Abstract
In this article, the author investigates the institutional and community determinants of banks' community stakeholder performance. The basic premise of the stakeholder theory proclaims that the key to improving corporate performance and ensuring the long-term survival of the firm is optimizing the results for all involved stakeholder groups rather than only the stockholders. Previously, bank research that examined issues relevant to the community tended to focus on the redlining question. In this study, we depart from this view and posit that impact of various bank and community characteristics on banks' community stakeholder performance differ. The sample for this study is limited to FDIC insured commercial banks with an asset size of over $250 million, defined as large by the bank regulators. Banks' community stakeholder performance is operationalized as total CRA related loans as a percentage of bank's total outstanding loans. Two control variables were used: equity, measured by equity to asset ratio; and age, measured by the log of the age of the bank. We used ordinary least square regressions to estimate the relative importance of the independent variables in the model by pooling all sample years to increase degrees of freedom.
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