Paper #1512

Title:

Is there a difference in financing efficiency? Conventional banks versus ethical banks

Authors:

Juan José Durán Herrera, María José García López, Carmen Avilés Palacios and Oriol Amat

Date:

February 2016

Abstract:

The current economic and financial crisis have underlying, to a certain extend, the short term perspective of the decision making processes of firms, specially of banks, and the weakness of principles and values in the design and selling of complex financial products. Within this context the demand of transparency and CSR has increasing. The named ethical banks appear as a model of supplying financial services with high potential for financing, especially for small firms as well as for individuals. In this paper we analyze and compare the return on assets and on equity over a period of five years of both Ethical Banks and Conventional Banks listed on Sustainability Index. For the empirical analysis we used a fixed data panel model and a Discriminant Function Analysis. We conclude that the conventional banks get higher rates of return, due to higher risk investments they undertake and to wider range of operations. But Ethical banks are more competitive when we compare them in terms of the real economy.

Keywords:

Ethical banking, Corporate Social Responsibility, banking and finance.

JEL codes:

M1

Area of Research:

Finance and Accounting

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