Journal of Retailing and Consumer Services 29 (2016) 4957

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Journal of Retailing and Consumer Services

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The CSR's inuence on customer responses in Indian banking sector

Mobin Fatma a,n, Zillur Rahman b
a
Research Development Center, Asia Pacic Institute of Managemnt, New Delhi 110025, India
b
Department of Management Studies, Indian Institute of Technology, Roorkee 247667, India

art ic l e i nf o a b s t r a c t

Article history: In the face of growing attention to corporate social responsibility (CSR) activities in the marketplace, this
Received 20 May 2015 paper seeks to demonstrate how corporate social responsibility (CSR) initiatives inuence customer
Received in revised form purchase intention in context of Indian retail banking. Further, the impact of awareness as a moderating
27 October 2015
variable between CSR and purchase intention has been examined. The conclusion drawn from this study
Accepted 14 November 2015
have important implications for Indian banks as they suggest that building a socially responsible image
might have a favorable effect on consumer purchase intention. Findings suggest that corporate ability has
Keywords: a strong effect on customer purchase intention while CSR activities were found to exert inuence on
Corporate social responsibility customer purchase intention in cases where the customer was aware of such activities being conducted.
CSR
This paper contributes to existing CSR literature by offering a deeper understanding into CSR dynamics
Indian banks
and its effect on consumer purchase intention. Further, the study tests the level of consumer awareness
Purchase intention
of CSR activities in a real market situation (not articial or simulated) which has not been done in
previous studies.
& 2015 Elsevier Ltd. All rights reserved.

1. Introduction inconclusiveness warrants further research on the effect of CSR

Practitioners today believe that companies are responsible to
the society within which they operate and need to full these
social obligations. This emphasizes the concept of corporate social
responsibility (CSR) which has not only been signicantly dis-
cussed in literature, but also acknowledged as business practice.
Many companies hire consultancies to advise them on the design,
implementation and communication of CSR strategies (Dusuki,
2008). The growing attention to this topic is evident in academic
literature; an increasing number of articles, books and specialized
journals are dedicated to this subject. These publications cover a
wide range of issues associated with CSR activities including the
motivations behind companies engaging in CSR practices, return
on investment, and communication and implementation of CSR
practices among others. However, studies have not been able to
determine the degree of returns to the rm from CSR activities
(Vaaland et al., 2008).
Although some researchers report a positive consumer re-
sponse towards companies engaged in CSR activities (Pomering
and Dolnicar, 2009; Gao, 2009; Parsa et al., 2015), others have
found that consumers are not interested in socially responsible
practices (Vaaland et al., 2008; Carrigan and Attalla, 2001). This
n
Corresponding author.
E-mail addresses: mobinfatimambd@gmail.com (M. Fatma),
zrahman786@gmail.com (Z. Rahman).
activities on consumer response. Most of the studies examining
consumer perception of CSR and its effect on behavioral outcomes
are experimental in nature (Berens et al., 2005; Sen and Bhatta-
charya, 2001; Brown and Dacin, 1997); respondents were put into
ctitious/simulated situations and their responses measured. In
reality however, responses may vary from those that were ob-
tained in articial surroundings because socially responsible
practices are not well known due to their complex nature (Mohr
et al., 2001). Thus, it would be interesting to examine the level of
consumer awareness of CSR initiatives and its subsequent effect on
customer purchase intention.
A majority of the research in this context has been done in
developed economies like US and UK, and there are limited studies
in developing nations like India. The banking sector in India is the
backbone of the economy and facilitates growth and development
of industries through the supply of capital. As per the guidelines of
Reserve Bank of India (RBI), banks in India should commit to social
and environmental responsibility in their operations. Also, CSR has
become a global phenomenon and calls for a better understanding
of consumer responses in developing nations (Fatma et al., 2015).
This study is an attempt to ll this void in literature by in-
vestigating CSR initiatives in the Indian banking context.
The study examines CSR activities carried out by Indian banks,
as their products and services are extensively spread among the
Indian population. This fact ensures that consumers will have
some knowledge of corporate associations and build their opinion
about the banking companies accordingly (Fatma et al., 2014). The

