The moderating effect of fintech on the relationship between CSR and banks' financial stability: Baron and Kenny's approach analysis

Abstract

PurposeCorporate social responsibility (CSR) and fintech have emerged as critical megatrends in the banking industry. This study aims to examine the impact of financial technology on the relationship between CSR and banks' financial stability. Specifically, it investigates the moderating effect of fintech on the association between CSR and the financial stability of conventional banks operating in Qatar, UAE, Saudi Arabia, Kuwait, Bahrain, Jordan, Pakistan and Turkey from 2010 to 2021.Design/methodology/approachTo achieve the authors’ objective, the authors apply Baron and Kenny's three-link model, tested with fixed and random effects regression models.FindingsThe results reveal that the development of fintech decreases banks' financial stability, whereas it promotes banks' involvement in CSR strategies. Furthermore, the findings indicate that fintech plays a moderating role in the relationship between CSR and financial stability. It positively moderates the impact of CSR on financial stability. The robustness analysis highlights the mutual reinforcement of fintech and CSR dimensions in improving the financial stability of banks. Thus, by fostering community and product responsibility, fintech could enhance the financial stability of banks.Practical implicationsFinally, the authors recommend that banks focus more on developing technological and environmentally friendly financial products.Originality/valueThis study contributes significantly by providing valuable insights for managers and policymakers seeking to improve banks' financial stability through the simultaneous adoption of new financial technology products and the strong commitment to CSR practices.