We argue banks that engage in corporate social responsibility (CSR) activities can improve the financial performance.

We apply three novel estimation methods to obtain the unbiased and full-blown CSR effect.

The models are PSM method, variance bias-corrected matching method and Heckman’s two-step method in switching regression.

We find that CSR banks outperform non-CSR banks in terms of return on assets and return on equity.

Our study offers policy suggestions for both government regulators and bank managers.