http://dx.doi.org/10.1016/j.jretconser.2015.11.008
0969-6989/& 2015 Elsevier Ltd. All rights reserved.
50 M. Fatma, Z. Rahman / Journal of Retailing and Consumer Services 29 (2016) 4957
banking sector is proactively engaged in CSR initiatives and has
become the main investor in these activities globally (Ogrizek,
2002; Decker, 2004; Fatma and Rahman, 2014). The effect of CSR
activities by banking rms on consumer behavioral outcomes
makes it a worthy topic of study. This study explores the im-
plications of CSR activities by rms on customer behavior relevant
to practitioners and academics.
The objectives of this study are: (1) to understand the ways in
which banks conduct CSR activities, (2) to determine consumer
awareness of these initiatives, (3) to measure the effect of con-
sumer awareness of CSR activities on consumer purchase inten-
tions, and (4) to understand how consumers trade-off between
traditional criteria and socially responsible practices. The paper is
structured as follows: It starts with review of literature and further
develops the hypothesis. Next, it explains the research metho-
dology adopted for the study followed by analysis, results and
discussion. The paper closes with conclusions and implications of
the study.
2. Literature review
2.1. Corporate social responsibility (CSR)
CSR has been dened in literature from different perspectives
from the Friedman classical view of maximizing return to share-
holders to the modern view of CSR as, the company's status and
activities with respect to its perceived societal or, at least, stakeholder
obligation (Brown and Dacin, 1997, p. 68). The term CSR implies
that companies have a responsibility towards the society in which
they operate, however the term does not mean the same thing for
everyone (Votaw, 1972). To some, it refers to legal responsibilities
while representing ethical and philanthropic responsibility to others.
The term responsibility used here is not directly related to an ob-
ligation or duty but seems to be voluntarily in action. Despite the
proliferation of different denitions and the complexity surrounding
the concept of CSR, many conceptualizations exist in CSR literature
including those that suggest this as a social or stakeholder obligation
(Maignan and Ferrell, 2000).
Carroll, 1979, 1991 offered a framework wherein he dened
CSR as the social responsibility of business encompasses the
economic, legal, ethical and discretionary (philanthropic) ex-
pectation that society has of an organizations, thus contributing
signicantly to CSR literature. He further stated that these re-
sponsibilities are left to the choice of mangers. Some of the ac-
tivities are guided by the company's desire to assume a social role
not mandated by law or expected from the business. Mohr et al.
(2001, p. 47) further elaborated these responsibilities and dened
CSR as a company's commitment to minimizing or eliminating
any harmful effects and maximizing its long run benecial impact
on society. In this regard, CSR includes an array of actions such as
behaving ethically, environmental protection and fair treatment of
employees. This denition considers the direct and indirect effects
of CSR activities on every stakeholder, and suggests that such ac-
tivities must be managed according to stakeholder theory (Mohr
and Webb, 2005).
Another widely accepted denition of CSR was given by the
European Commission (2001): CSR is a concept whereby com-
panies integrate social and environmental concerns in their busi-
ness operations and in their interaction with the stakeholders on
the voluntary basis. Campbell (2007), appreciates the centrality of
the stakeholder position and suggests that companies must not
knowingly do anything that could harm their stakeholders and if a
corporation do cause harm to their stakeholders, they must then
rectify it whenever the harm is discovered and brought to their
attention (p. 951).
2.2. Stakeholder view on CSR
The stakeholder concept is primary to CSR (Jamali and Mirshak,
2007). The term stakeholder is broad in scope and is dened as
those groups and individuals who can affect, or are affected by,
the achievement of an organization mission (Freeman, 1984, p.
54). Researchers have classied stakeholders as primary or sec-
ondary, voluntarily or involuntarily and external or internal (Tur-
ker, 2009). Stakeholders, acting either formally or informally, in-
dividually or collectively, are a key element in the rm's external
environment that can positively or negatively affect the organi-
zation (Murray and Vogel, 1997, p. 142). As per the stakeholder
view, the key challenge for managers and theorists is to know how
to improve the companystakeholder relationship by delivering
mutual benets (Bhattacharya et al., 2009). These benets may
have a conict of interest among stakeholders; a benet may hold
value for one stakeholder while another stakeholder might not
consider it to be as valuable (Bhattacharya et al., 2009).
One of the most important stakeholder groups sensitive to a
company's CSR activities is its customers (Bhattacharya and Sen,
2003). A survey done by Cone Corporate Citizenship study (2004)
suggested that 80% of Americans were willing to support compa-
nies associated with a socially responsible cause. There are a large
number of studies in extant literature suggesting that consumers
reward companies for engaging in CSR initiatives (Bhattacharya
and Sen, 2004; Feldman and Vasquez-Parraga, 2013). In order to
better understand the outcomes of CSR activities, an under-
standing of stakeholder benets is required (Bhattacharya et al.,
2009). There is limited literature on the psychological mechanism
that drives stakeholders' reaction to CSR activities carried out by
companies (Bhattacharya et al., 2009). According to the means-
end chain approach theory, consumers make purchase decisions
on the basis of functional benets related to the features of the
product/service, psychological benets related to the emotional
well-being of the person and their own personal values (Bhatta-
charya et al., 2009). Although CSR activities may not provide any
direct functional benets, they may contribute to psychological
benets and the well- being of society.
2.3. CSR and banking industry
Socially responsible activities have received signicant attention
in the banking sector (Peterson and Hermans, 2004). Today, a major
part of the bank's interest goes into solving social problems and
community welfare programmes (Rugimbana et al., 2008). Thus,
banks have become proactive investors in CSR activities (Marin et al.,
2009) and are communicating and reporting these practices through
multiple communication forums (Peterson and Hermans, 2004).
European Commission (2001) has suggested that CSR is a
multidimensional construct and has industry specic dimensions.
Compared to other sectors, banks have more visibility in society
(Mandell et al., 1981) and a higher product involvement. As
Thompson and Cowton (2004) suggested, banks are more likely to
be inuenced by negative reputation as compared to other com-
panies and are more vulnerable to negative reactions from sta-
keholders. It is critically important for banks to manage their re-
putation in order to differentiate themselves from competitors and
maintain stakeholder condence (Flavin et al., 2005). Retail banks
spend millions of dollars on CSR programs in order to strengthen
their reputation (McDonald and Rundle-Thiele, 2008). The im-
portance of building and managing a reputation in the service
