Examining the relationship between corporate social responsibility, corporate reputation and brand equity in Indian banking industry

• Published date: 01 February 2023
• Author: Aanchal Aggarwal,Noopur Saxena
• Date: 01 February 2023
• DOI: http://doi.org/10.1002/pa.2838

RESEARCH ARTICLE

Examining the relationship between corporate social

responsibility, corporate reputation and brand equity

in Indian banking industry

Aanchal Aggarwal | Noopur Saxena

School of Business Studies, Vivekananda

Institute of Professional Studies, New Delhi,

India

Correspondence

Noopur Saxena, School of Business Studies,

Vivekananda Institute of Professional Studies,

AU BLOCK, Pitampura, New Delhi 110034,

India.

Email: noopur.saxena07@yahoo.com

This study is an attempt to explain the relationship between corporate social responsibility

(CSR), corporate reputation, and brand equity in India's banking sector. The study uses

Carroll's Pyramid of CSR and the ‘triple bottom line concept’as the theoretical bases for

proposing a conceptual model. The data pertaining to 482 saving bank customers were

analysed using structural equation modelling for this study. The integrated effect of CSR

and corporate reputation on brand equity has been examined using the analyses of both

the direct and indirect model paths. The findings show that corporate reputation partially

mediates the relationship between CSR and brand equity, and that there exists a direct

relationship between CSR and brand equity. This research has significant implications for

CSR managers seeking to gain a competitive advantage in the industry by focusing upon

the CSR activities that help an organisation build a positive corporate reputation, leading

to a high level of brand equity.

KEYWORDS

banks, brand equity, corporate reputation, CSR, the Indian banking industry

1|INTRODUCTION

Corporate social responsibility (CSR) has become a rising concern for

businesses across all sectors in recent years (Gupta et al., 2021;

Hafez, 2018; Ramesh et al., 2019). Further, there is a commonality

among literature indicating that in order to differentiate an organisa-

tion from its competitor and concomitantly attain a competitive edge,

the manager of the organisation concerned needs to make effective

use of CSR (Ahmad et al., 2020; Ashraf et al., 2017; Joshi, 2019; Por-

ter & Kramer, 2006). The concept of CSR is a complex one and hence

it is difficult to describe mainly because it entails the use of varied

activities and channels, each of which encompasses a different con-

text, time period, and culture (Aksak et al., 2016; Jones et al., 2009;

McWilliams et al., 2006). Here, it is apt to cite Raza et al. (2019), who

stated that CSR is an ‘organisation's choice to add to society and envi-

ronment on voluntary grounds, which consecutively gives higher

profit and competitive differentiation’. Furthermore, many

researchers have observed that companies which are involved in CSR

activities benefit in the long run, by acquiring a favourable consumer

attitude, awareness, and a sense of attachment, which, in turn,

enables the organisation to build an optimistic brand image and posi-

tive reputation (Cowan & Guzman, 2020; Hafez, 2018; Melo &

Garrido-Morgado, 2012; Miller et al., 2020; Pratihari & Uzma, 2019).

The perception of customers about CSR affects a company's overall

reputation because of the customer's willingness to be associated

with a company that has such an admirable reputation (Bianchi

et al., 2019; Faatmawati & Fauzan, 2021; Lee et al., 2017; Pratihari &

Uzma, 2019).

A company tend to invest in CSR initiatives in order to foster a

positive moral capital (Chatjuthamard et al., 2021; Salvi et al., 2018)

and sustain its distinctive intangible assets (Godfrey, 2005;

Hafez, 2018; Toly et al., 2019) like its credibility and reputation.

According to Chatjuthamard et al. (2021), positive moral capital acts

as an insurance or safeguard against the potential harm that may be

caused by negative stakeholder assessment. Therefore, both intangi-

ble assets such as corporate reputation and brand equity are crucial

for an organisation's growth in the financial services industry

(Almeida & Coelho, 2017; Lai et al., 2010; Piskin & Kamanli, 2020).

Received: 18 January 2021 Revised: 20 July 2022 Accepted: 23 July 2022

DOI: 10.1002/pa.2838

J Public Affairs. 2023;23:e2838. wileyonlinelibrary.com/journal/pa © 2022 John Wiley & Sons Ltd. 1of16

https://doi.org/10.1002/pa.2838

Although the relevance of CSR is observed in all domains of the econ-

omy, it appears to be especially significant in the monetary sector

(Balmer et al., 2017; Memon et al., 2019).

