Muhammad Haroon Khan Management Studies 2022 Gomal Uni D I Khan 16.5.22

PhD
Thesis
IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON CUSTOMERS

LOYALTY IN ISLAMIC BANKS: MEDIATING ROLE OF CORPORATE
REPUTATION AND CUSTOMERS TRUST
Submitted By
Muhammad Haroon Rehan

PhD Scholar (Management Studies)
Registration No. 2266-D-2001
Supervisor
Dr. Qamar Afaq Qureshi

Head of Department
Department of Public Administration
Gomal University, Dera Ismail Khan
Ph.D Dissertation submitted to Department of Public Administration (Faculty of Law

& Administrative Sciences) in partial fulfilment of the requirement for the
Degree of Doctor of Philosophy (PhD) in Management Studies
Department of Public Administration, Gomal University,

Dera Ismail Khan, Khyber Pakhtunkhwa, Pakistan
2021
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Dedication
I hereby dedicate this research work to my father and mother whose inspirations enabled
me to produce the thesis in hand. I may not be able to achieve this milestone without
the support and encouragements from my parents. My wife and kids were also affected
during the entire research process. I appreciate their support in completing this research
work.
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Abstract
The present research study aimed at exploring the relationships among research variables
like association through correlation, cause-&-effect over regression and direct and indirect
effects over process model by collecting the primary data through structured questionnaire
from the respondents from Islamic banks located in Khyber Pakhtunkhwa, Pakistan. The
study also aimed at examining group mean differences in opinions of respondents towards
research variables. In this connection, results of the study revealed positive and significant
association between the predictors (economics, social and environmental responsibilities),
customers trust, corporate reputation and customers’ loyalty. Similarly, the regression
shows the significant impact of predictors on criterion variables. Likewise, the mediating
role of corporate reputation and the customers’ loyalty confirmed the partial mediation
through six mediation models. The multiple-mediation models further confirmed that
corporate reputation is active predictor for two models and customers trust is effective
mediator for one model. The test of significance also provides significant information about
demographics.
Consequently, this study aimed to contribute the existing literature by examining impact of
corporate social responsibility measures on consumer loyalty by overseeing the corporate
reputation and customer trust as mediators in context of Islamic banking sector in Khyber
Pakhtunkhwa, Pakistan. Therefore, results from study are expected to be helpful for Islamic
banks of Pakistan in better indulgence towards corporate social responsibility advantages
in the process of the strategic planning and development. This study contributes the existing
literature from the different dimensions like the theoretical, methodological, empirical and
practical thereby providing significant information about the relationships among research
variables under study. This research is expected to bring certain valuable recommendations
for policy makers and management of the Islamic banks in Khyber Pakhtunkhwa, Pakistan
to revisit their strategies and policies about corporate social responsibility and customers’
loyalty.
Keywords: Corporate Social Responsibility, Customer Loyalty, Corporate Reputation,

Customer Trust, Islamic Banks in Khyber Pakhtunkhwa, Pakistan
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TABLE OF CONTENTS
Certificate of Approval ......................................................... Error! Bookmark not defined.
Student’s Declaration ........................................................... Error! Bookmark not defined.
Dedication ........................................................................................................................ iv
Abstract ............................................................................................................................. v
CHAPTER No. 1 INTRODUCTION ................................................................................. 1
1.1 Background of Study ................................................................................................... 1
1.2 Problem Statement ...................................................................................................... 5
1.3 Objectives of Study ..................................................................................................... 5
1.4 Significance of Study .................................................................................................. 6
1.5 Research Gap ............................................................................................................... 6
1.6 Scope of Study............................................................................................................. 7
CHAPTER No. 2 LITERATURE REVIEW ...................................................................... 8
2.1 Existing Research ........................................................................................................ 8
2.2 The Banking Sector ................................................................................................... 10
2.2.1 The Banking Sector & Economic Change .......................................................... 12
2.2.2 The Banking Sector in Pakistan .......................................................................... 14
2.2.3 The Islamic Banking System .............................................................................. 16
2.2.4 The Islamic Banking System in Pakistan ........................................................... 19
2.2.5 The Islamic Banks in Khyber Pakhtunkhwa....................................................... 21
2.2.6 The Responsibilities of Islamic Banks ............................................................... 23
2.3 The Corporate Social Responsibility ......................................................................... 25
2.3.1 Evolution of Corporate Social Responsibility .................................................... 27
2.3.2 Meaning of Corporate Social Responsibility ...................................................... 29
2.3.3 Ethics of Corporate Social Responsibility .......................................................... 32
2.3.4 Importance of Corporate Social Responsibility .................................................. 34
2.3.5 Benefits of Corporate Social Responsibility ....................................................... 36
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2.3.6 Corporate Social Responsibility in Banking Industry ........................................ 38
2.3.7 Corporate Social Responsibility in Islamic Banks ............................................. 40
2.3.8 Stakeholders of Corporate Social Responsibility ............................................... 42
2.3.8.1 Employees .................................................................................................... 44
2.3.8.2 Government .................................................................................................. 45
2.3.8.3 Societies ....................................................................................................... 46
2.3.9 Theories of Corporate Social Responsibility ...................................................... 48
2.3.9.1 Classical Theory ........................................................................................... 48
2.3.9.2 Social Contract Theory ................................................................................ 49
2.3.9.3 Instrumental Theory ..................................................................................... 49
2.3.9.4 Legitimacy Theory ....................................................................................... 49
2.3.9.5 Stakeholder Theory ...................................................................................... 50
2.3.9.6 Triple‐Bottom Line Theory .......................................................................... 50
2.3.10 Dimensions of Corporate Social Responsibility ............................................... 51
2.3.10.1 Economic Responsibility ........................................................................... 52
2.3.10.2 Social Responsibility.................................................................................. 54
2.3.10.3 Environmental Responsibility .................................................................... 56
2.4 Customer Loyalty ...................................................................................................... 58
2.4.1 Definition of Customers Loyalty ........................................................................ 60
2.4.2 Customer Loyalty Formation .............................................................................. 62
2.4.3 Importance of Customers Loyalty ...................................................................... 65
2.4.4 Benefits of Customers Loyalty ........................................................................... 67
2.4.5 Customers Loyalty in Banking Sector ................................................................ 69
2.4.6 Customers Loyalty in Islamic Banking .............................................................. 71
2.4.7 Theories of Customer Loyalty ............................................................................ 73
2.4.7.1 Exchange Relationship Theory .................................................................... 74
2.4.7.2 Marketing Theory......................................................................................... 74
2.4.7.3 Social Comparison Theory ........................................................................... 74
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2.4.7.4 Social Identity Theory .................................................................................. 75
2.4.7.5 Schwartz's Value Theory ............................................................................. 75
2.4.7.6 Typological Loyalty Theory ........................................................................ 76
2.4.8 Dimensions of Loyalty........................................................................................ 76
2.4.8.1 Attitudinal Loyalty ....................................................................................... 77
2.4.8.2 Behavioral Loyalty ....................................................................................... 79
2.5 The Corporate Reputation ......................................................................................... 81
2.5.1 Concept of Corporate Reputation ....................................................................... 83
2.5.2 Importance of Corporate Reputation .................................................................. 86
2.5.3 Determinants of Corporate Reputation ............................................................... 88
2.5.4 Corporate Reputation in Banking Sector ............................................................ 90
2.5.5 Corporate Reputation in Islamic Banks .............................................................. 92
2.5.6 Theories of Corporate Reputation....................................................................... 94
2.5.6.1 Resource-Based Reputation Theory ............................................................. 95
2.5.6.2 Game Theory ................................................................................................ 95
2.5.6.3 Institutional Theory ...................................................................................... 95
2.5.6.4 Signaling Theory .......................................................................................... 96
2.5.6.5 Role Theory .................................................................................................. 96
2.5.6.6 Transaction Cost Economics ........................................................................ 97
2.5.7 Dimensions of Corporate Reputation ................................................................. 97
2.6 Customers Trust ........................................................................................................ 99
2.6.1 Conceptual Background of Trust ...................................................................... 101
2.6.2 Importance of Customers Trust ........................................................................ 103
2.6.3 Competitive Advantages of Customers Trust ................................................... 106
2.6.4 Customers Trust in Banking Sector .................................................................. 108
2.6.5 Customers Trust in Islamic Banking ................................................................ 110
2.6.6 Theories of Customers Trust............................................................................. 112
2.6.6.1 Commitment Trust Theory ......................................................................... 112
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2.6.6.2 Trust-Based Marketing Theory .................................................................. 113
2.6.6.3 Inducement-Contribution Theory............................................................... 113
2.6.6.4 Social Exchange Theory ............................................................................ 114
2.6.6.5 Sociological Theory ................................................................................... 114
2.6.7 Dimensions of Customers Trust ....................................................................... 114
2.7 Relationships among Research Variables ............................................................... 117
2.7.1 Corporate Social Responsibility and Corporate Reputation ............................. 117
2.7.2 Corporate Social Responsibility and Customers Trust ..................................... 119
2.7.3 Customer Loyalty and Corporate Reputation ................................................... 121
2.7.4 Customer Trust and Customer Loyalty ............................................................. 123
2.7.5 Corporate Social Responsibility and Customer Loyalty .................................. 126
2.7.6 Corporate Social Responsibility, Corporate Reputation and Loyalty............... 128
2.7.7 Corporate Social Responsibility, Customer Trust and Loyalty ........................ 130
2.8 Demographic Impacts.............................................................................................. 132
2.9 Working Concepts (Research Variables) ................................................................ 133
2.10 Working Concepts (Demographics) ...................................................................... 134
2.11 Theoretical Framework ......................................................................................... 135
2.12 Operationalization of Concepts ............................................................................. 136
2.13 Research Hypothesis ............................................................................................. 138
CHAPTER No. 3 MATERIALS AND METHODS ....................................................... 139
3.1 Research Philosophy ............................................................................................... 139
3.2 Inductive vs Deductive Research ............................................................................ 140
3.3 Research Approach .................................................................................................. 140
3.4 Research Design ...................................................................................................... 141
3.5 Population of Study ................................................................................................. 141
3.6 Sampling Technique & Sample-Size....................................................................... 141
3.7 Data Collection Methods ......................................................................................... 143
3.8 Data Analysis Methods ........................................................................................... 143
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3.9 Time Horizon .......................................................................................................... 143
3.10 Instrumentation (Design & Measurement) ............................................................ 144
3.11 Ethical Issues & Considerations ............................................................................ 144
3.12 Reliability of Instrument ....................................................................................... 144
3.13 Validity of Instrument ........................................................................................... 145
3.14 Mediation Analysis................................................................................................ 148
CHAPTER No. 4 RESULTS & DISCUSSIONS ............................................................ 150
4.1 Descriptive Results .................................................................................................. 150
4.2 Inferential Results.................................................................................................... 152
4.2.1 Correlation Analysis ......................................................................................... 153
4.2.2 Regression Analysis.......................................................................................... 154
4.3 Mediation Analysis.................................................................................................. 155
4.3.1 First Mediation Model ...................................................................................... 155
4.3.2 Second Mediation Model .................................................................................. 157
4.3.3 Third Mediation Model ..................................................................................... 159
4.3.4 Forth Mediation Model ..................................................................................... 162
4.3.5 Fifth Mediation Model ...................................................................................... 164
4.3.6 Sixth Mediation Model ..................................................................................... 166
4.4 Multiple Mediation .................................................................................................. 168
4.4.1 First Multi-Mediation Model ............................................................................ 168
4.4.2 Second Multi-Mediation Model........................................................................ 171
4.4.3 Third Multi-Mediation Model .......................................................................... 173
4.5 Test of Significance ................................................................................................. 176
4.6 Summary of Results ................................................................................................ 180
4.7 Discussions of Study ............................................................................................... 181
CHAPTER No. 5 CONCLUSION & RECOMMENDATIONS ...................................... 186
5.1 Summary ................................................................................................................. 186
5.2 Conclusion ............................................................................................................... 186
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5.3 Recommendations ................................................................................................... 191
5.4 Recommendations for Future Research .................................................................. 192
5.5 Practical Implications .............................................................................................. 193
5.6 Contribution of Study .............................................................................................. 193
5.7 Limitations of Study ................................................................................................ 194
REFERENCES .............................................................................................................. 195
Annexure 1 Questionnaire ............................................................................................. 222
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LIST OF TABLES & FIGURES
Tables 2.1 Research Variables ............................................................................... 133

