Does Social Sustainability Improve Firm Financial Performance? A Comparison of the Conventional and Islamic Banks of Pakistan

Abstract

Purpose: This study aims to investigate the relationship between Social Sustainability (SS) and firm financial performance (FFP) of the banking industry of Pakistan. Design/Methodology/Approach: The study employs Ordinary Least Square with Panel Corrected Standard Errors (OLS- PCSEs) to a data of 21 banks from Pakistan for 7 years from 2011 to 2017. Findings: The findings revealed that SS improves FFP measured by ROA and ROE. The study also noted that Islamic banks are comparatively more active than conventional banks in SS and hence they have better FFP than their conventional counterparts. Practical Implications: The study provides important insights for the practice and action of the conventional and Islamic banks in a developing country like Pakistan. The findings motivate the conventional banks to follow the footsteps of the Islamic banks in perusing SS for improving their financial performance.