Corporate Social Responsibility Disclosure’s Impact on Financial Stability and Efficiency

: A Comparative Analysis of Islamic and Conventional Banks in the GCC

Abstract

Although Islamic and conventional banks convert the same core inputs (deposits, capital, and talent) into broadly similar outputs, they are organised around fundamentally different normative blueprints. shariah-compliant institutions are governed by the principles of social justice, risk sharing, and the prohibition of riba (interest), whereas conventional banks operate within a secular, contract-based paradigm. These contrasting logics colour every aspect of corporate social responsibility (CSR) reporting. Islamic banks are expected, by doctrine and stakeholder demand, to disclose charitable disbursements, benevolent lending, and shariah board oversight alongside the usual environmental and governance metrics. Whether such richer disclosure merely signals moral intent or feeds back into complex performance indicators, however, remains an empirical question.
This study tests that question across the banking sectors of the Gulf Cooperation Council (GCC) member countries over the 2006-2023 period. Drawing on a matched sample of 44 institutions: 22 Islamic and 22 conventional. The study applies a nuanced CSR disclosure index and employs detailed content analysis of more than 750 annual reports. Financial stability is assessed using Z-scores, naïve distance to default, and naïve probability of default models, whereas cost and profit efficiency are estimated using stochastic frontier techniques.
The results are strikingly asymmetric. More thorough CSR disclosure by Islamic banks is correlated with larger solvency buffers and leaner cost structures. However, it seemingly tempers short-term profit efficiency. In conventional banks, the same level of disclosure intensity enhances profit efficiency but also incurs additional overheads and offers no discernible benefits in terms of stability. The results indicate that CSR is not a one-size-fits-all driver of performance. Instead, its efficacy depends on how well a bank’s reported initiatives resonate with its underlying institutional values and with what its key stakeholders genuinely expect.

Date of Award	4 May 2026
Original language	English
Awarding Institution	University of Portsmouth
Supervisor	Karen McBride (Supervisor), Jia Liu (Supervisor) & Khaled Hussainey (Supervisor)