Tables 2.2 Demographic Variables ........................................................................ 134
Figure 2.1 Theoretical Framework of the Study .................................................... 135
Table 2.3 Operationalization .................................................................................. 136
Tables 2.3 List of Hypotheses ................................................................................ 138
Table 3.1 Sample-Size Computation ..................................................................... 142
Table 3.2 The Likert Scale (5-point) ...................................................................... 144
Table 3.3 The Reliability Statistics ........................................................................ 145
Table 3.4 Validity Statistics (Economic Responsibility) ....................................... 146
Table 3.5 Validity Statistics (Social Responsibility) ............................................. 146
Table 3.6 Validity Statistics (Environmental Responsibility) ............................... 146
Table 3.7 Validity Statistics (Corporate Reputation) ............................................. 146
Table 3.8 Validity Statistics (Customers Trust) ..................................................... 147
Table 3.9 Validity Statistics (Customers Loyalty) ................................................. 147
Table 3.10 The Mediation Models ......................................................................... 148
Table 4.1 Cross-tabulation about Profession, Experience & Education ................ 150
Table 4.2 Cross-tabulation about Residence, Gender & Age ................................ 151
Table 4.3 Descriptive Statistics .............................................................................. 151
Table 4.4 Normality Distribution ........................................................................... 152
Table 4.5 Collinearity Statistics ............................................................................. 152
Table 4.6 Correlation Analysis .............................................................................. 153
Table 4.7 Model Summary ..................................................................................... 154
Table 4.7a Coefficients of Regression ................................................................... 154
Table 4.8a Coefficient of Regression ..................................................................... 155
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Table 4.9a Coefficient of Regression ..................................................................... 156
Table 4.10 Model Summary ................................................................................... 156
Table 4.10a Coefficient of Regression ................................................................... 156
Table 4.11 Normal Theory Tests OR Sobel Test ................................................... 157
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Table 4.47 Group Mean Differences about Education (ANOVA) ........................ 176
Table 4.48 Group Mean Differences about Profession (T-test) ............................. 177
Table 4.49 Group Mean Differences about Experience (ANOVA) ...................... 177
Table 4.50 Group Mean Differences about Residence (ANOVA) ........................ 178
Table 4.51 Group Mean Differences about Gender (ANOVA) ............................. 179
Table 4.52 Age-Based Group Mean Differences (ANOVA)................................. 179
Table 4.53 Summary Results (Correlation & Regression) .................................... 180
Table 4.54 Summary Results (Mediation) ............................................................. 180
Table 4.55 Summary Results (Multiple-Mediation) .............................................. 181
Table 4.56 Summary Results (Test of Significance) ............................................. 181
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CHAPTER No. 1 INTRODUCTION
The introduction helps to lead the readers from the broad subject area towards the particular
issue under investigation. It further helps in establishing the background, scope, context and
significance of research by providing substantial information about the topic supported by
problems statement, research objective, significance of study, research gap, limitations of
study and scope of study. These are the vital components without which no research study
can be undertaken and without which the objectives of research studies cannot be properly
achieved.
1.1 Background of Study

The service industry, around the globe, has been considered as the backbone for the social
and economic development. In addition to profit generation, the services industry is carrying
out the dynamic responsibilities to serve the humanity. In this connection, the banking sector
is also considered as dynamic sector who contribute its share in the economic development
and contribute significantly in serving the humanity/societies (Ganesh, Arnold & Reynolds,
2000). In banking sector, Islamic banks are considered as vital gears to national economic
progression thereby providing their services to serve the societies along with certain well-
defined responsibilities (Mohr, Webb & Harris, 2001). The corporate social responsibility
along with certain vital measures are considered as critical obligations of Islamic banks in
serving communities with enthusiastic manners in the context of developing countries like
Pakistan.
The mission of Pakistan State Bank is to promote financial stability by developing dynamic
and sound financial system to attain the justified and sustainable economic development and
prosperity in Pakistan. In this mission, Islamic banking system has playing significant role
by promoting and developing the Islamic practices in banking industry thereby ensuring the
Shariah transparency and compliance (Muhammad, 2002). The Islamic banks have occupied
substantial position and has become the fast-growing sector in entire financial system due
to efficient delivery of quality products and services to its different stakeholders (Archer &
Ahmed, 2003). The Islamic banks have become gradually dynamic profit-making financial
institutions. The Islamic banks have dynamic responsibilities which make them accountable
to the stakeholders in which the corporate social responsibility is inclusive package of these
responsibilities.
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The corporate social responsibility, during the few decades, becomes the area of interest for
business analysists, management researchers and organizations/banks. This phenomenon is
mainly emphasized on the role/responsibilities of businesses towards the societies. It helps
in ensuring the standards behavioral guidelines and measures by guiding the organizations
to adopt positive and productive measures for community development (Maignan & Ferrell,
2004). The “corporate social responsibility” is considered as vital strategic tool for business
and financial entities to develop the corporate image in viable situation. It helps in providing
good governance about workforces’ privileges, customers’ satisfaction and environmental
protection by aiming on stakeholder loyalty and trust (Beckerolsen, Cudmore & Hill, 2006).
It has many attributes among which the economic, social and environmental are the foremost
predictors.
The economic responsibility attribute of corporate social responsibility stands towards the
set values and principles with respect to the moral and ethical rules and regulations. In this
background, organizations/banks attempt to realize the clarification which might expedite
the business development and make revenues by helping the community (Walsh & Beatty,
2007). In this context, the economic judgments are made by seeing their inclusive dynamic
influences on the business and society respectively. The economic responsibility helpful in
improving organizational reputation towards engaging in activities and practices which pays
way to sustainable development (Marin, Ruiz & Rubio, 2009). The economic measurement
of CSR helps the societies in terms of economic contributions for the benefits and welfares
of community. This helps in determining social responsibility of organizations towards the
community.
The social responsibility brings the organizations to socially responsible to the society with
regard to their business operations. The corporate social responsibility recognized new facet
of responsibility on the part of organizations towards expectations of stakeholders to become
source of acceptability and social values (Kolk & Tulder, 2010). The social responsibility
denotes towards distinctive, far-reaching and interconnected change where the organization
are more focused on social responsibility regarding ethical behavior and self-actualization
to validate their business reputation. The social responsibility restricted the organizations to
focus more on social values of society along with prioritizing stakeholders’ interests instead
of motive of profit-maximization (Kim & Park, 2011). The stakeholders, in turn, will show
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utmost dedication, trust and loyalty toward organization due to their vital role in community
development.
The environmental responsibility perspective of “corporate social responsibility” rooted the

