Impact of Corporate Social Responsibility, Green Credit and Digitalisation on Bank Stability: A Case Study of Banks in Vietnam

Abstract

Background: Social responsibility, green lending, and digital transformation are crucial to sustainable development and offer banks chances to increase their market competitiveness and operate sustainably. Moreover, green credit and digital transformation are inevitable, but coordination is needed between banks, the government, and related organizations to implement them successfully.

Objective: This study examines the relationship between green credit, digitalization, and bank stability in Vietnam.

Methodology: The authors employed moments quantile regression (MMQR) to elucidate varied effects across varying levels of bank stability. The research used a panel dataset of Vietnamese commercial banks from 2010 to 2022. Data were obtained from the annual reports of the State Bank and banks.

Result: The results showed that each corporate social responsibility (CSR) component has different dimensions, such as shareholders, employees, customers, government, social, community, and environmental responsibility, which have different impacts on bank stability. Digital transformation is an essential solution to achieve sustainable development goals and opens up opportunities to help banks improve their competitiveness in the market.

Conclusion: There is a nonlinear relationship where higher levels of CSR engagement are associated with lower bank stability, but this negative effect diminishes at higher levels of CSR. In addition to using digital tools, green credit is essential in successfully implementing green programs to ensure banking sustainability.

Unique Contribution: The study has shown that CSR's positive impact on stability is more substantial for state-owned commercial banks and that the benefits of CSR may diminish during the COVID-19 pandemic.

Key Recommendation: Investments in digitalisation initially reduce bank stability due to high technology costs, but the interaction of digitalisation with CSR optimises efficiency and reduces information asymmetry, promoting long-term stability.