The relationship between CSR communication and Corporate reputation in the credit lending process. A qualitative study based on Italian banks

The overall objective of this study is to investigate the relationship between the communication of Corporate Social Responsibility (CSR) efforts and the corporate reputation (CR) in the context of the credit lending process of Italian banks. Prior researches indicate the existence of a two-way relationship between the communication of CSR actions and the corporate reputation. Basing on the theoretical principles of the signaling theory, several studies indicate that organizations might use the communication of their CSR practices to convey positive messages to their stakeholders helping them to build a favorable impression of the firm. Recently, some empirical studies (Stanaland et al., 2011; Maden et al., 2012) find that the stakeholder groups (including customers, employees and investors) tend to assign good reputations to those firms which they evaluate positively in terms of their social performance. On the other side, when companies possess an enhancing reputation this help to improve the credibility and the effectiveness of the CSR communication (Forman and Argenti, 2005, Scandizzo, 2011, Shamma, 2012; Yoon et al., 2006). The analysis of this relationship with respect to the banks remains quite unexplored. A little number of studies (Helm, 2007; Maden et al., 2012) has investigated the importance that investors (including banks) assigned to the CR when they assess the borrowers’ creditworthiness, indicating that the communication regarding the CSR practices (both positive and negative) have a significant influence on the investor loyalty and satisfaction. A few studies have examined the impact of the CSR on the cost of bank loans and into the credit risk management (Goss and Roberts, 2011; Weber et al., 2010) and reveal that CSR activities can be used to predict the financial performance of the borrowers and to improve the validity of the rating system. Furthermore we are not aware of similar studies realized in the Italian context. To contribute to the extant literature on the relationship between CSR communication and corporate reputation we have carried out an explorative research investigating this relationship based upon three Italian banks case studies. For each case study we realized semi-structured interviews with credit managers to examine whether (or not) banks take into consideration CSR communication within the corporate loan originator process, the importance assigned to the CSR in the phases featuring the processes of loan origination and monitoring and , how the corporate reputation impact on the assessment of the CSR disclosure made by the banks Researchers decided to investigate Italian banking for two main motivations: “comparability” and “voluntary disclosure environment”. As pointed out in other studies (Gamerschlag et al., 2010), CSR and their communication differ between countries. To analyzing homogeneous and comparable case studies we decided to concentrate on companies with a same political and institutional background. We select Italy where the CSR disclosure is completely voluntary, and there are not official regulation how to report on social and environmental aspects. The remainder of the paper is organized as follows: the first section reviews the relevant literature and formulates the research questions; the second section outlines the methodology used to carry out this study; the fourth section presents the results of the interviews; and the last section summaries and discusses the conclusions of this study.