**1. Introduction**

Since the seminal study of Sheldon in 1923, the term "corporate social responsibility" (CSR) has received phenomenal interest from different scholars as a behavioral financial tool to align business interests with society's interests [1]. CSR can be viewed as an ecosystem that aims to enhance the welfare of a society by conducting ethical business practices. According to World Business Council for Sustainable Development (WBCSD), "CSR is the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the

workforce and their families as well as of the local community and society at large" [2]. CSR is neither a charity nor a one-stop process. It is dynamic, welfare-oriented, and largely context-specific. It is enunciated under the ambit of formal and informal institutions to fulfill social obligations and ensure legitimacy in doing business. As countries worldwide tend to differ regarding economic status, regulatory forbearance, and social sanctions, so does the paradigm of CSR. Thus, CSR remains an iconic area for research to accumulate knowledge.

For empirical works, scholars tend to identify ceteris paribus CSR's determinants and impacts from different perspectives, such as governance, management strategies, industrial nature, and regulatory and financial developments [3–5]. CSR activities in developing economies also vary from developed economies. While firms in developed economies tend to allocate a significant portion of CSR budgets to gender equality, work culture, ethical business practices, and reputation, developing economies are likely to view CSR as a philanthropic activity and rarely consider such social components of CSR in the policy [6]. Scholars also tend to offer confounding empirical results concerning the economic benefit of CSR activities across countries. For example, some studies reveal a positive and significant association between CSR disclosure and firm performance [7–9], whereas others accentuate the negative relationship between them [10, 11]. In addition, some studies highlight the positive link between CSR and governance elements, whereas others do not confirm it [12–14]. More importantly, Nobel laureate Paul Samuelson strongly advocates CSR activities as a testament to noneconomic success [15]. By contrast, another Nobel laureate Friedman raises a strong voice against using corporations' money for general social interest [16]. Thus, the importance of CSR on firm values and factors promoting CSR activities remains a highly debatable issue in academic literature.

Given the above, we study CSR activities by banks in an emerging economy, such as Bangladesh, and examine whether the board elements influence the CSR activities of the banking industry to add knowledge. We consider the banking industry because this sector plays a critical role in supplying finance and promoting economic growth in developing economies, such as Bangladesh. Moreover, the banking sector deserves special attention in CSR study because the long-term success of a bank depends on both transactional and relational capital that CSR activities can increase. Also, banks can influence other businesses to practice socially responsible behaviors by incorporating CSR tools in their lending models [17].

We consider Bangladesh as a case to study CSR activities for two reasons. First, Bangladesh has been one of the leading economies in South Asia in terms of GDP growth rates in the last decade (6% plus on average). While economic development is evident in Bangladesh, the country is subject to global warming. For example, despite producing only 0.56% of the global emissions, Bangladesh is considered one of the most environmentally vulnerable countries globally [18]. It is said that by 1950, nearly 18 million people will be displaced in Bangladesh because of the increase in sea level alone [19]. Furthermore, the climate change caused by global warming will create detrimental effects on health, energy, productivity, water supply, agriculture, forestry, and the ecosystem of the country. Recognizing such severe consequences of global warming, the government of Bangladesh considered CSR as an economic policy tool in 2008 to ensure corporate accountability on the one hand and build a sound ecosystem on the other. However, empirical research on CSR activities in Bangladesh is found to be scant thus far and mostly confined to CSR disclosures in the annual reports [5, 20–25]. Therefore, updated knowledge of CSR activities in Bangladesh is crucial to policy reforms. We fill this void.

#### *Does Board Structure Matter in CSR Spending of Commercial Banks? Empirical Evidence… DOI: http://dx.doi.org/10.5772/intechopen.105589*

Second, Bangladesh does not have a vivid capital market that can supply necessary funds to the entrepreneurial firms, implying that the lion's share of the funds is intermediated through commercial banks. Thus, commercial banks expect to play an essential role in increasing the qualitative development of Bangladesh beyond increasing the financial depth as they can deploy creditors' rights in monitoring the firm. In this pretext, the central bank of Bangladesh (Bangladesh Bank) issued the first guideline on CSR for the banks and nonbank financial institutions in 2008 to make them part of the ecosystem by giving tax rebates on CSR spending. Of late (January 10, 2022), Bangladesh Bank issued another circular on CSR, highlighting more spending on healthcare and environmental issues to ensure the use of the funds for sustainable development. In the meantime, some studies were undertaken to understand the CSR activities of the banking system of Bangladesh, but they were mainly limited to CSR disclosures and financial performance [5, 20–25]. Thus, little has been known so far on the governance and CSR nexus in the banking industry of Bangladesh.

Given the above, we seek to answer whether the board structure mater in CSR spending of the commercial banks in Bangladesh. As a supreme authority, the corporate board is responsible for and oversees management and governance activities, is entrusted with protecting shareholders' interests, and ratifies actions supportive of the economic and social values of the firm. The stakeholder theory suggests that the extent to which a firm can enhance stakeholders' welfare depends on the demographic and cognitive profiles of the board member [26, 27]. This, in turn, directs a firm to allocate resources to facilitate social welfare. That being said, the board composition is likely to deter or promote the CSR activities of a corporation. This is particularly true in countries, such as Bangladesh, where the banking system primarily caters to the country's financial needs. However, to our knowledge, few studies have checked the board structure and CSR nexus in the context of Bangladesh. Therefore, we empirically address this issue by hand-collecting data from the annual reports of 30 private commercial banks listed on the Dhaka Stock Exchange (DSE) in Bangladesh to update knowledge. Simultaneously, we review the CSR guidelines of the Bangladesh bank and unfold patterns of CSR spending to contribute to the policy-making.

We find that board elements, such as independent directors and board size have a significant and positive relationship with CSR expenditures, suggesting that banks with larger boards and boards with more independent directors tend to spend more money on CSR activities. This finding supports the stakeholder theory and aligns with the findings of previous studies [13, 26, 28]. By contrast, we reveal that female directors tend to deter CSR spending by banks, indicating that they are either free riders or not interested in the CSR activities of the banks. Regarding control variables, we reveal that factors, such as firm size and leverage, positively influence the CSR spending of commercial banks, while firms' profitably has no such connection. As regards the pattern of CSR spending by banks, we find that although the absolute amount of CSR spending by banks has increased substantially over the years, they are limited to certain sectors, such as health, education, humanitarian, and disaster sectors, with a heterogeneous trend.

The rest of the chapter is organized as follows: Section 2 provides an overview of CSR guidelines for the banking system of Bangladesh, while Section 3 discusses the sector-wise distribution of CSR spending by Banks. Section 4 reviews previous literature and formulates hypotheses. Section 5 discusses research methods. Section 6 provides regression results, and Section 7 concludes the chapter with some policy remarks.
