Corporate Social Responsibility, Efficiency, and Risk in US Banking

Banks have faced increasing attention regarding their ability to balance Corporate Social Responsibility (CSR) initiatives, operational efficiency, and credit risk management, particularly in the wake of global financial challenges. This study examines the interplay between CSR, efficiency, and credit risk in 131 US banks from 2010 to 2018. Using the Choquet integral, two-step Data Envelopment Analysis, and a dynamic panel with the Generalized Method of Moments, the findings reveal a virtuous circle between CSR and credit risk, where CSR enhances credit risk profiles. Similarly, efficiency and risk exhibit mutual reinforcement. However, a vicious circle is identified between CSR and efficiency, indicating trade-offs between CSR objectives and operational efficiency. These insights guide policymakers and bank managers in optimizing this balance.