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Does being a responsible bank pay off? Evidence from the COVID-19 pandemic

Author

Listed:
  • Alper Kara

    (Brunel University London)

  • Steven Ongena

    (University of Zurich; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

  • Yilmaz Yildiz

    (University of Kent)

Abstract

We investigate whether banks’ initial responses during the first wave of the COVID-19 pandemic in supporting their customers, communities, and governments were perceived as value-enhancing by investors. Using a unique responsible banking measure for a sample of the largest US and European banks, we find a negative relationship between responsible bank behavior and stock market performance, particularly in the first wave of the pandemic. We also find that riskier banks were affected more negatively if they behaved responsibly. Overall, our findings show that banks’ responsible behavior during a crisis reduces, or at best is not relevant to, shareholder value.

Suggested Citation

  • Alper Kara & Steven Ongena & Yilmaz Yildiz, 2023. "Does being a responsible bank pay off? Evidence from the COVID-19 pandemic," Swiss Finance Institute Research Paper Series 23-80, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2380
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    More about this item

    Keywords

    COVID-19 pandemic; market performance; responsible banking; stakeholder vs. shareholder value;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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