Corporate social responsibility and stock price informativeness: evidence from the global banking industry

This study explores the impact of corporate social responsibility (CSR) performance on stock price informativeness (SPI) in the global banking industry. Drawing on a dataset of 217 banks from 45 countries between 2009 and 2020, we find that CSR performance significantly enhances SPI by ensuring that more bank-specific information is reflected in stock prices. These results align with signalling theory, which suggests that CSR performance reduces information asymmetry by signalling a firm's commitment to long-term sustainability and ethical practices, thereby improving market efficiency. The effect is stronger in countries with mandatory CSR disclosure regulations, underscoring the role of regulatory frameworks in amplifying the benefits of CSR activities. Furthermore, we find that the relationship between CSR performance and SPI is more pronounced in investment banks than in commercial banks, reflecting the greater market sensitivity to CSR performance in institutions with higher risk profiles. Our findings provide evidence of a critical link between CSR performance and improved market transparency, highlighting the role of CSR initiatives in fostering more accurate stock price reflections.