutional indicators have a positive relationship with the three models and financial stability, except for corruption. The study discovered that institutional quality plays a positive moderating role in the relationship between corporate social responsibility, all three banks, and financial stability in the case of the interaction effect.