sector is high due to the intangible nature of the product and the
need to build trust among stakeholders (Perez et al., 2013). Con-
sidering the important implications of CSR, a meaningful discus-
sion on CSR of the banking industry would bring out the important
areas of societal concerns in this sector.
 M. Fatma, Z. Rahman / Journal of Retailing and Consumer Services 29 (2016) 4957
The Indian banking sector is very competitive and rms have
started adopting CSR activities as a way to differentiate themselves
from competition (Fatma et al., 2015). In addition, law has man-
dated banking rms to invest two percent of their prots on CSR
activities. It thus becomes imperative for organizations to better
know how their CSR activities are helping in building relationships
with stakeholders. Whether the efforts made by banks through
CSR activities have any effect on their clients' behavior is worth
studying. Despite the large amount of money invested by banks in
CSR initiatives, there is limited research on how to evaluate CSR
activities, corresponding consumer responses and level of con-
sumer awareness of CSR activities (McDonald and Rundle-Thiele,
2008). How consumers evaluate and tradeoff between banks'
corporate ability and CSR actions is unclear (Rugimbana et al.,
2008) due to the limited understanding of consumer responses to
CSR activities. Some researchers have suggested that consumers
prefer CSR initiatives that favor them individually rather than
those that benet the community.
2.4. Consumer responses to CSR
Till date, many researchers have analyzed the effects of CSR
activities on customer behavior (Carvalho et al., 2010; Tian et al.,
2011; Oppewal et al., 2006; Becker-Olsen et al., 2006; Fatma and
Rahman, 2015) but the results are inconclusive (Chomvilailuk and
Butcher, 2013). Many studies have reported a positive inuence of
CSR activities on consumer behavioral outcomes such as product
evaluation (Brown and Dacin, 1997), company evaluation (Sen and
Bhattacharya, 2001), word of mouth (Handelman and Arnold,
1999), purchase intention (Tian et al., 2011), loyalty (Garcia de Los
Salomones et al., 2005) and brand equity. Luo and Bhattacharya,
2006 also found a positive association between the companies'
CSR rating and customer satisfaction. In a MORI (2000) survey of
consumers, it was found that 70% of consumers considered the
ethical reputation of business when buying a product or services.
The Center for Corporate Citizenship at Boston College reported
that too often, businesses and social activists take consumer
surveys at face value, believing that if people say that they would
like to purchase socially responsible goods, they will follow
through when it comes time to make the purchase (www.csreu
rope.org). These studies suggest that companies engaged in so-
cially responsible activities get favorable responses from custo-
mers as compared to the less socially responsible companies
(McDonald and Rundle-Thiele, 2008).
Nevertheless, there are several studies that have reported a no
relationship between CSR activities and consumer behavioral
outcomes (Vaaland et al., 2008; Carrigan and Attalla, 2001). Ac-
cording to Becker-Olsen et al., 2006, consumers will punish rms
for socially irresponsible actions. Sen and Bhattacharya, 2001 re-
ported that CSR activities can lead to a decrease in consumer
purchase intention if consumers have a belief that these activities
are at the cost of corporate ability (price, quality). Despite sig-
nicant literature on CSR and consumer responses, a compre-
hensive conceptualization has not yet been developed; CSR is still
generally understood as a couple of initiatives, ignoring the broad
spectrum of CSR activities.
2.5. CSR in a developing economy
CSR in a developing nations refers to the formal and informal
ways in which business makes a contribution to improving the
governance, social, ethical, labor and environmental conditions of the
developing countries in which they operate, while remaining sensi-
tive to prevailing religious, historical and cultural contexts (Visser,
2005a). In the last few years, CSR has emerged as a movement in
many developing countries like China, Brazil, India and South Africa
51
(Chapple and Moon, 2005). These countries face social challenges like
poverty, social degradation, hunger and disease, and social inequal-
ities (UN, 2006, p. 3). It has become more like a function of the na-
tional business system rather than a voluntary activity in developing
nations (Matten and Moon, 2004). Many companies in developing
countries are globalizing and accessing the international market
while adopting practices such as CSR code and sustainability re-
porting (Visser, 2005a). Belal (2001) pointed out that most of the
research on CSR has been done in the context of western countries
(e.g. USA, UK, Australia) and still little is known about CSR in emer-
ging countries, highlighting the need for more research on CSR in
developing countries (Jamali and Mirshak, 2007).
3. Hypothesis development
The conceptual model used in this study is shown in Fig. 1.
Studies (Mohr and Webb, 2005; Brown and Dacin, 1997) suggest
that increased attention to CSR activities seems to result in con-
sumer willingness to pay higher. Despite the interest shown by
consumers in CSR activities, in reality it plays only a minor role in
their purchase decision (Mohr et al., 2001). On the other hand,
numerous studies have shown that CSR activities have a positive
inuence on consumer purchase intention when consumers are
interested in these activities. It may be accepted that there must be
an agreement between CSR activities and business strategies of a
company. Also, unethical practices tend to have a greater negative
impact on purchase intention as compared to the positive impact
of ethical ones (Trudel and Cotte, 2009). For instance, Creyer and
Ross (1997) found that consumers rewarded companies for so-
cially responsible behavior by paying premium prices for their
products/services, and also penalized companies that were un-
ethical by demanding lower prices for their products. The inu-
ence of CSR activities on consumers' purchase intention is complex
and its effect can be direct or indirect. Its effect is direct when it
converts consumers' belief of CSR activities into positive action
(increased purchased intention) and indirect when the corporate
context for CSR activities is created (Sen and Bhattacharya, 2001;
Mohr and Webb, 2005). Consumers who respond positively to
socially responsible practices of companies tend to exhibit a more
responsible purchase behavior (Mohr and Webb, 2005). Many re-
searchers reveal that consumers feel it is important for companies
to be involved in CSR practices, but this perceived importance of
CSR practices is rarely reected in their actual purchase behavior
(Basil and Weber, 2006). Therefore, we propose the following
hypothesis-
H1. CSR association is positively related to consumer purchase
intention.
Corporate ability (CA) refers to consumers' perception of a
company's core competitive ability (Prahalad and Hamel, 1994). It
includes a rm's expertize in producing or delivering products or
services innovatively (Brown and Dacin, 1997) and the abstract
dimensions that may summarize a number of different attributes
Awareness
Corporate ability H2
H3
Purchase intention
H1
CSR
Fig. 1. Conceptual model.
52 M. Fatma, Z. Rahman / Journal of Retailing and Consumer Services 29 (2016) 4957

