The cost of Corporate Social Responsibility: the case of the Community Reinvestment Act
AbstractA Data Envelopment Analysis (DEA) cost minimization model is employed to estimate the cost to thrift institutions of achieving a rating of ‘outstanding’ under the anti-redlining Community Reinvestment Act, which is viewed as an act of voluntary Corporate Social Responsibility (CSR). There is no difference in overall cost efficiency between ‘outstanding’ and minimally compliant ‘satisfactory’ thrifts. However, the sources of cost inefficiency do differ, and an ‘outstanding’ rating involves annual extra cost of $6.547 million or, 1.2% of total costs. This added cost is the shadow price of CSR since it is not an explicit output or input in the DEA cost model. Before and after-tax rates of return are the same for the ‘outstanding’ and ‘satisfactory’ thrifts, which implies a recoupment of the extra cost. The findings are consistent with CSR as a management choice based on balancing marginal cost and marginal revenue. An incidental finding is that larger thrifts are less efficient. Copyright Springer Science+Business Media, LLC 2006
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Bibliographic InfoArticle provided by Springer in its journal Journal of Productivity Analysis.
Volume (Year): 26 (2006)
Issue (Month): 3 (December)
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Web page: http://www.springerlink.com/link.asp?id=100296
Corporate Social Responsibility; Community Reinvestment Act; Data Envelopment Analysis; Cost efficiency; M14; G28; D21;
Other versions of this item:
- Donald F. Vitaliano & Gregory Stella, 2004. "The Cost of Corporate Social Responsibility: The Case of the Community Reinvestment Act," Rensselaer Working Papers in Economics 0412, Rensselaer Polytechnic Institute, Department of Economics.
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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