Corporate Social Performance and Social Disclosure: Evidence from Italian Mutual Banks

ABSTRACTThe social report is a tool with which Social Disclosure can be attempted. However, it may become merely a communication of the fulfilment of a series of requirements. From this perspective, this study seeks to verify, with reference to the Italian Mutual Banks, whether the intensity of Social Disclosure (SD) is indeed representative of social responsibility. The aim is therefore twofold: on the one hand, the intention is to estimate the intensity of SD by measuring the extent to which the social reports of a sample of 57 mutual banks comply with GRI guidelines; and on the other, to test the relationship between social-environmental and financial performance and the intensity of SD. The analysis shows that SD intensity is closely linked to the quality of social reports. Some categories, such as corporate identity, membership and community, exhibit high levels of disclosure whilst for other categories, like the environment, there is a lack of a coherent and unitary plan. Moreover, the degree of SD intensity does not appear to be completely represented into actual social-environmental performance and this confirms the shortcomings of the use of SD as a proxy for Corporate Social Performance.INTRODUCTIONAlthough banks play a central role in the economy, there is a lack of literature on their social and environmental aspects (Campbell & Slack 2011). The social report is an instrument with which a firm accounts for what it is doing for its stakeholders (Signori & Rusconi 2009) by reducing opacity and increasing transparency. Social Disclosure (SD), however, may be only the formal fulfilment of certain requirements, and it may be used as a mere marketing strategy, which negates its deeper meaning.From this perspective, the study seeks to verify, with reference to the Italian Mutual Banks (IMB), whether SD intensity is indeed representative of social-environmental responsibility. The aim is therefore twofold: on the one hand, the intention is to evaluate SD intensity by measuring, on a sample of 57 IMBs, the extent to which their social reports and management reports comply with the requirements of the Global Reporting Initiative (GRI, 2006) and on the other, to test the relationship between social-environmental and financial performance and the SD intensity.The decision to treat the IMBs has been determined both by their institutional nature, whereby responsibility and solidarity are integral parts of cooperative banks' activities (Kandel & Lazear 1992), and by their traditional economic model, which is substantially dependent on the interest margin. The presence of these characteristics has been the basis of their capacity to promote the stability of the financial system even in adverse conditions, such as those in times of crisis (Groeneveld & De Vries 2009; Ayadi et al. 2010). The interest margin of IMBs is above the average for the Italian banking system, but it is counterbalanced by a higher incidence of costs related to meeting needs of customers which are traditionally more sensitive to relations (Boscia & Di Salvo 2009). For this reason, social reports assume greater significance in the IMBs, and the quality of the information given to the stakeholders becomes their distinctive and central feature (EACB 2010).The aim of the study is to contribute to the debate on SD and Corporate Social Performance (CSP) in several respects. The first concerns the lack of research with particular regard to the IMBs: the numerous works on SD measurement mainly concern non-financial companies (Mio 2010; Secchi 2006; Unerman 1999; Willis 2003; Wiseman 1982; Adams et al. 1998; Morhadt et al. 2002; Marx 1993), or commercial banks (ABI 2003; ABI 2005; Brown & Deegan 1998; Hossain & Reaz 2007). The second aspect relates to the relationship between SD and CSP: numerous papers in the literature study the link between CSP and financial performance, but few authors have dealt with the topic examined by this study (Abbot 1979; Ulman 1985). …