The Determinants of Environmental and Social Performance and Its Effect on the Financial Performance of the Ethiopian Banking Sectors: Multi‐Mediation Analysis

ABSTRACT The present study examines how Corporate Social Responsibility culture (CSRC) and Corporate Social Responsibility leadership (CSRL) jointly enhance CSR performance (CSRP) (environmental performance (EP), social performance (SP)) and how CSRP subsequently drives financial performance (FP) through the mediating roles of customer satisfaction (CS) and corporate image (CI). Grounded in an integrative framework of Resource‐Based View, Stakeholder Theory, and Knowledge‐Based View, this study employs a quantitative, cross‐sectional approach. Data from 473 employees in the Ethiopian banking sector were analyzed using partial least squares structural equation modeling (PLS‐SEM) with SmartPLS 4. The findings indicate that CSRC ( β = 0.384, p < 0.001) and CSRL ( β = 0.332, p < 0.001) significantly predict CSRP, which in turn positively influences FP ( β = 0.200, p < 0.001). Customer satisfaction ( β = 0.206, p < 0.001) and corporate image ( β = 0.189, p < 0.001) fully mediate the CSRP–FP relationship. Therefore, these findings underscore the strategic importance of embedding CSR in leadership and culture to improve societal and environmental impact as well as financial outcomes. This study contributes by (1) being one of the first to empirically examine the instruction of CSRC, CSRL, and multidimensional CSRP in Ethiopian banking and (2) proposing and validating a novel mediated pathway in which CS and CI fully transmit CSRP effects to FP—a mechanism previously unexamined in this context. Implications for managers and policymakers underscore the need to prioritize CSR integration across all organizational levels to achieve sustainable competitive advantage.