of a company (Berens and van Riel, 2004, p. 56). These attributes
refer to the company's expertize in manufacturing, innovativeness,
product quality, research and development, customer orientation
and employee expertize (Gupta, 2002). Corporate ability associa-
tion related to the quality of products or services imply companies'
expertize in managing the existing product or services and
meeting the customer needs while on the other side, CA associa-
tion related to innovation imply the company's ability to develop a
new technology and responded to the changing market demand.
Consumer perception related to corporate ability features helps
the company in reducing the perceived risk and helps the custo-
mer in evaluation and building a trust with the company (Doney
and Cannon, 1997).Previous research has found CA association to
have a positive inuence on product evaluation (Berens et al.,
2005; Brown and Dacin, 1997) and corporate evaluation done by
the consumer (Sen and Bhattacharya, 2001; Luo and Bhattacharya,
2006). Therefore, the following hypothesis is proposed:
H2. CA association is positively related to consumer purchase
intention.
3.1. Moderating role of consumer awareness of CSR
Consumer awareness of CSR activities is a precondition to
benets such as customercompany identication (Marin et al.,
2009), loyalty (Becker-Olsen et al., 2006) and purchase intention
(Tian et al., 2011; Marquina and Morales, 2012), but awareness
levels vary among consumers (Bhattacharya and Sen, 2004). Most
studies either assume that consumers would be aware, or aware-
ness is articially created under experimental conditions (Brown
and Dacin, 1997; Tian et al., 2011). It has been found that con-
sumers are generally unaware of the CSR activities of companies
(Sen et al., 2006; Pomering and Dolnicar, 2009), but proper com-
munication can raise the level of awareness (Wigley, 2008). Car-
rigan and Attalla (2001) reported that consumer lack the in-
formation about the company's overall behavior, not only its
ethical practices but also the unethical ones. Literature has pro-
vided contradictory evidence, as another has said that consumers
are aware about the unethical practices of the companies as the
media tend to cover these activities (Alexander, 2002). If con-
sumers are made aware of CSR activities, it may lead to positive
attitude and behavioral intention towards buying the product
(Pomering and Dolnicar, 2009). Therefore, the following hypoth-
esis is proposed:
H3. Consumer awareness of CSR activities moderates the re-
lationship between CSR association and consumer purchase in-
tention, such relationship is stronger when awareness is high
versus low.
involvement is important because consumers process information
before making a purchase decision. In such a case, CSR should have
a signicant inuence in the formation of an image in the custo-
mer's mind. This makes the banking business an interesting case
to study due to both the commercial ability and marketing asso-
ciation along with its CSR. This fact is advocated by the growing
body of academic literature on the relationship between nancial
service providers and their clients (Romn and Ruiz, 2005; Marin
and Ruiz, 2007; Jrvinen et al., 2003).
The objective of this study is to investigate the CSR initiatives of
Indian banks and determine how these initiatives inuence cus-
tomer behavior. The sample considered for the survey comprised
customers of public sector banks residing in Delhi the capital of
India, with a population of around sixteen million (Census, 2011).
The total population of NCT of Delhi stands at 16,787,941, out of
which 53.53 per cent (8,987,326) are males while 46.47 per cent
(7,800,615) are females. This highlights that Delhi has extensive
client base and more banks have the capacity to focus on Delhi as
an objective business. Delhi is an economically developed city of
India, so the residents have enough experience to answer the
question about the CSR activities (Fatma et al., 2015). The custo-
mers mentioned above were individuals above 18 years of age who
had a bank account and were responsible for nancial matters
with the bank at the time of survey. This made it possible to gather
information from customers with enough experience with the
bank. Data were collected through personal surveys during
working hours in different branches of different banks.
Non-probabilistic sampling procedure has been used with a
combination of quota and convenience sampling methods consider-
ing two demographic criteria respondent age and gender. To ensure
that the sample represented the population, quota was stratied on
the basis of the population characterization that is periodically done
by the National Sample Survey Ofce (NSSO) in India. The data was
collected between January 2014 and March 2014 and a total of 454
people were contacted in various banks. The total number of valid
responses received was 423, making the response rate 93%. Of all
respondents, 55.31% were male and 44.68% were female which is
comparable to Delhi population shown in Table 1. The majority of
respondents (46.80%) were 4060 years old. Also, most of the re-
spondents (50.59%) had completed intermediate education. The
sample description is given in Table 1.
4.2. Measures
The survey instrument comprised ve sections: The rst sec-
tion gathered respondent demographic information. Section two
comprised questions related to the bank's ability of providing
better services. The third section captured consumer perception of
the bank's socially responsible practices. Section four comprised
questions measuring the level of consumer awareness of the

