Nonlinear and Threshold Effects of CSR Expenditure on Bank Liquidity Creation: The Moderating Role of Bank Culture

ABSTRACT This study investigates the nonlinear and threshold effects of Corporate Social Responsibility expenditure (CSRE) on bank liquidity creation, incorporating the moderating role of bank culture. Using panel data from 29 Vietnamese banks from 2010 to 2023, we employ a dynamic Generalized Method of Moments model, dynamic panel threshold regression and panel vector autoregression model to uncover the relationship between variables. The findings reveal an inverted U ‐shaped relationship, where CSR investments positively influence liquidity creation up to a threshold, beyond which excessive investment reduces its benefits. Besides, control and create bank culture weaken this nexus. These findings offer significant implications for bank managers and policymakers by highlighting the importance of banks determining appropriate CSRE thresholds for optimal liquidity creation benefits, avoiding overinvestment and fostering suitable bank cultures to moderate CSRE—liquidity creation association.