efforts of the organizations towards environmental issues by benefiting societies to protect
them from environmental impediments. The organization can contribute willingly in making
friendly environment where individuals be able to interact each other without any hindrance
of environmental constraints (Ali & Rizwan, 2013). The challenging environment in modern
competitive situation becomes most significant hurdle in sustainable development of the
societies. The assurance of environmental protection is vital concern for the organizations
in achieving competitive edge in viable environment due to technological advancement and
change (Oberseder, Schleglmich, Murphy & Gruber, 2014). Through effective and efficient
measures to the environmental protection, organization are able to gain customers trust and
loyalty.
Through the effective and strategic corporate social responsibility measures, organizations
might be able to reach the loyalties of their stakeholders. The continuous and long-lasting
interaction of individuals with specific organization by using its products and services and
their recommendations to other individuals comes under the umbrella of loyalty (Rosario,
Carmen & Simonetti, 2015). In marking this loyalty, the corporate social responsibility has
played significant role as per validation and confirmations of existing researches in diverse
contexts. The effective corporate social responsibility policies help organizations in marking
their images in customers’ perspectives which in turn inspire customers to become loyal and
committed to organizations (González & Vilela, 2016). The organizational efforts towards
corporate social responsibility will improve stakeholders trust which lead to loyalty of the
customers.
The stakeholders’ trust is the most significant phenomenon in the contemporary competitive
environment as the organizational survival and its development is contingent upon the trust
level of their customers. The literature reveals that higher the trust level of customers, higher
will be the chances of success of concerned organization (Goyal & Chanda, 2017). Trust is
basically willingness of individuals on organizational activities towards their expectations
in fulfilling their needs concerning products and services. Trust is confidence of individuals
through the transaction which denotes to the integrity and reliability of both the parties. The
CSR is vital in shaping the attitude and behavior of customers which further leads to higher
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trust and commitment (Raza, Bhutta, Iqbal & Faraz, 2018). Thus. corporate responsibilities
are vital in determining organizational aims towards customers’ respect, market-share and
reputation.
The corporate reputation is also considered as effective tool in gauging the trend and growth
of the organizations. The corporate reputation is affected by diverse factors which can affect
corporate image of organization positively and negatively. Similarly, corporate reputation
is also explored by various researchers as the facilitating as well as intervening phenomenon
in the relationships among the different research variables (Aramburu & Pescador, 2019).
The reputation is considered as an effective tool towards development of organizations and
nurturing stakeholders’ behavior. The customer loyalty is influenced positively by corporate
reputation of the organizations. Corporate reputation is effective phenomenon which affect
connection between corporate social responsibility and customers’ loyalty and trust which
are explored by researchers in similar as well as different contexts (Azeem, Sajjad & Khan,
2020).
The foremost aim of this study is to examine the conceptual/theoretical framework which
calculates the relationships of the corporate social responsibility measures the customers’
loyalty and trust in the Islamic banking context thereby aimed at producing certain valued
theoretical and empirical information. This information might be helpful in filling the gaps
as exists in the literature to provide some support over the findings this study to the existing
database of knowledge. This study is expected to provide recommendations to management
of the banking sector, the policy makers and customers to get certain valuable information
about the significances of the corporate social responsibility measures to get them aware
about the basic functions of the concepts (corporate social responsibility, reputation, trust &
loyalty) and their roles in the development of the societies in the developing countries like
Pakistan.
The researcher, being the Meezan Bank Manager an Islamic bank in Khyber Pakhtunkhwa,
better knows about standing of customer loyalty concerning banks performance, credibility
and success. Thus, researcher aimed at exploring different measures which are responsible
in shaping and improving the loyalty of the customers towards the banks. Thus, by exploring
the relevant literature on the Islamic banks, the researcher found the concept of corporate
social responsibility measures as the widely researched traits in determining the customers’
loyalty towards Islamic banks. Similarly, the bank reputation and customers trust are widely
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researched in banking sector as the entire banking system is contingent on mutual trust by
trust of the customers on banks while banks trust on customers. Hence, these concepts were
transformed into theoretical framework which is thus used as guideline for guiding research
study.
For this purpose, this study is attempts to examine corporate social responsibility measures
as predicting variables in determining customers’ loyalty with mediating role of customers
trust in context of Islamic banks in Khyber Pakhtunkhwa, Pakistan. Therefore, the secondary
data was collected from various online databases (journals, books & reports) while primary
data has been collected from customers hailing from Islamic banks in Khyber Pakhtunkhwa,
Pakistan. First hand data was collected through adapted version of questionnaire which was
extracted from previous research studies about research issues. The said data (primary) was
analyzed by using different statistical procedures to answer research questions (hypotheses)
as emerged from theoretical framework of study. This study is expected to provide certain
valuable information to fill the existing gaps in the research as mentioned in the problem
statement.
1.2 Problem Statement

This study aims at exploring the relationships between the corporate social responsibility,
customers’ loyalty and corporate reputation and trust in context of Islamic banks in Khyber
Pakhtunkhwa, Pakistan by collecting data from the customers hailing from Islamic Banks
in all the districts of Khyber Pakhtunkhwa. The Islamic banks are considered as backbone
of national economy as also considered as the vital contributor towards the national
exchequer. The corporate social responsibility is dynamic for financial institution and to
what extent it is significant in Islamic banking system in shaping the attitude and heavier of
the stakeholders is the main theme of present research study. This study further aims at
exploring the research gap in existing research studies thereby providing substantial
information from the literature and results from the field study.
1.3 Objectives of Study

 To examine association between “corporate social responsibility”, customer loyalty,
corporate reputation and customers trust and in context of Islamic banking sector.
 To examine cause-&-effect among the “corporate social responsibility and customer

loyalty”, in the Islamic banking sector, Khyber Pakhtunkhwa, Pakistan.
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 To examine mediating role of the corporate reputation in linking the corporate social
responsibility and customer loyalty” in Islamic banking context.
 To examine mediating role of the customers’ trust in linking the corporate social
responsibility and customer loyalty” in Islamic banking context.
 To examine the role of corporate reputation and customers’ trust through multiple
mediation in linking CSR and customer loyalty” in Islamic banking context.
 To explore the variation in group, mean differences concerning the “corporate social
responsibility, customer” loyalty, corporate reputation and trust in Islamic banks.
1.4 Significance of Study

 This study is helpful in providing the comprehensive package of research variables
and research design to understand the systematic way for conducting the study.
 This study is vital in providing valuable information about the relationships among
the research variables under considerations in the context of Islamic Banks.
 This study will be significant in exploring views of stakeholders from Islamic banks
sector about the corporate social responsibility, loyalty, reputation and trust.
 This study might be helpful in providing suitable suggestions to management of the

Islamic banks to take certain positive measures about the mentioned issues.
 This research will be helpful for future researchers in providing practical guidelines
for conducting their research studies in similarly as well as different contexts.
1.5 Research Gap

 The corporate social responsibility is significant phenomenon and vital for all the
organizations including the banking sector.
 The literature offered sufficient evidence about relationships among corporate social
responsibilities, reputation, trust and customer loyalty in different contexts.
 But limited research is thus available in context of Islamic banks. Thus, this study
“examine the relationships among” research variables in the Islamic banks.
 This study will also fill the empirical gap by using the advanced tools like multiple
mediation analysis to examine the mentioned relationships statistically.
 This study is expected to provide the significant information from the results which
will thus help in filling the existing gaps (theoretical).
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1.6 Scope of Study
 The scope generally mentions the area of research which is aimed to be explored
along with the parameters through which the study is to be conducted.
 It further includes the information about the models and theories in support of the
research issues/concepts under considerations for the specified purpose.
 The scope includes the inclusive analysis of determinations in terms of the context,
duration, population and sample and the background of the respondents.
 In this regard, all prerequisite information related with the scope of study has been
provided in research methodology section covered from each dimension.
 The scope of this study is related with examination of corporate social responsibility
(social, economic & environmental), customers trust, corporate reputations and
customers loyalty in Islamic banking context wherein customers were thus included
as target population.
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CHAPTER No. 2 LITERATURE REVIEW
The review of literature helps the researchers in reviewing existing knowledge with regard
to the theoretical contribution of different available studies on particular issue/topic. The
literature review is amalgamation of different accessible secondary sources regarding the
understanding of the research concepts and their inter-relationships by converting variables/
concepts into theoretical framework which is thus used as guideline for conducting the main
study. Thus, comprehensive literature about research variables and their interrelationship in
general and in particular context along with supporting theories have been presented in this
section.
2.1 Existing Research

The strong banking system, around the globe, is the croon of the economic development as
banking sector is paying major contribution in setting out the savings across the countries.
In developing countries like Pakistan, the financial sector is also considered as the backbone
for spirited economic development. In Pakistan, different sectors of economies are playing
their substantial role in economic growth in which banking sector is considered as leading
constituent (Muhammad, 2002). The banking sector accounts for about three-fourth of entire
financial sector. The statement bank of Pakistan is regularity body of financial sector who
frame the policies and roles for financial sector including banking sector wherein different
banks are functional like commercial and Islamic banks (Archer & Ahmed, 2003). The role
of Islamic banks is vital to offer interest free products and services to customers around the
country.
The Islamic banks are disbursing their economic share in economic growth thereby offering
different products and services to their customers. Though, the main theme of these banks
are the revenue generation, however, these banks are also plating their contribution towards
the prosperity of community. Among many efforts, the role of Islamic banks, over corporate
social responsibility is critical in determining their images in societies (Maali, Casson &
Napier, 2006). The corporate social responsibility realizes the economic, environmental and
social measures of Islamic banks to contribute in evolving the local economy by producing
quality facilities to individuals in community (Farook, Hassan & Lanis, 2011). These banks
over these responsibilities have influence in serving societies over diverse corporate social
8
tasks to preserve their images toward stakeholders and community (Afridi, Gul & Haider,
2018).
The corporate social responsibilities, over economic control signifies the indirect and direct
economic impact from bank operations on its stakeholders by offering chances for profit
maximization, providing job prospects and emerging linkages with local business (Maignan
& Ferrell, 2004). The social responsibility denotes the bank efforts in contributing through
different social welfare programs for betterment of individuals in societies. However, the
environment concern represents banks efforts in reducing environmental constraints faced
by societies (Beckerolsen, Cudmore & Hill, 2006). These responsibilities, when realized in
true spirit leads stakeholders to trust and undaunted loyalty which further helps in creating
reputation of Islamic banks (Marin, Ruiz & Rubio, 2009). These are dynamic in predicting
customers’ trust, loyalty and corporate reputation of Islamic banks (Aramburu & Pescador,
2019).
The sustainable development theory has been followed in present research as presented by
Gladwin, Kennelly and Krause (1995) which aimed at practicing the diverse theories in one
package by bridging different theories to achieve certain objectives. In literature, different
theories are presented by different researchers about the research concepts (corporate social
responsibility, customer loyalty, reputation and trust), however, the main theories have been
followed in research like for corporate social responsibility, triple‐bottom line theory by
Elkington (1997) has been followed. For loyalty, researcher followed Dick and Basu (1994),
theory however, for customer trust, Morgan and Hunt (1994) theory while for the corporate
reputation, Fombrun and Shanley (1990) have been followed which aimed at bridging the
theories in exploring theoretical gap as exists in different contexts including Islamic banking
system.
The existing literature offers various models and theories related with the research concepts
under considerations. The selection of the more exact theory or theories and models is the
most important phase of research process since without theoretical support, no theoretical
model or framework can be constructed. Thus, this study aimed to construct the theoretical
model to test in the field study. Moreover, the theory testing is also an important phase of
research process without which researchers cannot conduct their research studies. Thus, in
this section, the researcher discussed the theories and models as presented by the researchers
9
related with the research concepts under study with the aim to test these theories in the field
to get some desired information and to reach the conclusion. Therefore, this study aimed to
answer certain questions those which are developed from theoretical framework of present
study.
This study is focused on definite corporate responsibilities and its impact over customers’
trust, loyalty and corporate reputation in Islamic banking sector of Khyber Pakhtunkhwa,
Pakistan. For this drive, this section explored these concepts along with interrelationships
thereby following the supporting models and theories to examine the commonalities and the
differences in opinions/views of the researchers through existing literature. This literature
helps in understanding the research concepts and its implication in the specific context to
achieve desired objectives. Consequently, researcher discussed research issues (dimensions
of the corporate social responsibility, corporate reputation, customers trust and customers’
loyalty) more comprehensively to obtain the prerequisite information about the relationships
among the research variables in the particular context to achieve certain objectives of the
study.
2.2 The Banking Sector

