Summary of the thesis Business administration: The relationship between corporate social responsibility, brand equity and financial performance of joint-stock commercial banks in Mekong

The study focus on joint-stock commercial banks operating at Mekong Delta. Secondary data was collected from 2011-2018. Primary data is collected by in-depth interviews of experts working in banking industry and interviewing by questionnaires from January 2018 to August 2018. The object of this study is the relationship between corporate social responsibility, brand equity and financial performance of commercial banks. Interviewers are customers, employees and managers who are currently working in joint-stock commercial banks.

MINISTRY OF EDUCATION AND TRAINING

CAN THO UNIVERSITY

SUMMARY OF THE THESIS

Major: Business administration

Code: 62340102

LE PHUOC HUONG

THE RELATIONSHIP BETWEEN CORPORATE SOCIAL RESPONSIBILITY, BRAND EQUITY AND FINANCIAL PERFORMANCE OF JOINT-STOCK

COMMERCIAL BANKS

IN MEKONG DELTA

Can Tho, 2020

THE THESIS ARE COMPLETED AT

CAN THO UNIVERSITY

Supervisors: - Luu Tien Thuan, Ph.D

- Huynh Quang Linh, Ph.D

The dissertation is defended in front of the doctoral thesis committee at university level

The dissertation can be found at the library:

Learning Resource Center, Can Tho University

Vietnam National Library

LIST OF PUBLISHED ARTICLES

1 Le Phuoc Huong, Luu Tien Thuan 2017 Corporate social

responsibility - a literature review and future research directions

Can Tho University Journal of Science Vol 50 19-33

2 Le Phuoc Huong, Luu Tien Thuan 2017 Corporate social

responsibility of joint stock commercial banks: a study of some dimensions Journal Economics - Technology Bình Dương

University No19 83-94

3 Le Phuoc Huong, Luu Tien Thuan 2017 Corporate social

responsibility – A literature review and future research directions

UHD-CTU Annual economics and business conference, 13-14/1/2017, Can Tho University

4 Le Phuoc Huong, Luu Tien Thuan 2018 Corporate Social

Responsibility in Banking Banking Technology Review 148 48-67

5 Le Phuoc Huong, Luu Tien Thuan 2018 The effects of Corporate

social responsibility on brand equity and financial performance: The case of commercial banks in Mekong Delta Proceedings of

National Scientific Workshop: Economic and business development in Vietnam in the context of globalization Can Tho University 414 –

437

6 Le Phuoc Huong, Luu Tien Thuan and Nguyen Hai Trung 2018

Impacts of social responsibilities to the awareness of bank employees in the Mekong Delta Review of Regional Sustainable

Development 8/3 105-115

7 Le Phuoc Huong, Luu Tien Thuan and Hua Ngoc Le 2019 Corporate

social responsibility and customer loyalty: case of joint-stock commercial banks Journal Economics - Technology Bình Dương

University No 26 46-56

8 Le Phuoc Huong, Luu Tien Thuan 2019 The impact of corporate

social responsibility and brand equity on financial performance: The case of banking employees Journal of Science Ho Chi Minh

City Open University Vol 14 41-53

9 Le Phuoc Huong, Luu Tien Thuan 2019 The relationship between

corporate social responsibility, brand equity and financial performance: The case of commercial banks in Mekong Delta

Can Tho University Journal of Science Vol 55 85-94

10 Le Phuoc Huong, Luu Tien Thuan 2019 The impact of corporate

social responsibility on financial performance: Case of Vietnam joint stock commercial banks Banking Science & Training Review

Vol 211 12-24

et al., 2015) Some managers believe that CSR is simply charity work

while CSR includes internal factors, other managers think that barrier of implementing CSR’s practices is due to lack of human resources, financial resources and implementation techniques (Nguyen Dinh Tai, 2010) According to Sprinkle and Maines (2010), any organizations must pay attention to its impacts on environment and social security Although understanding social needs, banks or enterprises can hardly give up their goal of maximizing profits (Sprinkle & Maines, 2010) Therefore, the harmony between CSR’s activities and financial performance, that is good for society and benefits for organizations are absolutely legitimate and necessary

