Cross-Ownership and Bank Stability: The Moderating Role of Corporate Social Responsibility Disclosure

Abstract

This study examines the impact of cross-ownership on bank stability and the moderating role of corporate social responsibility (CSR) disclosure on such impact. By using data from 560 banks across 38 countries and territories in Asia during the 2011–2022 period and applying the fixed-effect and system GMM methods, we provide important findings. Firstly, the broad cross-ownership degree increases bank stability, while significant ownership between banks reduces bank stability. Secondly, CSR disclosure can amplify the positive impact of the broad cross-ownership degree and mitigate the negative effects of significant ownership between banks on bank stability. The importance of CSR disclosure was amplified during the COVID-19 crisis. Thirdly, we found that the broad cross-ownership degree enhances bank stability via improved performance and reduced profit volatility, whereas significant ownership between banks reduces bank stability via decreasing bank profitability and decreasing capital ratios. Furthermore, CSR disclosure increases the positive effects of the broad cross-ownership degree via increasing the negative effects of the broad cross-ownership degree on profit volatility, while CSR disclosure reduces the negative effects of significant ownership between banks via reducing the negative impact of significant ownership between banks on profitability and capital ratios.