The banking sector is considered as the pivot around the financial standing of the countries
as strong banking system is measured as the nucleus for strong financial position for both
the developed as well as the developing countries. The main function of the banking sector
is to hold the financial assets for the stakeholders thereby investing these assets to generate
more assets by sharing profits among concerned stakeholders (Margaret & Hannah, 2001).
The banking sector perform these activities under the direction and regulation of the state
bank of concerned country. There is different type of banks (commercial, conventional &
Islamic) who performs the same functions like holding of money, investing of money and
sharing of interests among stakeholders (Henderson & Tom, 2005). The banks perform core
function (receiving deposits, offering loan, investing assets) as per mutual trust of banks and
stakeholders.
The banking sector is major constituent of financial system and considered as active actors
towards the financial markets. The foremost function of the bank is to interact with those
people who have sufficient capital likewise the depositors and the investors thereby offering
them some additional values for their capitals (Renneboog, Horst & Zhang, 2008). The bank
10
offers these capitals to those individuals who are seeking capital likewise individuals who
need loans for domestic purposes, the businessmen who desires to expand their businesses,
individuals who dealt with financing and trading equities and individuals who are seeking
for investment and insurance opportunities (Surroca, Tribó & Waddock, 2010). The banks
offer services that signifies professionalism, integrity and strength relating to investment
banking, insurance, asset management and brokerage under this umbrella with aim to ease
stakeholders.
The banking sector is considered as the backbone for strong financial position of developing
countries. The main responsibility hold by state bank is to acts as regulatory body in framing
the policies for both public and private banks. These banks perform their financial activities
under the supervision and guidance of state bank of each country (Ghoul, Guedhami, Kwok
& Mishra, 2011). Along with, there are certain risks associated with deposits and investment
of capitals of the stakeholders which directly falls on shoulders of concerned banks. In this
regard, when bank invests capitals of stakeholder in futures market due to vested interests
then it might prevent simply risks associated with interests (Fiordelisi, Soana & Schwizer,
2013). When the concerned banks fail to deal with the risks then it might have knock-back
magnitude on banking industry which ultimately affect stakeholders’ sensitivity about banks
credibility.
The banking sector is required to edge the risks as these banks have to follow the directions
and guidance from state bank of the country. The application of these regulations is vital for
the concerned banks with the aim to maintain the trust level of the stakeholders (Cheng,
Ioannou & Serafeim, 2014). The literature revealed that without the trust, the banks might
not be able to achieve their desired status and ranking in modern competitive environment.
The banks are required to take those measures which are vital in increasing and nurturing
the loyalty of the stakeholders. Thus, for concerned banks, it is vital to adopt the rigid rules,
policies and regulations to maintain the customers trust and loyalty (Kiliç, Kuzey & Uyar,
2015). Similarly, banking sector is required to adopt flexible regulations about stakeholder
to solve issues on priority to sustain trust and loyalty with banks by applying the prerequisite
procedures.
Similarly, due to technological change, the banking sector is also required to adopt advanced
technologies to facilitate their stakeholders. In modern era, banking system has introduced
11
the different online facilities to assist their customers to save their time and other resources.
In this connection, introduction of mobile banking application and online banking system
has increased awareness of stakeholders about the benefits of online banking (Ruiz, García
& Revilla, 2016). In developing countries, technological changes forced the banking system
to adopt the latest tools to ease their customers to interact easily with the facilities offered
to them by concerned banks (Wu, Shen & Chen, 2017). The banking system are trying their
level best to use advanced technologies to compete market and to attract customers with the
intention to become leading and emerging sector to achieve desired standing in competitive
environment.
The banking sector also faced numerous challenges with regard to the changing aspect in
the policies and regulations are frame by state bank from time to time. These are main and
leading parameters which forced policy makers to introduce the flexible policies in easing
and facilitating stakeholders to investment their capitals in banking sector (Salman, Noor,
Salman & Hafeez, 2018). The main reason behind is to nurture the trust level of stakeholders
which is the partial requirement for the banking sector to develop their corporate reputation
in the minds and hearts of concerned stakeholders (Aramburu & Pescador, 2019). Similarly,
fulfillment of timely obligations is core responsibility of banking sector which leads towards
undaunted loyalty of the stakeholders. These are measured as decisive factors towards banks
reputation and corporate image leads to optimistic economic change (Raza, Burney Ullah,
2020).
2.2.1 The Banking Sector & Economic Change

The existing research provides substantial evidence about instrumental relationship between
variants in banking sector development and its kinematic impact on economic development
of concerned country. The emerging economies are more concerned towards the economic
change due to change in technological development and changes in the level of productions
(Greening & Turban, 2000). This leads banking sector to play its critical role in determining
the financial standing of the concerned country by introducing and implementing the quality
measures that leads towards the encouraging economic change. Similarly, the need to inspire
and cope the economic growth is phenomenon of interest globally and become the leading
challenge for developed and developing countries (Simpson & Kohers, 2002). The role of
banking sector becomes vital that provides prospects for economic changes and economic
development.
12
The economic change is basically considered the change in structure of economic system.
This change thus results in changes in cultures, societies, businesses and even the daily lives
of the individuals in the societies. The economic change not only affect the economic system
of concerned country but also affect the entire organism of the country (Maudos & Guevara,
2004). Likewise, it affects the political system as the change in economies leads to mark the
politics by laminating the dogmatic conveniences, economic changes distress the economic
policies, economic change leads to social change, change in economies leads to change in
the demographic features of individuals, economic change leads to change in legal prospects
(Wright & Rwabizambuga, 2006). Likewise, concerning rules, regulations and policies, the
economic change leads towards technological changes and implementation of the advanced
technologies.
Similarly, the economic change leads to the changes in the market structures with regard to
supply and demands, trades and trading policies, changes in managing financial resources
for disaster risk management, the economic change leads to create economic problems and
last but not least, economic changes lead to mark business models (Riel & Fombrun, 2007).
All these are the potential kinematics caused by economic change in both the developed as
well as developing countries. The economic change also affects income level of individuals
and create economic disparities in societies (Makni, Francoeur & Bellavance, 2009). The
economic analysts proposed and developed the refined financial systems at an early stage
for the successful economies by mentioning that financial sector is backbone for economic
growth of emerging economies in response to growing economic prerequisites for economic
change.
Similarly, different analysts examined the problems of the causativeness and pedals for non-
financial dynamics that leads to influence economic growth. In this regard, several empirical
studies suggested that economic changes lead to economic disparity and affects economic
development process in destructive manners (Ghoul, Guedhami, Kwok & Mishra, 2011).
Similarly, some researcher recommends that economic growth cycle and driving economic
forces turned into the demand and supply casual relationships in diverse comportments. The
literature shows that the more efficient the banking sector of the country, the more effective
is the economic development of concerned country (Fiordelisi, Soana & Schwizer, 2013).
There is strong link amid banking sector and financial market as most of capitals in markets
13
are offered by banking sector to different investors to invest in different available investment
opportunities.
The banking sector, during the past decades, played significant role in providing different
resources to different sector of the economies to increase their production level and to serve
the national economy towards economic development (Gangi & Trotta, 2015). Conversely,
individuals and players of the financial markets also demands the risk management service
to manage the associated availability and implementation of investment opportunities. Thus,
banking sector provide traditional services for the risk management towards the economies
of scope. The banking sector is liable to offer the better services to supply chain management
by providing service to generate more investment opportunities (Goyal & Chanda, 2017).
The economic change is measured as critical objective since the development process needs
criterion desires to please the human willingness that occurs over financing investment and
production.
The banking sector is also responsible for economic change as it provides different prospects
to different group of individuals to invest and earn more wealth. These opportunities include
demands for deposits, currency circulation, savings deposits, large and small denomination
time securities, repurchase agreements, institutional and retail financial market for mutual
reserves (Gangi, Mario, Nicola & Daniele, 2018). These are the main parameters which are
caused by economic changes and which further provides an opportunity for the economic
development. In developing states like Pakistan, problems exist like inflation, stumpy living
standards, poverty and unemployment at larger scale which directly tells on economic health
of the country (Raza, Burney & Ullah, 2020). The country seeks to sustain economic change
to grow revenue and to produce more investment chances to meet the miracle of economic
change.
2.2.2 The Banking Sector in Pakistan