4. Methodology Table 1
Sample description.
4.1. Sample and data collection
Variable Sample % Population %
This theoretical model was tested in the Indian banking sector
Gender
which enjoys some relationship marketing advantages with cli- Male 234 55.31 8987326 55.53
ents; the high risk perceived by customers in the decision making Female 189 44.68 7800615 46.46
process makes them build a relationship with their bank (Perez Size 423 16787941
et al., 2013; Marin and Ruiz, 2007). Banking services demand a Age
Under 40 156 36.87 6926704.45 41.26
high degree of involvement with the consumer and are char- 4060 198 46.80 8096823.94 48.23
acterized as risky and infrequently purchased by the consumer. In Over 60 69 16.31 1764412.59 10.51
this case, the purchase is not on a daily basis, but actually the Qualication
decision to become a customer of a bank. As a consequence, Intermediate 214 50.59 7999453.88 47.65
Bachelors degree 123 29.07 2724682.82 16.23
banking customers engage in a complex decision making process Masters degree 86 20.33 1660327.36 9.89
(Kotler and Lee, 2005). Investigating services that warrant high
 M. Fatma, Z. Rahman / Journal of Retailing and Consumer Services 29 (2016) 4957 53

bank's CSR initiatives. The last section consists of items measuring Table 2
consumer purchase intention. All items in this study have been Standardized loadings.
taken from previous studies and modied according to the re-
Construct Item Convergent Relibility
quirements of the present study. Items have been measured using validity
a ve point Likert scale. Before the nal survey, a pilot test was Standardized AVE CR Cronbach's
done with MBA students to evaluate readability of the scale. Ex- loadings
ploratory factor analysis with varimax rotation was used to ana-
Corporate ability CA1 0.85 0.71 0.928 0.89
lyze the appropriateness of the items in their respective factors (CA) CA2 0.82
and some of the items were rephrased and removed from the CA3 0.79
questionnaire. The nal list of measurement of items is given in CA4 0.76
appendix. Corporate social re- CSR1 0.74 0.079 0.906 0.93
sponsibility (CSR) CSR2 0.76
Corporate ability was measured with four items taken from the
CSR3 0.84
study of Brown and Dacin (1997). Consumer perception of CSR CSR4 0.87
activities was measured with ve items taken from the study of CSR5 0.88
Klein and Dawar (2004), Brown and Dacin (1997). Consumer Awareness (AWAR) AWAR1 0.87 0.76 0.950 0.91
AWAR2 0.89
awareness of CSR activities was measured with two scale items
Purchase intention PI1 0.92 0.85 0.927 0.94
taken from the study of Pomering and Dolnicar (2009). Finally, (PI) PI2 0.89
purchase intention was measured with a four item scale based on PI3 0.94
a previous study by Garcia de los Salmones et al. (2005), Zeithaml PI4 0.91
et al. (1996).

