A lot of spectacular technological innovations have stunningly transformed the scene and, the diverse society provokes the concept of profit-sharing in the shape of corporate social responsibility (CSR). The study elaborates the relationship between CSR and financial performance (FP) of the conventional and Islamic banks of Pakistan. Moreover, the work explores the moderating role of bank size on the relationship between CSR-FP of Islamic and conventional banks of Pakistan separately. The study takes data from annual reports of the banks listed at the Pakistan Stock Exchange (PSE) during 2010-2018. The study first applies several panel data diagnostic tests and after checking normality of data applies regression and moderated regression to check the relationship between size, CSR and FP of Islamic and conventional banks of Pakistan; by taking leverage as a control variable. The results indicate that the bank size moderates the relationship between CSR-FP and depicts a positive significant relationship between CSR activities and FP in the case of conventional banks of Pakistan. The results are in line with the legitimacy theory, social contract, and stakeholder theory. While as in the case of Islamic banks the size negatively moderates the relationship between CSR and FP. The results are supporting agency theory. The research work has important practical consequences that would help the bank managers to adopt optimal investment in CSR activities. Moreover, the study guides that if Islamic banks would be able to expand their size, they could do more investment in CSR activities same like conventional banks are doing. This research covers the banking sector of Pakistan. The work is unique due to the less explored areas of study in the banking sector of Pakistan. Furthermore, the findings of the study would lay some practical foundations upon which more detail analysis could be based, which is currently less explored.
Corporate social responsibility, Performance, Islamic, Banking, Financial