According to Fatma et al (2016a), each industry needs reliable

measurement tools for evaluating stakeholders’ perpection In addition,

few CSR’s studies in the Asian context (Chapple & Moon, 2005; Fatma et

al., 2014) Compared to other industries, banking industry is effected by

brand, reputations and negative information about reputation that will lead

to negative actions of stakeholders (Thompson & Cowton, 2004) Retail banks spent a lot of money on CSR’s programs to strengthen brands (McDonald & Rundle-Thiele, 2008) The importance of brand equity in the service sectors is crucial because their products and services are

intangible, so the trust of stakeholders is needed (Pérez et al., 2013) In

the context of restructuring Vietnamese banking system, in order to enhancing brand equity and financial performance through CSR’s programs of JSBs in Mekong Delta, the issues to be addressed are measuring the impacts of CSR’s perception of customers, employees and

managers From the above reasons, the study "The relationship between

corporate social responsibility, brand equity and financial performance

of joint-stock commercial banks in Mekong Delta" is a controversial

topic

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1.2 THE PURPOSE OF THIS STUDY

(1) To measure the impact of CSR’s perception on financial performance

of joint stock commercial banks

(2) To measure the impact of CSR’s perception on brand equity of joint stock commercial banks

(3) To measure the impact of CSR’s perception and brand equity on financial performance of joint stck commercial banks

(4) To propose some managerial implications for banking managers to conduct effectively CSR’s practices for enhancing brand equity and financial performance

1.3 SCOPE OF STUDY

The study focus on joint-stock commercial banks operating at Mekong Delta Secondary data was collected from 2011-2018 Primary data is collected by in-depth interviews of experts working in banking industry and interviewing by questionnaires from January 2018 to August

2018 The object of this study is the relationship between corporate social responsibility, brand equity and financial performance of commercial banks Interviewers are customers, employees and managers who are currently working in joint-stock commercial banks

1.4 THEORETICAL AND PRACTICAL CONTRIBUTIONS Theoretical Contributions

The findings of this research contribute to the field of CSR, which are meaningful for researchers, lecturers and managers, but also propose directions for further researches on the interaction between CSR, brand equity and financial performance In particular, according to the literature review, the author has not found any researches on the impact

of five perceived CSR’s dimensions and brand equity in two aspects: customer-based brand equity and employee-based brand equity on financial performance in banking industry Therefore, this study contributes to CSR perception and its academic marketing outcomes in several ways: (1) contributing to supplement scientific knowledge to the field of marketing and management, thereby enriching the sources of references in the field of marketing and management (2) constructing and testing to the CSR’s scale for banking industry, customer-based brand equity and employee-based brand equity, after verifying this reliability can be used for the future research In addition, this study is

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one of the pioneering studies that determine the impact of CSR’s dimensions, brand equity on financial performance by primary data and quantitative research (3) The findings propose many orientations for further studies to construct more tests to generalize deeply about the relationships of perceived CSR, brand equity and financial performance

in Vietnamese banking industry, and trying to apply the theoretical framework In addition, the process and methodology are considered as a reference for future researches

Practical contributions

The research results have practical contributions for banking industry

in Mekong Delta as well as Vietnam as follows: (1) Provide a scientific basis for banking managers to decide on the implementation of CSR’s activities and allocating resources on each dimensions to improve financial performance and enhance brand equity for gaining competitive advantage (2) Provide evidences to show the difference between staffs and managers, male and female customers in each CSR’s dimension So that, banking managers can apply suitable strategies for each group (3) Testing customer-based brand equity and employee-based brand equity and (4) The findings of this research and managerial implications as a meaningful reference for banking industry

1.5 THE STRUCTURE OF THESIS

The thesis consists of 151 pages with 5 chapters as follows: Introduction; Literature review and research model; Research design; Results and discussion; Conclusions and managerial implications

CHAPTER 2: LITERATURE REVIEW AND

RESEARCH MODEL

2.1 STAKEHOLDER THEORY

The term "stakeholders" first appeared in 1963 to present business ethics (Freeman, 1984) Stakeholders are participants, influencing or benefiting from CSR’s activities including shareholders/owners, community, customers, partners and staffs CSR’s practices should bring

the highest benefits to stakeholders Wang et al (2015) confirms the

theory of fulcrum to draw conclusions about CSR - financial performance relationship There are many theories used in CSR studies, but stakeholder theory is still the most reasonable theory and popular choice According to stakeholder theory, organizations aim to balance the

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expectations of all stakeholder groups through their activities Managers should consider and maintain the expectations of all stakeholder groups when they make decisions to disclosure relevant CSR’s information Inheriting previous studies, this thesis also applies stakeholder theory to approach CSR according to the dimensions of customers, employees, community, shareholders, legal and ethical requirement According to