The revolutionary trends can be seen in banking sector during past decades with introduction
and implementation of effective strategies and reforms that transformed the banking sector
into the strong, sound and effective banking system in Pakistan. According to the IMF and
world Bank, as per their assessment reports respectively, the efficient and effective reforms
execution results in the competitive and well-organized financial system in Pakistan (Hardy
& Patti, 2001). These reforms were merely not only focused upon the public sector, but it
14
was more focused on private sector. The constructive economic change was possible due to
vital role of both public and private banking sectors (Burki & Niazi, 2003). The jurisdictive
context and Pakistan state bank directorial ability have value-added knowingly to success
of banking sector and ultimately, banking sector become sounder with improved resilience
to tremors.
The banking sector has increased their finances towards government in collaboration with
the private banking sector which results in better understanding towards economic change.
The banks increase their investments ominously in government securities as well as improve
their activities as dynamic as imparting to households and businesses thereby providing the
revenues with aims to offer risk-free retributions and facilitated them to pole returns even
in the pathetic economic situations (Khalid, 2006). The banking sector retributions sustained
to gather vital returns back on investing in government securities with risk-free objectives.
Furthermore, the investment in available and accessible opportunities also backed towards
accumulation of higher profitability (Qayyum & Abdul, 2007). There transformations with
quality events supported by government helps in sustainable socio-economic development
in Pakistan.
In Pakistan, the banking sector gone over the important evolution phase during past decade
and financial players from private sector added values and sufficient growth in evidenced
in both the public and private banking sector (Ahmad, Malik & Afzal, 2010). Consequently,
the revenue from the core banking activities has increased significantly because of complex
business dimensions due to which earnings are estimated to improve further owing to better
tendencies toward housing finance, consumer finance and enriched lending to the different
sector of economies. In Pakistan, this role was performed by banking sector which involves
commercial banks, Islamic banks, foreign banks, micro-finance banks and finance advance
institutions (Qayyum & Anwar, 2011). There are diverse public and private financial entities
which are involved in performing this critical role thereby contributing towards economic
change.
The banking sector in Pakistan has faced various issues during the past few decades which
are mainly related with the economic uncertainty and political instability that remains the
leading problematic concerns. The banking sector is producing revenues along with decline
in defaults and surplus liquidity however, the economic situation is still deteriorating due to
political and administrative unpredictability (Zafar & Aziz, 2013). The fact is that economic
15
development is directly with development of concerned country and efficient role of baking
sector is quite impressive towards economic change. This sector not only helps in increasing
the revenues but also helps in increasing and maintaining the gross domestic product growth
to a larger extent (Nayak & Goel, 2014). This increasing trend is possible just only efficient
role of banking sector along with the supporting and supervisory role of the governmental
functionaries.
The banking sector is also critically emphasized on the regulatory directions of the state
bank of Pakistan who acts as the controlling body to keenly observe the financial activities
of both the public and private financial institutions. Moreover, the role of small and medium
enterprises is also vital in backing the national economy to a greater extent (Jérôme, Hubert
& Fabien, 2015). Through, it not an ideal solution however it may strength banking sector
to emphasis on SMEs which is considered as life-line towards the economic development.
There are some other active players in financial markets those who are performing this role
very active in contributing economic development (Tara, Singh & Kumar, 2016). However,
foremost drawback of state-owned banks is that government has lined them from indicting
high interest rates and tries to preserve financial overheads to its minima thereby increasing
profitability.
The banking sector in Pakistan has faced different issues related with its internal as well as
external environment which needs special attention from regularity authority of concerned
banks and from government. These needs comprehensive and formal documentation which
may highlight the prerequisite towards the economic change (Samia & Anwar, 2018). Along
with the role of commercial banks, the emergence of the Islamic banking system has also
changed entire scenario. During past decades, there is shift from traditional banking system
to Islamic banking system by providing the banking services from the Islamic perspectives
(Babar, Rashid, Sumaira & Nawaz, 2019). The Islamic banking system played significant
role in proving economic boom to the national economy in larger scale by offering different
services to attract clienteles and to shift their attention from conventional to Islamic banking
system.
2.2.3 The Islamic Banking System

The Islamic financing commonly known as Islamic banking is related with the financing or
the banking activities that meet the terms with Islamic laws (sharia) with aim to practically
16
implement the sharia law over expansion of the Islamic economics (Muhammad, 2002). The
Islamic banks provides different services to clientele among which loss-bearing and profit-
sharing (Mudarabah) joint venture (Musharaka), safekeeping (Wadiah), leasing (Ijara) cost-
plus and (Murabahah) are foremost services offered by the Islamic banking system. In this
drive, investment in businesses which offer services and goods reflected at the variance with
Islamic philosophies is declared as haraam (prohibited and sinful) (Archer & Ahmed, 2003).
These exclusions were applied in changing inscriptions in Muslim communities/countries
to avoid un-Islamic practices to ensure all undertakings according to Islamic principles and
standards.
The Islamic banking system gained popularity across the world and different Islamic banks
are providing different services to their customers. For this purpose, the revitalization of the
Islamic banking system, numerous Islamic banks were formed with the aim to put on these
principles within the Muslim community at both public and private commercial institutions
(Patti & Hardy, 2005). Financial institutions (sharia compliant) denoted around one percent
of the world total assets, in collaboration with gulf cooperation council countries. Though,
Islamic banking still marks-up only portion of banking assets still, its foundation has faster
growing banking resources as whole and is likely to be in progress (Maali, Casson & Napier,
2006). The business industry has praised for recurring to path of the divine supervision in
falling economic and political dominance of Muslim countries over visible mark of Islamic
revivalism.
The Islamic banking system provides different opportunities for development as provided
by diverse financial institutions. The analysts suggested that application of Islamic values
in banking sector bring along certain desired aspirations like no unemployment, no inflation,
no poverty and no exploitation once Islamic principles are implemented in letters and spirit
(Hussain, 2006). Conversely, some analysts criticized criteria that deteriorating to mature
loss and profit allocation and promotion of investment ethical modes thereby offering goods
and services from Islamic perspectives by neglecting interest on investment by complying
sharia law, entail bigger risks and higher costs than conventional banks, will lead to lower
incomes rates of Islamic banks which leads to standing of concerned banks (Hassan, 2007).
However, these banks are still functioning in cultured demeanors by realizing their desired
objectives.
17
The Islamic financing sector around the globe are functional as financial institutions and
there is ongoing trend of merging the industry of Islamic banking, with massive acquisitions
and mergers going on in most of developed and developing countries. Similarly, the digital
revolution and technological change establishing change in Islamic banking sector which
results in the emergence of various new Islamic banks (Djojosugito, 2008). There is growing
trend as witnessed in the developed countries and revolution is evident as large scale thereby
providing open Islamic windows at the commercial markets. The extent of Islamic banking
system in developed countries shadows effective inaugurations of numerous Islamic banks
(Ahmad, Rehman & Safwan, 2010). The net profits and growing assets transverse markets
have attracted sufficient clienteles is significant contribution in riches the Islamic financial
institutions.
The Islamic banking system with respect to realizing standing of creativity and innovation
in response to the conventional banks, are more focused on introduction and implementation
of innovative product and services offered to the clienteles as per the principles sharia. The
Islamic banking sector honored the global finance Islamic finance awards for the innovative
services offered by financial institutions around the world (AAOIFI, 2012). The financial
institutions were honored for extensive increase in earnings and returns thereby maintaining
sound margins. The diminishing costs were lower generally, income fee was sophisticated
and financial institutions strengthened their income statements and balance sheets (Amin,
Isa & Fontaine, 2013). All these were considered as quality measures from Islamic banking
sector is response to the commercial banks by facilitating customers by providing excellence
services.
The Islamic banking system around the world gained popularity due to provision of interest
free goods and services with innovative demeanors. The fact is that today Islamic banking
sector is considered as the most critical competitor for conventional banking sector as it not
only provides the short-term services to their clientele but it also provides long-term services
to stakeholders (Rammal & Parker, 2014). Keeping in view growing trends in development
of Islamic banking system globally, developing countries were also focused on emergence
of Islamic banking system (Islamic Banking Bulletin, 2018). For this purpose, in Pakistan,
numerous banks have been established who offer goods and services in prolonged manner
as per ethical guidelines and principles of sharia (Javeria, Siddiqui & Rasheed, 2019). Thus,
18
Islamic banks occupied unique position and standup in economic change and development
in Pakistan.
2.2.4 The Islamic Banking System in Pakistan

The Islamic banks are playing significant role in different sectors of economies thereby
offering diverse innovative services to customers. In Pakistan, different Islamic banks are
functional since inception and there is gradual development in establishment of Islamic bank
branches across the country (Aggarwal & Yousef, 2000). During past decades, commercial
banks and private banks were more dominant on financial sector of country however, with
the emergence of Islamic banks, entire financial scenario was dramatically changed. There
is an increasing trend as evidenced in the customers as these banks attract most of customers
from the conventional banking system towards Islamic banking system (Muhammad, 2002).
Similarly, most of commercial banks is Pakistan were privatized due to their poor services
which in turn create gap for other banks to grip significant standing in banking sector of the
country.
In Pakistan, in this scenario, the emergence of Islamic banks becomes the vital phenomenon
for financial institutions to grip the situation and to compete banking industry. The Islamic
banks due to their application of sharia laws and principles occupied overwhelming position
in financial market of Pakistan (Patti & Hardy, 2005). In this connection, in 2000, the state
bank was functioning as Islamic bank and immediately after few years, Meezan bank in the
2002 was registered as first Islamic bank in Pakistan. Thus, Islamic banks became the thread
for the non-Islamic banks in different regions of the country. The Islamic banks have been
declared as most well-established financial institutions in the country (Hassan, 2007). The
literature revealed that Islamic banking sector is top performer in contemporary era thereby
providing dominant products and services both in developed and developing countries like
Pakistan.
The Islamic banking system has major impact on economic change from diverse dimensions
as it offers most of the economic share to the national economy from its businesses in the
trade industries. These banks are different from conventional banks in their basic banking
activities like the risk sharing and Riba policies which are basic instrumental strategies for
attracting clienteles (State Bank of Pakistan, 2009). The Islamic banks generate their income
from profit while conventional banks make the income from fixed interest. The conventional
19
banks act as pure financial arbitrators while Islamic banks are recognized as trade-oriented
business entities. The reason behind is Islamic principles as followed by the Islamic banks
in performing their banking operations (Islamic Banking Department, 2010). Thus, the aim
of Islamic banking is to promote integrity and prosperity of the Islamic values in financial
sector.
The Islamic banking system at the peak merged various other banks thereby converting them
in Islamic banks to proceed their activities according to principles of sharia. The objective
of Islamic banks was to eliminate the interest system associated with financial matters and
interest is outlawed in Islam consequently its elimination was prime objectives of emergence
Islamic banking system (Zafar & Aziz, 2013). This system was focused mainly on sharing
the rewards and risks thereby removing the dilemma of interest from financial transactions
as the Islamic law never allow the investments wherein there is existence of reward and risk
which is main theme of interest-based business exchanges (Rammal & Parker, 2014). The
impartial division of wealth among diverse stakeholders is concern of Islamic institutions
thus these institutions gained fame in business markets by becoming nucleus for financial
markets.
The Islamic banking main function is interest-free exchanges as per the principles of Islam
that has been proved from the Holy Quran through different revelations from time to time.
The interest was exposed as authority and blessing of blessings and it is wicked adaptation
be appropriate to others (Janjua, Rashid & Ain, 2014). Thus, these financial activities not
only ensure economic values and principles of Islam but also become source of expanding
the Islamic values in the entire world of business. Various Islamic banks are functional in
Pakistan with a view to provide quality services to customers thereby ensuring the Islamic
values with regard to businesses (Yungucu & Saiti, 2016). The Islamic banking system is
considered as active player towards financial development of Pakistan. The Islamic banking
system is measured as backbone for strong financial system and economic development of
Pakistan.
The Islamic banks have been expanded to almost all the regions of Pakistan due to their
broad-spectrum vision towards the economic development of Pakistan. However, there is a
dire need to expand this phenomenon along with the provision of all those services which
are offered by commercial banks with their own principles (Aysan, Disli & Ozturk, 2018).
20
The Islamic banks guarantees to ensure the Islamic values in their business transactions and
offer products and services in such manner that it eliminates existence of interest in financial
exchanges. Thus, bank who follows Islamic regulations is eligible for registration as Islamic
bank under the Pakistan state bank (Rafay & Farid, 2019). The state bank acts as an advisor
for Islamic banking institutions thereby ensuring services as per Islamic laws. In Pakistan,
different Islamic banks are performing the same responsibilities in Khyber Pakhtunkhwa,
Pakistan.
2.2.5 The Islamic Banks in Khyber Pakhtunkhwa