In the Indian banking industry, in fact, the acronym CSR has also

been termed as ‘Community Service Banking’(Pratihari &

Uzma, 2019). This is due to the fact that CSR in the Indian banking

sector focuses on financial inclusion and the provision of financial ser-

vices in the country's unbanked regions, as well as boosting the coun-

try's socio-economic growth through a focus on various activities

such as the eradication of poverty, delivery of education and health

care services, and the promotion of rural and infrastructure develop-

ment, and so forth (Dhingra & Mittal, 2014; Moharana, 2013;

Pratihari & Uzma, 2019). Therefore, since banking is one of the signifi-

cant sectors involved in delivering various CSR initiatives, this sector

plays a prominent role in the CSR landscape (Pratihari & Uzma, 2019).

In India, the banking industry has to deal with fierce internal competi-

tion because of the criticality of building and maintaining customer

connections in an environment characterised by the homogeneity of

service offerings (Poolthong & Mandhachitara, 2009). In such a sce-

nario, banks can distinguish themselves apart from their competitors

by implementing effective CSR activities and brand management

strategies, which help establish a distinct and favourable perception in

the minds of the customers of the banking industry (Perez & Del

Bosque, 2015; Ramesh et al., 2019). Thus, this study is highly contem-

porary and relevant, as it would enable bank executives to determine

how and to what extent CSR contributes to brand equity in competi-

tive financial markets.

1.1 |Research gaps

It is important to understand how customers truly assess the CSR

efforts of banks. This subject especially merits more diligent investiga-

tion in view of the paucity of literature on the subject. McDonald and

Rundle-Thiele (2008) stipulate that while banks finance diverse CSR

activities, little research has been undertaken on examining how cus-

tomers react to different CSR initiatives in retail banking. Although

research in this area has been conducted in the Western and devel-

oped countries, the corresponding investigations in developing coun-

tries have been few and far between (Gunesh & Geraldine, 2015).

Therefore, this study attempts to bridge this gap by examining how

Indian customers perceive the CSR initiatives implemented by banks

in India.

Although it is generally known that, CSR impacts both corporate

reputation (Salehzadeh et al., 2018) and brand equity (e.g., Fatma

et al., 2015; Hsu, 2012; Lai et al., 2010), not much is known as to how

perceptions of CSR influence company reputation and brand equity in

the Indian context. Moreover, despite the fact that corporate reputa-

tion is a significant construct for measuring brand equity, there is a

notable lack of empirical research examining the role of corporate rep-

utation in building brand equity (Hafez, 2018). Consequently, this

study proposes that corporate reputation could act as a prospective

mediator connecting CSR and brand equity. This study thus provides

an in-depth insight into the perceptions of banking customers about

CSR and its potential impact on brand equity through the impact of

company reputation.

1.2 |Rationale of the study

The purpose of this study is to examine the concepts of CSR, corpo-

rate reputation, and brand equity in banking services in light of the

aforementioned imperatives and arguments. There have been very

few studies adopting a multi-perspective approach to analyse the

implementation of CSR in the Indian banking industry are minuscule

(Pratihari & Uzma, 2018). Therefore, the current study act as an amal-

gam of several concepts originating from different approaches like

ethical responsibility, economic responsibility, and philanthropic

responsibility derived from Carroll's Pyramid of CSR (1991), and envi-

ronmental responsibility emanating from the triple bottom line con-

cept (Elkington, 1998). Furthermore, recognising the crucial role of

India's banking sector in the country's economy, this study focuses on

CSR practices carried out by Indian commercial banks, and introduces

corporate reputation as a meditational pathway connecting percep-

tions about CSR to brand equity. Consequently, the purpose of this

study is to examine a conceptual model delineating the direct and

indirect relationships of CSR with brand equity.

Through this work, we thus emphasise the need to study the fol-

lowing relationships that may exist among Indian banks with regard to

their CSR activities. In this context, research objectives that may be

formulated would be to examine the roles played by the following

concepts in determining the relationships between banks and their

customers:

1. CSR and brand equity among Indian banking customers;

2. CSR and corporate reputation; and

3. Corporate reputation and its mediating influence in the relation-

ship between CSR and brand equity.

2|LITERATURE REVIEW AND

HYPOTHESIS DEVELOPMENT

2.1 |CSR and its dimensions

From the discussion above, it is clear that CSR refers to a company's

interaction with the society at large, as well as the manner in which

the values engendered by a company value fit in with community

expectations (Atuguba & Dowuona-Hammond, 2006). In a more

detailed analysis, CSR refers to corporate policies and actions that

reflect the responsibility of the business to ensure the larger societal

good, according to Matten and Moon (2008). Furthermore, CSR also

plays a vital role in ensuring a firm's survival in the present competi-

tive environment (Dangelico et al., 2017; Howes, 2017; Waheed

et al., 2020). Thus, additional research is needed, particularly in emerg-

ing economies, to fully understand and appreciate the various CSR

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