Retolaza et al (2009), the stakeholder theory is the most relevant theory

to study CSR in banking industry

2.2 CORPORATE SOCIAL RESPONSIBILITY

The CSR’s definition of the European Commission (2001) is that enterprises should integrate social and environmental concerns into their business; interact with stakeholders on a voluntary basis CSR is a broad concept and is expressed in the view of individual researchers, depend on the context of the study (Dahlsrud, 2008) Researching the relationship between CSR, brand equity and financial performance, this thesis uses the CSR’s definition of European Commission (2001) and Carroll (1979) This concept covers the voluntary, social aspect, environmental aspect, economic aspect, and stakeholders According to Dahlsrud (2008), this CSR’s definition has the highest Google search frequency among the 37 definitions studied Currently, there is no legal document related to CSR

in Vietnamese banking industry

2.3 BRAND EQUITY

Customer-based brand equity: There are many different views on

brand equity model, but Aaker’s model (1991) is often cited by most

academic researchers (Atilgan et al., 2005) According to Kayaman &

Arasli (2007), the brand equity components are closely related, in which the higher perceived quality leads to the better brand awareness and increased brand loyalty Yoo & Donthu (2001) was implemented to develop a scale for evaluating customer-based brand equity The results have developed and validated multi-dimensional customer-based brand equity scales drawn from the concepts of Aaker and Keller’s brand equity Multi-step psychological tests proved that new brand equity scale is reliable, valid, analytical and generalized across many cultures and product categories including brand loyalty, perceived quality and brand image Similarly, in this study, the author contacted interviewers at branches, should ignore brand awareness, customer-based brand equity including brand loyalty, perceived quality and brand image

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Employee-based brand equity: be measured through some

dimensions are brand citizenship behaviour, employee satisfaction, employee intention to stay and positive employee word-of-mouth (King & Grace, 2010) Employee satisfaction is considered an important dimension

of employee-based brand equity and is related to employee engagement

(Boselie & van der Wiele, 2002) and active communication (Shinnar et

al., 2004) Brand citizenship behavior is the behavior of employees

according to standards consistent with the brand equity (Burmann & Zeplin, 2005) Employee satisfaction is the level of employee satisfaction received from their job and is the result of doing what they want and the value of that job (King & Grace, 2010) The employee intention to stay is

the future intention of employees to continue their current work (Good et

al., 1996) Positive employee word-of-mouth is the level at which an

employee is willing to say positive things about the business and is ready

to introduce the business to others (King & Grace, 2010)

Boaventura et al (2012), Robin et al (2018) In addition, two ratios are

widely publicized by joint-stock commercial banks through audited financial statements to confirm the truthfulness and reasonableness Moreover, ROE and ROA measures the income ratio, reflecting the actual situation of banks in an accounting period, in order to see more clearly the relationship between CSR, brand equity and financial performance

2.5 LITERATURE REVIEW

Chomvilailuk & Butcher (2010) tested the positive impact of CSR

on brand preference and perceived quality Thailand banking industry Banking industry is considered to be the most competitive industry in Brazil, Scharf & Fernandes (2013) using secondary data can show the

relationship between CSR and brand awareness Mirabi et al (2014) conducted research with Iranian banking industry context, Fatma et al (2015) with the context of Indian banks, Khan et al (2015) conducting

research in the context of Pakistan banks In summary, CSR’s perception

in banking industry of two internal and external entities gives different results on the impact of CSR on brand equity Experimental studies have

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demonstrated a causal relationship between CSR and bank performance

such as Wu & Chen (2013), Adegbola (2014) and Iqbal et al (2014) In

the context of Pakistan banks, Malik & Nadeem (2014) argued that banks have many limitations in implementing CSR’s activities, although CSR positively impact on financial performance Understanding the relationship between CSR and financial performance is really valuable for managers, shareholders and other stakeholders to help them making decisions on allocating resources, promoting CSR’s activities (Simpson & Kohers, 2002) However, the perceived of CSR is ambiguous and adapting to CSR is limited (Truong, 2016)