The Islamic banking system is functional in prosperous demeanors in Khyber Pakhtunkhwa,
Pakistan and numerous Islamic banks are performing responsibilities in effective manner by
providing the goods and services as per Islamic values and ethos (Muhammad, 2002). The
main Islamic banks in Khyber Pakhtunkhwa are the Bank of Khyber and Meezan Bank those
who are offering their services from Islamic perspectives. However, there are certain other
banks likewise the public and private those who are offering the product and services based
upon principles of Islamic banking system (Archer & Ahmed, 2003). Along with provision
of conventional services, banks are providing services thereby ensuring principles of Islam
towards business transactions. Thus, Islamic banking system is as active as in other parts of
the country. These banks are offering services and contributing towards growth on national
economy.
The Islamic banking system implement the reforms ensures that the transference to interest
free economy should be ended in phased and gradual means without make happen any
interruptions. The policy came to conclusion to change Islamic banking system in analogous
with conservative banking system (Janjua, 2004). The state bank of Pakistan implemented
the detailed criteria for functional banks thereby setting-up the new developed commercial
bank to perform entirely banking commerce based on offered Islamic products, setting-up
businesses by commercial banks for directing sharia compliant transactions and postulating
branches by commercial banking system to dealing entirely in Islamic products and services
(Maali, Casson & Napier, 2006). This was the main reason which attract most of commercial
and conventional banks towards Islamic banking system around country including Khyber
Pakhtunkhwa.
21
The Islamic banking system is in boom in Khyber Pakhtunkhwa and commercial banks have
availed the opportunities for the Islamic banking system thereby offering their goods and
services as per ethics of sharia (Hussain, 2006). These banks include Muslim commercial
bank, the Habib bank limited, United bank limited, allied bank limited, Alfalah bank limited
and many other banks who provides the business opportunities in Islamic views of business.
These banks, under supervision of state bank of Pakistan, enjoys the limited liabilities while
Islamic banks enjoys unlimited liabilities under direction of state bank (Gait & Worthington,
2008). The main theme behind is the interest free banking that denotes the different banking
operations and instruments which spurt from interest-based transactions. Thus, these Islamic
banks are adoring diverse indefinite powers to enjoy their banking operations in the Islamic
perspectives.
In this connection, the Islamic banking system is wide-ranging term which predicts not only
to evade transactions of interest-based as banned in sharia but avoid unprincipled activities
by participating dynamically in attaining objectives and goals of the Islamic economy. The
stance of Islamic banking sector rests inspiring impact on economic growth expectation and
in fact Islamic banks play significant role in elevation of foreign direct investments not only
at regional and national levels (Khattak & Rehman, 2010). The Islamic banking in Khyber
Pakhtunkhwa has improved effect regardless of governing restrictions and different Islamic
banks now serves as the pivot for Islamic finances. The state bank as advisor is performing
main role in seeing services as delivered by Islamic banks (Butt et al., 2011). The network
of Islamic banks is increasing tremendously and various new Islamic banks significantly
emerged.
In Khyber Pakhtunkhwa, the main responsibility with regard to Islamic banking system falls
upon the shoulders of Bank of Khyber and Meezan banks those who are offering the services
entirely from Islamic approaches (State Bank of Pakistan, 2014). In Khyber Pakhtunkhwa,
Islamic banks are also successful due to high interaction of people with the religion and due
to application of sharia value and principles as compared to other parts of the country. Thus,
there are many banks who provided facilities of deposits and loans to generate and earn the
economic from transactional undertakings (Yungucu & Saiti, 2016). The Islamic banks are
considered most critical banks in adaptation of Islamic principles by prohibiting the interest
on loans and interests on other banking activities like provision of goods and services to
22
their customers in such a manner that business exchanges are guaranteed with interest-free
phenomenon.
The Islamic banks are also considered as best entities for providing sources through Islamic
financing services of Ijarah and refinance and for this purpose, Islamic banks offers diverse
deposit systems to the customers (Ullah & Karaghouli, 2017). Thus, various research studies
examined the standing of Islamic banks in different context however, this study examined
credibility of Islamic banks in the context of Khyber Pakhtunkhwa, Pakistan. Along with,
Islamic banks also provide some other services which are not yet available in commercial
banks like profit sharing, joint venture, safekeeping, Islamic insurance, international fund
transfer system, cost-benefit finance, leasing and Islamic bonds (Khan, Atiq & Ullah, 2018).
Besides provision of these services, Islamic banks have sequence of diverse tasks which are
related with credibility of Islamic banks in Pakistan by assuring these duties in letters and
spirit.
2.2.6 The Responsibilities of Islamic Banks

The clienteles of Islamic banking system are relishing massive services and products which
are offered by Islamic banks but, there are certain responsibilities on Islamic banks which
are critical measures for their active relations in operational activities (Jarhi & Iqbal, 2001).
Islamic banks leading concern is its exposure towards corporate social responsibility, ethical
identity, social reporting, Islamic values, social and business ethics, corporate sustainability,
environmental concern, socially liable savings and corporate social performance which are
most critical responsibilities concerning Islamic banking system (Archer & Ahmed, 2003).
The Islamic banks are also bound by certain Islamic principles which are basic responsibility
of Islamic banks in posing and managing their business activities to their stakeholders in
undertaking businesses associated with the credibility of the Islamic finances from Islamic
perspectives.
The prime responsibility of Islamic banks is to inspire line of work and events as dynamic
interface with deficit units and surplus units of the national economy. Along with, the main
and critical responsibility is related with objects at providing services with market attuned
services and products to facilitate their clienteles (Maali, Casson & Napier, 2006). Besides,
the other responsibilities are related with advisory services, letter of guarantee and shipping
guarantee which makes responsible the banks towards basic functions of the Islamic banking
23
system. Consequently, Islamic banks take dynamics of social responsibility irrespective of
financial magnitudes so on consequences are destructive/constructive (Djojosugito, 2008).
The leading concern of Islamic banks is exclusion of investment in haram events like supply
chains, bookmaking and other barred activities as stated illegal by the sharia from Islamic
perspectives.
The Islamic banks have also responsibility of the social reporting which actually take places
within the social relationship framework. The basic theme towards the social reporting from
Islamic perspectives is understanding towards ownership, social justice and accountability
with main issues towards social relationships (Ahmad, Rehman & Safwan, 2010). Similarly,
the Islamic banks as entities towards value-orientation requisite to measure their corporate
ethical uniqueness. The Islamic banking talk about the banking system as in line with the
Islamic principles and the sharia is anxious towards welfare in society and justice promotion.
Similarly, responsibility of Islamic banks is ensuring businesses in profit-loss-sharing and
interest-free based which preserves philosophies of comradeship (Butt et al., 2011). Thus,
Islamic banks are required to put emphasis on standards that support and enforce Islamic
values.
Similarly, Islamic ethics and responsibility are companionable perceptions as Islamic bank
business ethics are related with the Islamic principles that manage the standards of wrong
and right and bad and good. The Islamic banking sector offers package of responsibilities
towards stakeholders and customers from diverse dimensions (Amin, Isa & Fontaine, 2013).
The Islamic banks provides services related with financial advisory facilities, privatization
advisory services, acquisition and merger control, venture capital, equity placement, range
related with cash management, capital market procedures (trading), brokerage services and
realize all required responsibilities which comes under the jurisdiction of Islamic banking
(Rammal & Parker, 2014). The Islamic banking ensures business transactions and activities
as per principles of Islam by ensuring the Islamic principles and standards in exchange with
stakeholders.
The Islamic banks are also ensuring their responsibilities related with the routine procedures
and processes of banking activities. These responsibilities are related mainly with functions
of Islamic banks likewise purchase/sale of foreign currencies, zakat deduction, remittances,
pay-orders, telegraphic transferal, custodial and lockers services, online electronic transfer,
24
demand draft, non-interest and current bank account facilities, purchase and sales of stock/
shares, clearing facility, electronic banking window, collection of the dividends and mobile
banking (Yunguc & Saiti, 2016). All these are procedural responsibilities of Islamic bank
for which they are responsible to their stakeholders and state bank. The Islamic banks are
responsible to provide all these facilities as per directions of sharia economic philosophies
(Ullah & Karaghouli, 2017). Thus, Islamic banks ensures provision of facilities from Islamic
philosophy.
In Pakistan, Islamic banking system is responsible by proving their realization to contend

with deep-rooted conventional banking system. The Islamic bank executes multiple tasks to
assist diverse stakeholder consistent with the particular desires (Khan, Atiq & Ullah, 2018).
Like conventional banks, the Islamic banks also mere the resources by acquiescent securities
from the investors and be responsible for these reserves to financiers for productive schemes
to produce profits by ensuring Islamic principles of economics (Rafay & Farid, 2019). Also,
it is the responsibility of the Islamic banks to provide interest-free services and products as
per sharia value to serve diverse sectors of the economy (Raza, Burney & Ullah, 2020). The
diverse packages for the Islamic banking system ensure banking operations through Islamic
principles to serve societies among which most critical is phenomenon of corporate social
responsibility.
2.3 The Corporate Social Responsibility

