Edited by James R. Barth, Chen Lin and Clas Wihlborg
Chapter 24: Social, Environmental, Ethical and Trust (SEET) Issues in Banking: An Overview
Andreas G.F. Hoepner and John O.S. Wilson* 24.1 INTRODUCTION Banks play critical roles in every economy. They operate the payments system, are a source of credit for large parts of the economy, and (except in times of crisis) act as a safe haven for depositors’ funds. The banking system aids in allocating resources from those in surplus (depositors) to those in deficit (borrowers) by transforming relatively small liquid deposits into larger illiquid loans. Via this intermediation process, banks help match deposit and loan supply and provide liquidity to an economy. If intermediation is undertaken in an efficient manner, then deposit and credit demands can be met at low cost, benefiting the parties concerned as well as the economy overall (via positive externalities including long-term economic growth and progress in human development). The recent financial crisis, however, has brought a focus on negative externalities in banking such as the contagious effects of bank failures and costs of government bailouts. Tangential to these, but by no means less important, are social, environmental, ethical and trust issues (SEET). Over the last decade, corporate social responsibility has developed into an important strategy to enable firms to increase and smooth cash flows through consumer goodwill and loyalty, respectively (Carroll, 1999; Carroll and Shabana, 2010; Mintzberg, 1983). Consequently, a number of researchers have investigated the impact of corporate social responsibility or corporate environmental management on organizational performance (Becchetti et al., 2009; Griffin and Mahon, 1997; Margolis and Walsh, 2003; Orlitzky et al., 2003). While no conclusive...
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