After literature review, I have not found any research to study the relationship between CSR, brand equity and financial performance in banking industry and some issues have not been properly concerned Some gaps in the study of CSR’s topics are as follows: (1) Previous research focused on secondary data of listed companies on the stock exchange CSR’s perception is ambiguous (2) Most of the CSR’s studies

in the first period focused on developed countries (3) CSR’s research in Vietnamese banking industry has not used primary data as well as quantitative methods (4) Putting the brand equity to the intermediate component in CSR- financial performance relationship has not found any research done, especially the banking sector (5) Factors that are considered to have an impact on measuring brand equity from the perception of customers and employees is related to CSR So putting brand equity in the relationship between CSR and financial performance has special significance in banking industry

2.6 HYPOTHESIS DEVELOPMENT

CSR and financial performance

One of the most important goals of enterprises is to consider how the

impact of CSR investment on financial performance (Pätäri et al., 2014)

Friedman (1970) which argues that corporate responsibility is to add value to shareholders, regardless of social issues, while Narver (1971) argues that moderate businesses must maximize shareholders' benefits and should take voluntary actions for social issues, especially pollution According to Lee (2008), CSR’s studies have shifted from macro-level research to micro-level (enterprise) and shifted to studying the impact of CSR on profits Literature review showed that there are three groups of discussing the CSR - financial performance relationship including

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positive relationship, negative relationship and no relationship The second group based on stakeholder theory of Freeman (1984) argues that there exists a positive relationship between CSR and financial performance CSR will improve company value through cost savings, strengthening reputation However, a positive relationship is evident with

some specific conditions According to Crifo et al (2016), many CSR’s

dimensions combined together will positively impact on financial performance rather than approach only one dimension The positive direct relationship between CSR and financial performance is demonstrated by

many empirical studies such as Kang et al (2010), Babalola (2012), Chetty et al (2015) Lee et al (2013) researched employees' awareness of

CSR’s activities that showed that CSR’s perception has a positive impact

on company performance

CSR and brand equity

Studying the CSR - brand equity relationship often focuses on customer to operate managerial strategies Polonsky & Jevons (2009) believed that there is a relationship between CSR and brand equity, so managers should connect CSR’s activities and branding activities Empirical researches provided evidences of positive effects of CSR on

components of brand equity (Lai et al., 2010; Hsu, 2012) In service

sector, CSR impacts on brand equity directly (He & Li, 2011) CSR used all stakeholder’s approach has a positive impact on brand equity,

especially customer (Torres et al., 2012) CSR is considered as a good

tool to achieve brand image, perceived quality and customer loyalty

(Martínez et al., 2014; Tingchi Liu et al., 2014; Hur et al., 2014; Enock &

Basavaraj, 2014; Esmaeilpour & Barjoei, 2016) In summary, there is a relationship between CSR and brand equity with different levels when studying different industries

Brand equity and financial performance

There is a large number of studies about the positive relationship between brand equity and firm performance in different industries For example, the brand equity positively impacts on profitability (Park &

Srinivasan, 1994; Aaker, 1996; Kim et al., 2003) Moreover, Srivastava & Shocker (1991) and Shocker et al (1994) demonstrated that brand equity

influences on future profits and long-term cash flows According to customer approach, the components of brand equity such as brand loyalty, perceived quality, brand image have a positive effect on financial

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performance (Kim & Kim, 2005) In service industry, this impact is even more dramatic, but few studies have empirically demonstrated the relationship between brand equity and financial performance for service

brands (Kim et al., 2003) Non-parametric analysis shows that there is a

positive relationship between the components of brand equity and

financial performance (Kim et al., 2003) The success of brand

management comes from understanding brand equity and managing brand equity to increase financial performance (Kim & Kim, 2005) In terms of effectiveness, some studies have confirmed a positive relationship between brand equity and company performance (Park & Srinivasan, 1994; Aaker, 1996) Prasad & Dev (2000) argue that strong brand equity will drive up revenue Wang and Sengupta (2016) showed that brand equity plays an intermediary role in the positive relationship between stakeholders and company performance

From the proposed conceptual framework, the author review literature to build hypotheses Literature review and the current situation

of banking industry, the perceived of CSR is divided into 5 dimensions (employee, shareholder, legal and ethical requirement, customer,

community) according to Pérez et al (2013) and these dimensions have a

positive impact on brand equity and financial performance This discussion leads to hypotheses: H1 to H5 each CSR’s dimension is positively associated with financial performance We proposed the following hypotheses from H6 to H10 each CSR’s dimension impacts positively on brand equity and H11 Brand equity is positively associated with financial performance, mediates the impact of CSR on financial performance

