Social responsibility and financial performance of banks in Iran

The purpose of this study is to investigate the role of social responsibility on the financial performance of Iranian banks. In this study, first a quantitative index was created by combination of 9 indicators of the banking system. The indicators were selected to cover the social responsibility of the country's banking system to shareholders, customers, borrowers, producers, society and the government. Then, the effect of this index on the financial performance (return on assets) of 11 selected banks, including 3 state-owned banks, 3 semi-public banks, and 5 private banks, over period 2007-2017 by using the Generalized Moments Method (GMM) was examined. The results showed that first; the average social responsibility index was for private banks (0.39), for state-owned banks (0.46) and for semi-public banks (0.57). Therefore, private banks have the least social responsibility and semi-public banks have the most social responsibility. Second; there is a positive and significant relationship between social responsibility and financial performance of the banks under review, so that by playing a higher role of social responsibility, the financial performance of banks improves. Third; This relationship is weaker in state and semi-state banks than in private banks, so that with the increasing role of social responsibility, the financial performance of private banks improves more sharply.