The corporate social responsibility is important phenomena with regard to the public and
private and manufacturing and service sector organizations. However, its role in the banking
sector is phenomenal due to its overwhelming role in the economic development of country
(Chau & Siu, 2000). The application of corporate social responsibility measures in banking
sector needs additional concentration due to its dealing with economic matters related with
stakeholder trust which further nurture their abilities and potential to become the permanent
stakeholders of concerned banks. In contemporary era, each organization is bound to please
the responsibilities which make them accountable to stakeholders and societies (Backhaus,
Stone & Heiner, 2002). The corporate social responsibilities describe complete package of
responsibilities about organizational activities and services to act and serve as per required
standards.
25
The corporate social responsibility plays vital role in attaining viable brink over competitors
over maximum revenues acquisition and improving business interactions with stakeholders.
Different researchers presented different models of corporate social responsibility; however,
research has used three-dimensional model (triple‐bottom line model) offered by Elkington
(1998). This model suggested concept which develops stress of organization on economic
bottom line phenomenon to cover social and environmental considerations of the society.
This concept further organization responsibility towards their customers with commitments
to make sure supporting processes and activities towards stakeholders (Norman & Donald,
2004). Some organizations realized triple‐bottom line framework to appraise enactments in
inclusive manner so as to produce the better values and standards for their businesses and
organization.
The corporate social responsibility in the context of banking sector is also matter of greater
importance for the policy makers as well as the stakeholders of the banks. It defines concrete
package of responsibilities that defines the purpose and the role towards the societies. The
triple bottom line model represents three foremost responsibilities of the banks to perform
their activities within different perspectives as well as the welfares of the stakeholders and
general people in the society (Yamak & Süer, 2005). It further helps in defining the critical
role of the concerned banks towards the welfare of the societies in terms of the social,
economic and environmental dimensions. Thus, banks are bound over these responsibilities
in addition to compliance of sharia thereby offering goods and services to their customers/
stakeholders by describing its critical role to maintain the customers trust (Ennew & Sekhon,
2007).
The corporate responsibility from social perspectives defines role of concerned organization
towards the societies in terms of social dimensions that how can these organizations/banks
can serve the societies in addition to their basic functions. Therefore, main focus is on social
prosperity and development of banks in connection to social responsibility (Decker & Sale,
2009). Similarly, economic responsibility denotes to economic share of banks towards the
economic growth as well as their responsible behavior towards individuals in societies. It
defines the economic share of the concerned banks towards the economy at regional as well
as national level (Anghel, Grigore & Roşca, 2011). It defines banks role towards societies
that how banks routine operations are helpful for the societies from different dimensions.
26
Thus, banks are more optimistic and responsible in their operations towards societies and
stakeholders.
The environmental responsibility denotes to the role of concerned Islamic banks with regard
to their contribution in environmental dimensions that how these banks can contribute to
societies from the environmental perspectives. The environmental protection is the basic
responsibility of the organizations including Islamic banking sector as each of organization
is subsidizing their critical role towards environmental protection from diverse dimensions
(Asemah, Okpanachi & Olumuji, 2013). In modern era, it is the foremost responsibility of
the Islamic banks to contribute in their environmental spheres by taking certain well-defined
measures to contribute societies by playing their vital role in environmental development
(Farcane & Bureana, 2015). The Islamic banks are more contiguous in executing CSR from
different magnitudes to contribute the individuals in societies by performing overwhelming
responsibilities.
The corporate social responsibility is vital in the Islamic banking sector as these banks are
operating their business activities as per the guidelines from sharia. The Islamic banks are
more worried about the corporate social responsibility from different perspectives as these
banks functioning their transactional deeds by keeping in view standing of Islamic principles
as Islam is broad religion of peace and prosperity and always focused upon development of
the societies (Ullah & Karaghouli, 2017). The Islamic banks are more concentrated on the
fulfilled of corporate errands as allied with routine functional activities. Islamic banks in
Khyber Pakhtunkhwa, are concerned with corporate social responsibilities thereby ensuring
critical role of tasks towards societies (Babar et al., 2019). Conversely, to understand this
phenomenon systematically, there is dire need to understand evolution of corporate social
responsibility.
2.3.1 Evolution of Corporate Social Responsibility

The corporate social responsibility is a historic conception and its evolution can be traced
back to Muslim communities. Its existence can be mark out from teachings of Islam about
the social responsibilities in the shape of sadqa and zakat which were recommended to help
the poor and needy people in the societies (Muhammad, 2002). During the 20th century,
phenomenon was shifted from Muslim societies to western communities. Besides, existence
of this phenomenon can be witnessed from famous book “functions of executive” authored
27
by Barnard wherein need was analyzed about social, physical, legal, moral and economic
fundamentals dominant in societies while making business decisions (Archer & Ahmed,
2003). Later on, Drucker clearly clarified concept of CSR in book “practice of management”
thereby addressing these responsibilities as foremost requirements while establishing the
businesses.
The concept was further explained that supercilious obligation for public goods and services
is the emergent prerequisite for businesses to emphasized their concerns towards the public
good and services, backing strong principles towards societies by contributing to promote
strength, stability and harmony in societies (Garriga & Melé, 2004). The main focus was on
the critical role of businesses towards the welfare of the societies. Bowen was perhaps the
main writer who defined formally the corporate social responsibility by suggesting that it is
fundamental obligation business owners to follow the policies and make the decisions which
are most befitting with welfare of the societies (Luo & Bhattacharya, 2006). The researchers
further recommend that corporate social responsibility is basically denoting to the business
operations wherein the certain share of earnings is contributed towards the prosperity of the
societies.
The corporate social responsibility further denoted to actions and decisions of the business
which is beyond uninterrupted technical and economic interests. However, some analysts
have criticized the concept thereby suggesting that main theme behind the businesses is to
serve stakeholders by increasing their wealth and not to societies from different dimensions
(Kotler & Lee, 2008). The reason behind was justified that business entities main function
is to increase wealth for their own and for their stakeholders and not to contribute societies
by spending the share of their income on the welfare of societies. The customers, employees
and shareholders can contribute the societies individually and collectively by sharing some
of portion of their income from investments (Marin, Ruiz & Rubio, 2009). However, most
of business analysts were of views that corporate social responsibility is a challenge for the
businesses.
The business analysts opined that the main responsibility of the business entities serves as
basic economic units in the societies thereby contributing the national economies wherein,
they have to pay numerous obligations to the government and thus they are not bound to
contribute more towards societies (Surroca, Tribó & Waddock, 2010). The fact is that the
business entities are required to contribute the societies by donating some portion of their
28
income by facilitating societies from social, environmental and economic magnitudes. The
CSR therefore brings upon certain obligations towards businesses to voluntarily contribute
societies without need for material values and vested interests of the businesses (Alafi &
Hasoneh, 2012). Numerous organizations already framed the strategies and policies to spend
some portion of their income on general public welfare in society who need some financial
assistance.
Moreover, the corporate social responsibility was recommended as the facilitating strategy
to attract the clienteles and to increase the financial gain as well as the financial performance
of concerned organizations. Later on, analysts recommended CSR as the significant tool for
increasing financial gain in background of financial institutions including the banking sector
(Öberseder et al., 2014). The fact is that banking system is more worried about the increase
in number of customers and this can only be possible when the concerned banks offer some
other packages towards welfare of stakeholders among which corporate social responsibility
has been considered as the comprehensive parcels (González & Vilela, 2016). Therefore,
this responsibility is helpful for banking sector to attain their leading objectives of achieving
financial and viable edge and attracting more customers towards the banks to improve their
standing.
The corporate responsibility is also significant for banking sector especially for the Islamic
banks to achieve their desired objectives and to serve societies as endorsed by the teachings
of Islam. This phenomenon gained momentum during the last decades and almost all banks
whether public/private are apprehensive about execution of corporate social responsibility
to improve the performance and to lead in competitive markets (Gangi, Mario, Nicola &
Daniele, 2018). The CSR is also considered as linkages between individuals and industries
and between industries and societies. Thus, diverse researchers examined significant impact
of the corporate social responsibility on financial performance in banks context in developed
as well as developing countries (Aramburu & Pescador, 2019). Thus, different researchers
defined CSR from different magnitudes and scopes to understand suitable meaning of the
phenomenon.
2.3.2 Meaning of Corporate Social Responsibility

The corporate social responsibility was firstly defined by Bowen (1953) by recommending
that business entities enormous authority in decision making which influence significantly
29
the livelihood of individuals in societies thus these entities have certain obligations towards
societies which they have to pay from different magnitudes (Cronin, Brady & Hult, 2000).
Therefore, corporate social responsibility is well-defined as the responsibilities of business
organizations to follow those strategies and policies by making decisions and by following
those stroke lines which are desired regarding the values and objectives towards the societies
(Simpson & Kohers, 2002). The business entities are required to manage operational doings
so as to realize individuals’ expectations and to increase the social and economic welfare of
the society. These business entries are direly required to fulfill their obligations towards the
societies.
The broader perspective of corporate social responsibility is related with diverse devastating
parameters like the sustainability, ethics, corporate citizenship, the stakeholder management
and environmental obligations together with effective attitude by using narrower elucidation
to recommend the social and economic responsibilities for organizations is only about make
best use of generating revenues in ethical and legal manner but also by focusing on interests
of shareholders (Garriga & Melé, 2004). The main focus remains on welfare of the societies
thereby contributing the societies from diverse dimensions like some related businesses with
social order while other assumed that businesses ought not only legal and economic tasks
(Luo & Bhattacharya, 2006). These measures must satisfy interests of community welfare,
politics, employee happiness and education thereby contributing societies from different
dimensions.
Similarly, the corporate social responsibility has been recommended by various researchers
as the notion towards the “iron law of responsibility” thereby keeping in view the interests
of the communities, suppliers workforces and to put social benefits and economic gains on
the equal traction in allowing for responsibilities of virtuous corporate citizenship by further
stressing upon business and social interests to be considered in prolonged manners (Nan &
Heo, 2007). Thus, corporate social responsibility has been considered as foremost element
for the public relationships with the concerned business entities. Thus, the corporate social
responsibility in diverse extents like social, economic and environmental extents contribute
the entire society by bringing certain quality measures (Decker & Sale, 2009). Similarly, the
corporate responsibility also brings some desired changes in vested interests of business
entities.
30
The responsibilities of the business organizations are unlimited towards societies therefore
some researchers operationalized CSR over different classifications likewise the corporate
actions into three-dimensional schematic approach including social responsiveness, social
responsibility and the social obligation (Jackso & Apostolakou, 2010). The social obligation
denotes to corporate stroke in connection to legal constraints and market forces while social
obligation is all about the behaviors those which are consistent with social values norms and
hopes however, and social approachability is about the organizational capability to do ahead
variations in society and market by taking edges to minimalize the adversarial sound effects
on stakeholders’ behaviors (Jurisova & Durkova, 2012). Thus, the corporate responsibilities
have been measured as the distinct obligations of the business entities towards the entire
communities.
The meaning of corporate social responsibility was ended precisely more when it was shared
into different capacities likewise the legal, economic, discretionary and ethical and later on
these classifications refined into social, economic and environmental responsibilities. The
stakeholders standing towards corporate social responsibility originated to be predictable as
important dynamic force about corporate stakeholders (Michelon, Boesso & Kumar, 2013).
Thus, the CSR enables organizations to give emphasis more on stakeholders needs towards
their basic requirements. Thus, these responsibilities are not only vital for organizations but
also dynamic for the concerned stakeholders (Farcane & Bureana, 2015). It further bound
the organizations to focus more on the basic functions of the entities in their operations
towards the societies that how these operations are helpful for the corporate reputation of
businesses.
The corporate social responsibility has also more apprehension to societies and businesses
were predictable to set of scales stockholders’ need for respectable financial performance
with desires for other stakeholders like the community and employees. Since, stakeholders’
satisfaction from business activities of organizations is sign for attracting more customers
to organizations (Salman, Sami, Mohamed & Khater, 2017). The varieties of stakeholders
intricate in business operations which has increased the force on business reporting and
engagement of CSR activities that delicate public consciousness and increase prerequisite
for the corporate business accountability (Aramburu & Pescador, 2019). The organizational
practices about ethical business and objectives for viable society change were consistent
31
together with basic functions of concerned business entity towards societies from different
dimensions.
2.3.3 Ethics of Corporate Social Responsibility

