How do corporate governance and corporate social responsibility affect credit risk?

Abstract

We contribute to the existing literature by examining the relationship between corporate governance, corporate social responsibility (CSR) and bank risk. We apply fixed effect model to analyse the results, we find that board size, board meetings and board independence significantly and negatively affect banks’ credit risk. However, ownership concentration significantly increases bank credit risk. Further, we find that CSR leads to decreased bank credit risk. Our study enables banks in emerging economies to gain a better understanding of how to implement effective governance & CSR activities to mitigate credit risk.