2.7 CONCEPTUEL MODEL

After literature review, the author proposes the proposed conceptuel model Accordingly, dimensions of corporate social responsibility impact positively on brand equity and financial performance; brand equity positively impact on financial performance

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CHAPTER 3: RESEARCH DESIGN

3.1 QUALITATIVE RESEARCH

The main objective of qualitative research is to understand the status

of how joint-stock commercial banks implement CSR’s activities, the financial performance of joint-stock commercial banks The author aims

to explore CSR’s dimensions, and whether these dimensions affect on brand equity and financial performance At the same time, the author aims

to discover the perception of customers and employees as a result of the process of perceived CSR of customers and staffs, and whether these factors are related to brand equity and financial performance The author selected 23 experienced managers in banking management to assess the overall picture of CSR’s perception, brand equity and financial performance for joint-stock commercial banks operating in Mekong Delta Specifically, it is summarized in the following table:

Table 3.1 Design of qualitative research

Research method Characteristics

Scope Joint-stock commercial banks are operating in Mekong Delta Information Managers in the banking industry

Collected data Analysis of secondary information from financial statements,

annual reports, sustainable reports, information on stock commercial bank website, State Bank of Vietnam Data analysis In-depth interviews and content analysis

Joint-Cases 12 of the total 29 joint-stock commercial banks in 12

provinces in Mekong Delta

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3.2 QUANTITATIVE RESEARCH

From the results of the literature review and qualitative research, the author proposes conceptual model and hypotheses In order to test these hypotheses, the author needs to conduct a large-scale survey, collect data from customers and employees, and then analyzed collected data The sequence of steps is carried out as follows: constructing the scales, collecting data for formal research and data analysis

Constructing the scales to measure concepts

The proposed conceptual framework has four main concepts, in which CSR is divided into five dimensions, specifically as shown in Table 3.2

Table 3.2 Measurement scale for CSR

In my bank…

Community dimension

csr101

Uses part of its budget for

donations and social projects to

advance the situation of the most

unprivileges groups of the society

Carroll (1991), Maignan

et al (1999), Maignan

(2001), David et al (2005), Singh et al

(2008), Melo & Morgado (2012),

Garrido-Martinez et al (2013), Tingchi Liu et al (2014), Fatma et al (2014), Raufflet et al (2014), Khan et al (2015)

Fatma & Rahman (2016)

csr102

Contributes money to cultural and

social events (music, sports )

csr103

Plays a role in the social beyond the

economical benefits generation

csr104

Is concerned with improving the

general well-being of society

csr105

Is concerned with respecting and

protecting the natural environment

Employee dimension

csr201 Pay fair salaries to its employees Boal & Peery (1985),

Maignan et al (1999), Mercer (2003), David et

al (2005), Marin et al

(2009), Tingchi Liu et al

(2014), Pérez & del

Offers training and career

opportunities to its employees

csr205 Offers a pleasant work environment

csr206 Helps solving social problems

Customer dimension

csr301

Establishes procedures to comply

with customers’s complains Carroll (1991), Maignan et al (1999),

McWilliams & Siegel (2001), Mercer(2003), Decker (2004), Crespo & del Bosque (2005), Singh

csr302 Treats its customers honestly

csr303

Has employees that offer complete

information about corporate

products/services to customers

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csr304

Uses customers’ satisfaction as an

indicator to improve the

product/service marketing

et al (2008), Fatma et al

(2014), Zheng et al (2014), Tingchi Liu et al

Always respects rules and

regulations defined by law

Maignan et al (1999),

Maignan (2001), Mercer (2003), Crespo & del Bosque (2005), Tingchi

Liu et al (2014), Khan et

al (2015)

csr502

Is concerned with fulfilling its

obligations vis-a-vis its

Table 3.3 Measurement scale for customer-based brand equity

cbbe01

The appearance of counter and staff

(clean, neat, appropriately dressed)

cbbe02 The bank has up-to-date equipment

cbbe03 This bank is a top brand

cbbe04

Its personnel are knowledgeable about all

areas of bank services and friendly

cbbe05

I can recognize this bank branding

among other competitors

cbbe06

Financial services of this bank are high

quality

cbbe07 This bank offers high level of services

cbbe08 This bank is my first choice

cbbe09

I am satisfied with the perceived quality

of this bank

cbbe10 I recommend this bank to others

cbbe11 I would not switch to other banks for the next time