Table 3
5. Analysis and results Goodness of t indexes.

This study applies two different measures to reduce the com- NFI NNFI CFI GFI RMSEA
mon method bias. First, personal identities of the respondents
SB 2 (180df) 369.783 (p 0.000) 0.911 0.923 0.899 0.912 0.06
were kept anonymous. Second, Harman's single factor test was
used. In this test, if a common method bias is present in the
sample data, a single factor will account for the majority of var- Table 4
iance in the dependent or independent variables. The result of Discriminate validity.
exploratory factor analysis shows the four factors with their var-
Mean Standard deviation # of items CA CSR AWAR PI
iances as 14.5, 36.92, 17.32, and 27.92. Thus, no single factor ac-
counts for the majority of variance. Thus common method bias is CA 3.89 1.02 4 1
unlikely to be present in our sample data. CSR 2.95 1.4 5 0.432 1
AWAR 3.08 1.02 2 0.468 0.358 1
5.1. Validation of measures PI 2.57 .74 4 576 0.586 0.621 0.1

Note: CA corporate ability; CSR corporate social responsibility; AWAR awareness, PI

The two stage approach of model validation is followed for
each construct prior to testing the hypothesized structural path
relationship (Anderson and Gerbing, 1988). First, the conrmatory
factor analysis (CFA) model was specied showing all the possible
relationships among the latent variables before testing the struc-
tural model. Results show the overall goodness of t of the mea-
surement model as shown in Tables 2 and 3. All the t indices GFI,
NFI, NNFI, CFI are above 0.8, meeting the minimum recommended
value as prescribed by Hair et al. (1999). The root mean square
error of estimation (RMSEA) value is smaller than 0.7 (Bentler and
Bonett, 1980). Cronbach's alpha in each case ranges between 0.89
and 0.94, exceeding 0.7, as suggested by Nunnally and Bernstein
(1994), indicating internal consistency and reliability. Composite
reliability of all measures exceed the 0.6, threshold recommended
by Fornell and Larcker (1981), indicating a good internal con-
sistency reliability.
The average variance extracted (AVE) for all constructs exceeds
0.50 (Fornell and Larcker, 1981) showing that all items capture
sufcient variance in their underlying factors. Overall, the data t
well and assure the convergent validity of the model. Finally,
discriminate validity is examined by factor correlation and is
conrmed as AVE is greater than the squared correlation between
the underlying factors. Item to factor correlation is less than 0.7
(Fornell and Larcker, 1981), conrming the discriminate validity of
the model. (Table 4).
purchase intention
model, the structural model was tested. The goodness of t indices
for the structural model falls within acceptable range (SB 2
(143df) 298.16, CFI0.95, GFI 0.91, NFI 0.92, NNFI 0.90,
RMSEA 0.06) conrming that the model ts. Finally, the above
stated hypotheses were tested. Table 5 shows the estimated
standardized coefcients along with the t- value; all hypotheses
are supported at a signicant (p o0.05). H1 posits the impact of
corporate ability on consumer purchase intention; ndings show a
direct and positive impact. Therefore, H1 is supported. H2 which
proposed a direct relationship between CSR activities and con-
sumer purchase intention is found statistically signicant at 0.05
levels. Hence, H2 is supported.
5.3. Moderation effect
H3 posits the moderating effect of consumer awareness of CSR
activities on purchase intention. To test the proposed relationship,
regression analysis was applied. First, the sample was split into
Table 5
Path coefcients.
Hypothesis Standardized coefcients t value Contrast

