Purpose: For the dimensions of the corporate social responsibility (CSR) score, only environmental practices have shown a significant negative link with banking performance. However, the social and government dimensions did not have a significant effect on this variable. The authors also find that the financial performance of banks depends primarily on the financial stability of the bank, in particular, on capital adequacy and on the management of liquidity risk.Design/methodology/approach: The recurrence of banking and financial crises has revealed the complexity and vulnerability of the financial and banking system. In this article, the authors empirically study the impact of CSR on the financial performance of banks as well as the individual effect of each dimension of CSR (social, governance and environmental) with particular attention to the moderating role of financial stability. Based on a sample of 23 French banks over the period from 2010 to 2018, the results indicate a negative and significant effect of CSR measured by the overall CSR score on the performance of banks.Findings: This study provides insight into the essential role of financial stability in moderating the benefits of CSR disclosure while virtually no previous study examines this effect.Originality/value: This article offers several contributions to the literature. First, this study builds on previous research by providing a more comprehensive view and evidence on the relationship between CSR and bank performance. The authors affirm and show that the financial stability of the bank moderates the effect of CSR on the performance of banks. The link between social responsibility and performance demonstrated in this study is more complicated than the direct–direct relationship as widely assumed in the previous literature.

Purpose: This study examines the effect of the informational content of local credit rating announcements in emerging markets on the liquidity of their bond markets. This study analyses the liquidity of bonds in various emerging bond markets using a sample of nine countries: Argentina, Mexico, Peru, Hungary, Poland, Spain, Turkey, Hong Kong and Greece. The sample includes daily data on sovereign bonds that go from July 2009 to July 2017. The main focus is on the period before and after the sovereign debt crisis. This study notes that the bond liquidity is affected due to the sign of the rating granted by the rating agencies for each country.Design/methodology/approach: This study aims to question the sources of liquidity problem of sovereign bonds issued by the emerging countries. The study’s database consists of daily data of all nine emerging countries for the period from July 2009 to July 2017. Panel data were collected from the Datastream database.Findings: This study first directly tests the information content of bond ratings announcements and their effect on bond market liquidity. Next, the impact of rating changes on sovereign bond liquidity around the rating announcements is studied. Rating changes can affect sovereign bond's price, trading and liquidity around the announcement date. In particular the rating changes that move the bonds out of the investment grade category can elicit selling pressure or even fire sale of the fallen angels.Originality/value: This research aims to present data on the prices of sovereign bonds that react to changes in credit rating by studying the price movements around the announcement of changes in credit rating. The literature is very rich in studies on credit rating changes on stocks and corporate bonds, but this study is perhaps the first attempt on sovereign bonds.

Volatility Transmission Between Dow Jones Stock Index And Emerging Islamic Stock Index: Case Of Subprime Financial Crises

The recurrence of banking and financial crises has revealed the complexity and vulnerability of the conventional financial and banking system. In this paper, we empirically investigate the impact of Environmental, Social, and Governance disclosure (ESG) on banking stability, as well as the individual effect of each dimension of ESG, with particular attention to the moderating role of capital structure. Using a mixed sample composed of 18 Islamic banks and 22 conventional banks from 2014 to 2022, the results indicate a positive and significant effect of ESG, measured by the ESG score, on banking stability. Among the dimensions of the ESG score, only environmental and governance practices have shown a significant positive link with banking stability. However, the social dimension did not have a significant effect on this variable. Additionally, our results suggest that the Islamic character further enhances the positive relationship between ESG and financial stability due to ethical foundations. Furthermore, we find that the financial stability of Islamic and conventional banks primarily depends on capital structure, specifically the adequacy of equity, and credit risk management. Our study sheds light on the essential role of capital structure in moderating the benefits of ESG disclosure, an effect that has not been extensively examined in previous studies.