Determinants of bank social responsibility: case of Croatia

Recently fi nancial sector and its responsibilities have come under great scrutiny. This has led to putting more emphasis on social responsibility of fi nancial institutions, primarily banks, due to their powerful and influential position. Banks have an impact not only on financial and economic system, but on a wider community as well. Their socially responsible practices in particular may have important social implications, what is even more emphasized within bank-centric financial systems, typical of CEE countries. Due to a lack of existing research, the aim of the paper is to assess social responsibility of banks at individual and industry level in a specific CEE context. At bank individual level, focus is put on factors of bank size, ownership status and financial performance, while at the bank industry level the structure of granted loans is included in the analysis. The framework for assessing bank social responsibility is derived and adapted from previous research conducted by Cuesta-Gonzalez, et al. [23] and Scholtens [81]. It is applied to Croatian banking sector, while the level of social responsibility is empirically related to factors at bank individual and industry level. Research findings offer an overview of social responsibility of Croatian banks. The results demonstrate that bank social responsibility is related to factors of bank size and ownership status at the individual level, and to the structure of granted loans at the industry level. However, the nature of the link between bank social and financial performance did not prove significant. Such findings offer a wider lesson of what factors are associated with social performance of financial sector. Additionally, they may serve as a useful reference point for further investigation of socially responsible practices in Croatia and other CEE countries