Paper short abstract:

In modern financial institutions, implementing sustainable Corporate Social Responsibility (CSR) is essential in order to increase banks` surplus and corporate value. This study is to evaluate the effects of CSR on the increase in corporate value for Japanese financial institutions.

Paper long abstract:

In modern financial institutions, implementing sustainable Corporate Social Responsibility (CSR) is essential in order to increase banks` surplus and corporate value. If financial institutions provide high-quality financial services in the best interests of their customers, it enhances the productivity of the corporate sector and contributes to steady asset accumulation in the private sector, and the resultant stronger customer base will ensure a stable revenue flow. A perception gap exists between Japanese financial institutions and their customers in terms of banks' lending practices. From the banks' point of view, customers they are willing to finance are scarce, and thus 　competition through rate discounts becomes fierce; from the customer's point of view, banks won't lend to them without some kind of collateral or guarantee.

The first aim of this study is to evaluate the effects of CSR on the increase in corporate value for Japanese financial institutions. Our empirical analysis is based on a survey on trust and reputation of Japanese financial institutions (members of the Japanese Bankers Association) in relation to CSR.

The second aim of this study is to examine the efficacy of the "Business Model for Creating Shared Value (CSV)," also known as the "Business Model for Japanese Financial Institutions," in increasing corporate value. The Business Model for CSV, officially announced by the Japanese Financial Services Agency (JFSA) in October 2016, is a customer-oriented asset management and intermediation model. At that time, JFSA encouraged financial institutions to voluntarily disclose their initiatives to create customer-oriented business policies. Accordingly, this study will examine the effectiveness of CSV between financial institutions and their customers.

Our research revealed a common perception that the expense of CSR is simply one of the costs of doing business as a financial institutions. However, in the changing relationship between CSR and society, we can also think of it as financial institutions beginning to consider CSR as part of their branding strategy. To establish the sustainability of CSR, we will demonstrate the capitalization of brand value for financial institutions through banks` surplus analysis in a two-stage economic model.