H1 CA- PI 0.68 8.69 Accepted

5.2. Structural model testing
H2 CSR- PI 0.38 4.98 Accepted

After testing the reliability and validity of the measurement p o0.05

54 M. Fatma, Z. Rahman / Journal of Retailing and Consumer Services 29 (2016) 4957
two groups based on their level of awareness (high/low) of CSR
activities. The aware group comprised 83 individuals while the
unaware group consisted of 335 individuals. This allowed us to
evaluate the path coefcients of two sub-samples group. We
evaluated the two models the base model (unconstrained
model) freely estimates the structural path of interest and the
alternative model (constrained model), where the path is xed.
Moderation of the proposed model was determined based on the
chi-square difference test. If a signicant difference is observed in
the 2 in comparing the models, than the signicant moderation
effect is exists.
An independent t-test on both groups conrmed the signicant
difference in both samples. The signicant difference of 2 shows
that consumer awareness of CSR activities has a stronger inuence
on consumer purchase intention and the hypothesis (H3) is ac-
cepted. The model observed some signicant differences in the
path loading for high awareness versus low awareness on two
groups. The test results of this statistical analysis are shown in
Table 6.The ndings are congruent with the theoretical argument
of previous studies which stated that consumer awareness of CSR
activities was a precondition to have its effect on consumer pur-
chase intention (Sen and Bhattacharya, 2001; Pomering and Dol-
nicar, 2009).
6. Discussion and implications
In this study, we demonstrate the inuence of CSR and cor-
porate ability on consumer responses (specically on purchase
intention) that better reect the consumer's state of mind. In to-
day's highly competitive business world, companies supplement
their marketing activities with socially responsible or sustainable
practices to gain competitive advantage. This study offers a deeper
understanding of the inuence of CSR activities on consumer be-
havioral outcomes.
A recent development in CSR literature is the use of the sta-
keholder approach. It is found that the companies that address
stakeholder concern in business activities perform better than
those that do not (Polonsky and Scott, 2005). Customers are one of
the important stakeholder groups that are most affected by an
organization's activities (Freeman, 1984). Therefore, in order to
develop and implement a CSR strategy, companies are required to
take care of all stakeholders' interests. Sometimes this becomes
contradictory as one initiative that is benecial to one stakeholder
group may result in increased cost to another (Bhattacharya et al.,
2009).
This study contributes to existing literature by examining
consumer responses to CSR activities in a developing country such
as India and lls the gap that existed due to research being limited
only to developed markets. Results show that positive consumer
response is a decisive indicator for companies to incorporate so-
cially responsible practices in their operations. Therefore, apart
from the achievement of business goals, the company has a chance
to give back to the community and fulll the desire of consumers
that of socially responsible consumption.
Findings of this study have important implications for banking
companies in India. It is important for companies to build a
Table 6
Moderation effect.
Relationship Moderated variable awareness Chi-square difference
Aware Unaware
CSR-PI 0.78 (t 5.53) 0.36 (t 4.58) 2 (df 111) 239.37
socially responsible image to have a positive inuence on con-
sumer behavior. However, it is of utmost importance to commu-
nicate these activities to have a favorable response in consumers'
minds (Swaen and Vanhamme, 2004). Then again, this commu-
nication may lead to further expectations. CSR activities are more
likely to have positive effects when they are considered credible by
consumers (Yoon et al., 2006). If the communicated activities are
not consistent with the actual behavior of the company, the result
might be decreased credibility and negative company image. It is
noteworthy here that it is not heavy investment in CSR activities
that is important, but the selection of appropriate CSR activities
(Becker-Olsen et al., 2006). It is advisable to invest in activities that
are closely aligned with the mission and values of the company
and at the same time contribute towards community
development.
For banks to increase consumer purchase intention, corporate
ability performance must be of high quality. The retail banking sector
is a prot oriented industry and revenue is assigned topmost priority
while CSR activities are a part of overall strategy. Consumers view
CSR as a value adding activity but are not a substitute for quality
services. In order to increase consumer purchase intention, banks
should communicate with consumers about their involvement in
CSR activities to form a favorable image in their minds. This could
lead to positive consumer behavior. It is important to note that
purchase intention cannot be fostered by immediate marketing ef-
forts, but requires long term view, strategic plans and effective ac-
tions. To summarize, purchase intention can be enhanced by
strengthening corporate ability and CSR association.
6.1. The moderating effect of CSR awareness
The effect of CSR activities on consumer response has been well
documented in literature, but the issue of consumer awareness has
been seldom discussed. Findings of this study reveal that the level
of consumer awareness of CSR initiatives in India is low and is the
reason why consumers do not respond to CSR. The present study
shows that consumers who are more aware of CSR initiatives ex-
hibit favorable purchase behavior. These ndings are consistent
with those of Arli and Lasmono (2010) which suggested that if
consumers were aware of CSR initiatives, it would impact their
purchase behavior. Thus, companies should make an effort to
educate customers and make them aware of their socially re-
sponsible practices. This should be done strategically without it
being perceived as a marketing ploy. Lack of consumer awareness
is the key inhibiting factor behind consumers not willing to pay for
products/services of socially responsible rms.
7. Conclusion, limitation and direction for future research
This study makes two distinct contributions: First, results show
that corporate ability has the strongest inuence on purchase in-
tention. The reasons for this may be: (1) For the company, expertize
in producing or delivering services is the most important activity.
(2) For consumers, the availability of high quality and timely service
is of utmost importance; this emphasizes that consumers buy for a
personal reason rather than a societal one (Berens et al., 2005).
Second, the moderating effect of level of consumer awareness of CSR
initiatives on purchase intention is demonstrated. Findings reveal
that CSR activities positively affect consumer purchase intention if
consumers are aware of CSR initiatives.
The results are empirically measured and veried and con-
rm the ndings of previous studies where the link between
social initiative and consumer behavioral outcomes has been
studied (Mohr and Webb, 2005; Brown and Dacin, 1997; Sen and
Bhattacharya, 2001). Consumer awareness of CSR activities is
 M. Fatma, Z. Rahman / Journal of Retailing and Consumer Services 29 (2016) 4957 55

necessary to have an effect on consumer purchase intention
(Wigley, 2008; Mohr et al., 2001). Despite this fact, previous
studies have not considered awareness as an inuencing factor;
past studies have assumed awareness of CSR or created it by
providing examples, then measuring consumer responses
(Mohr et al., 2001, p. 48). Consequently, the level of consumer
awareness of CSR activities has been tested in articial settings
and it remains unclear whether the consumer in the market is
actually aware of such activities, leaving a gap in our under-
standing. Many researchers (e.g. Mohr et al., 2001; Pomering
and Dolnicar, 2009) have given a call to examine the level of
consumer awareness of CSR initiatives in a real scenario. The
present paper addresses this call and contributes to extant lit-
erature by examining the moderating effect of the level con-
sumer awareness of bank CSR initiatives on purchase intention.
Apart from signicant ndings, many limitations have been
acknowledged in this study. The present model of the study has
been tested in the banking sector, where the nature of services is
complex and there is a perceived risk associated with these ser-
vices. This leads to the overestimation of the corporate ability
association. The authors suggest that the proposed model be tes-
ted in other sectors also where these the perceived risk associated
with services is less and nature of services is less complex. Fur-
thermore, consumer understanding of CSR initiatives has been
measured on existing scales that use a predened understanding
of CSR. This implies that it does not describe consumers' own
understanding of social responsibilities (Maignan, 2001). Further
research may explore the types of social issues consumers con-
sider when evaluating a company. There is an attitudebehavior
gap among consumers in the actual market place; for instance,
consumers may have a tendency to say that they are willing to pay
more for goods/products of socially responsible rms but whether
they actually do so remains doubtful. Also, future research may
focus on establishing a link between the intentions and actual
behavior of consumers.

Appendix A

Item Reference
This bank.

CA1 Has expertise in the area of nancial services Brown and Dacin (1997), Berens et al.
(2007)
CA2 Is skilled in what they do. Brown and Dacin (1997), Berens et al.
(2007)
CA3 Offers a wide range of nancial products Berens et al. (2007)
CA4 Satisfy the customer needs Brown and Dacin (1997)
CSR1 Is socially responsible Klein and Dawar (2004), Brown and
Dacin (1997).
CSR2 Doesn't harm the environment Klein and Dawar (2004), Brown and
Dacin (1997).
CSR3 Contributes to the welfare of society Klein and Dawar (2004), Brown and
Dacin (1997).
CSR4 Contributes to the donation programme Klein and Dawar (2004), Brown and
Dacin (1997)
CSR5 Contributes to the recovering from the economic crises Klein and Dawar (2004), Brown and
Dacin (1997)
AWAR Are you aware of any initiatives your bank is involved in, which are aimed at im- Pomering and Dolnicar (2009)
1 proving the social conditions in the community.
AWAR2 Are you aware of any initiative, your banks is involved in, which are aimed at im- Pomering and Dolnicar (2009)
proving the environmental condition.
PI 1 I shall continue considering this one as my main bank/ saving bank in the next few Garcia de los Salmones et al. 2005,
years. Zeithaml et al. 1996
PI2 I would keep being a customer of this bank/saving bank even if another entity offered Zeithaml et al. 1996
better rates.
PI3 I would recommend this bank if someone asked my advice. Zeithaml et al. (1996), Soderlund
(2002)
PI4 If you want to invest your savings, how likely is that you would buy the investment Garcia de los Salmones et al. (2005),
product of this bank. Zeithaml et al. (1996)

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