The researchers have identified ethical values of corporate social responsibility in diverse
economic situations either favorable or unfavorable. Though, around the world, corporate
social responsibility has been understood as an opportunity, undeniable priority and viable
edge for business community (Simpson & Kohers, 2002). The CSR appeared to capable the
organizations as innocuous from the criticism, as comprehended in the disasters of economic
change. It not helps in creating the respectable corporate image in the eyes of stakeholders
but helps in increasing ethical values of the organizations. Thus, it has been considered as
the dynamic tool to develop credibility of concerned organization (Garriga & Melé, 2004).
The early researchers believed that organizations should be more focused on contributions
towards the society from different perspectives to serve the individuals and societies all
together.
The corporate social responsibility is practical in organizations since it helps in reducing

risk and cost, strengthening reputation and legitimacy, create favorable situations and build
viable lead by producing the synergy and values. The CSR is also helpful in improving the
corporate images, reducing financial risk, increasing stakeholders’ values and reducing the
insecurity towards economic change (Crespo & Bosque, 2005). In modern era, stakeholders
are expected the ethical practices in the businesses to whom these stakeholders are dealing
and it thus helps in rewarding the organizations when they show their willingness to pay
higher which in turn inspire the organizations to contribute towards the development of the
society (Luo & Bhattacharya, 2006). The CSR not only helps during the economic change
but it also helps in increasing the stakeholders’ beliefs, values and concerns during the risk
management.
The researchers realized the close connection between corporate social responsibility and
the corporate image as the active participation in corporate social responsibility measures
helps in increasing their values in the minds of stakeholders which indirectly leads towards
the corporate accountability (Matten & Moon, 2008). The litCSR helps in increasing the
social performance of the organizations and thus helps in building the business legitimacy.
The organizations have responsibility to strength ethically and subsidize towards economic
32
development in addition to the wellbeing of the stakeholders and the community in general
(Peterson & Jun, 2009). The corporate social model was recommended by the researchers
with the aim that it might help the organizations in terms to increase the economic values
but also helps in increasing the stakeholders’ values and the ultimate trust on the concerned
organizations.
The corporate social responsibility helps in increasing the social responsibility along with
issues of responsiveness as witnessed in societies. In this regard, various ethical principles
were recommended by researchers towards social responsibilities which comprises policies,
procedures and ethical principles from different dimensions like the social, environmental
and economic responsibilities which are instrumental for organizations in attaining viable
edge in the competitive environment (Kim & Park, 2011). This in turn, helps concerned
organizations in increasing their performance, reducing risk and developing the positive
perceptions of stakeholders towards organizations. The organizations who are lesser focused
on concept of CSR are expected to have lesser credibility, decreasing trends in customers’
values and standards by facing the risks at higher forces in social order (Pérez & Bosque,
2013).
The corporate social responsibility is crucial for the organizations in attracting customers,
lenders and investors however, different researchers have different views about anticipating
role of corporate responsibilities about varying aspects of organizational change (Rosario,
Carmen & Simonetti, 2015). These aspects are mainly focusing on technological changes
and variation in the economic situations which directly influences organizational credibility.
The ethical standards of CSR effect organizational operational activities by bounding them
to take active partaking in improvement of societies (Salman et al., 2017). The organizations
are further required to put more emphasis on corporate responsibilities to serve societies
from social and environmental perspectives to participate in societal development thereby
offering serious role in upbringing the situation at par toward fortune and development in
societies.
In recent era, there is increasing trend evident in adoptability of CSR measures in banking
sector and all banks whether convention, commercial and Islamic banks around the world
including the developing countries like Pakistan. The Islamic banks are moreover concerned
with the corporate social responsibility as these banks are functional on principles of sharia
33
in serving the societies which is the basic ethical standard of the Islamic principles towards
societies (Shankar, Dash & Chakraborty, 2018). The numerous researchers refined existing
models of CSR in context of Islamic banking and recommended triple bottom line model as
most befitting model for Islamic banks (Rafay & Farid, 2019). Thus, the focus remained the
significant on application of corporate social responsibility measures from Islamic banking
sector towards development of societies thereby focusing on importance of corporate social
responsibility.
2.3.4 Importance of Corporate Social Responsibility

The corporate social responsibility emerged as an important phenomenon during the past
few decades due to its critical role towards development of societies. These responsibilities
bind the organizations to serve the societies from different dimensions/measures to maintain
their strong positions in competitive economic situations (Williams & Siegel, 2001). Thus,
the organizations are needed to comprehend the situation thereby focusing on the vitality
and standing of the CSR in organizational context. The CSR helps in managing the strategic
values for the organizations by adding values to businesses and becomes serious concerns
for management of the organizations (Bhattacharya & Sen, 2004). Thus, linking strategic
and economics management, the organizations are required to concentrate more on effective
utilization of resources, the financial growth and income, competitive advantage as well as
capabilities.
The measures of corporate social responsibility help the concerned organizations to remains
the leading phenomenon for stakeholders as well as organizations. Therefore, organizations
are much anxious about the importance of CSR in bringing their status at pat to the required
level (Mattingly & Berman, 2006). The CSR is important for diverse nature of organizations
including banking sector as there is strong evidence about application of the corporate social
responsibility in banking sector. The banking sector experiences various opportunities for
development through the execution of corporate social responsibility as it not only helps in
attaining the competitive edge but also helps in attaining more customers towards concerned
banking sector (Swaen & Chumpitaz, 2008). Correspondingly, Islamic banks are also strong
operators of corporate social responsibility which used same conveniences to facilitate the
societies.
34
The credibility of corporate social responsibility is Islamic banking is resilient as compared
to the conventional banking system as Islamic banks are already functional within the limit
and jurisdiction as specified by teachings of Islam. Islam is a comprehensive religion and
always remains focused on the development of the societies thus the Islamic banks are more
worried about dynamics of CSR (Farook, Hassan & Lanis, 2011). Similarly, Islamic banks
over diverse measures towards the societies are also become vital due to numerous manners.
The role of corporate social responsibility is Islamic banks become phenomenal due to the
overwhelming responsibilities on the banks towards society (Amin, Isa & Fontaine, 2013).
Likewise, role of these banks is also critical in managing the liabilities and responsibilities
towards societies through active participation and involvement in developmental process of
societies.
Likewise, the importance of corporate social responsibility in Islamic banking system is also
in dimensions as recommended by the researchers like social, economic and environmental
responsibilities which are critical for successful operation of the banking activities as well
as the long-term development (Ailawadi, Neslin, Luan & Taylor, 2014). Similarly, CSR is
vital for banks in developing strategic approached, implementation of policies, exploitation
of progressive policies, decreases threads from competitors, reduce the cost and increase the
benefits to stakeholders and also contribute the society from environmental eruption (Gonza
& Rodrıguez, 2015). These are leading parameters which makes the distinction between
conventional and Islamic banks with regard to the corporate social responsibility. Similarly,
the provisions of various facilities to deserving people is also the basics of corporate social
responsibilities.
The success of the banking sector is contingent upon many overwhelming dynamic factors
among which the corporate social responsibility falls at the top due to its important role in
developing strategies for societal development. Among other dynamics, this responsibility
is more strengthen as it is mainly focused upon the development of societies and the growth
in the financial attainment of the concerned banks (González & Vilela, 2016). Therefore,
the banking sector especially the Islamic banking system is much closer to the execution of
the CSR in letters and spirit. Likewise, the CSR is also important for Islamic banks due to
their emergence nature and due to their application for conducting activities in an uncertain
situation (Ullah & Karaghouli, 2017). Along with, application of certain responsibilities in
35
Islamic perspectives and principles is also a challenge for concerned banks to survive and
develop.
The exponential technological development necessitates the organizations to keep vibrant

abilities in the capacity building, reconfiguring and integrating experiences to participate in
rapidly-changing economic situations (Afridi, Gul & Haider, 2018). Thus, corporate social
responsibility along with technological adaptation and innovation pay the ways towards
economic development (Rafay & Farid, 2019). The main responsibility falls upon shoulders
of the concerned Islamic banks to come and grip the situation by competing the banking
industries through its quality measures towards the societies development. The banks are
required to utilize their all resources for the active and successful adaptation of the CSR in
competitive environment for customers’ satisfaction (Raza, & Burney, 2020). The corporate
social responsibility has certain benefits and assistances for individuals, societies and for
organizations.
2.3.5 Benefits of Corporate Social Responsibility

The corporate social responsibility brings certain benefits for stakeholders and organizations
which are addressed in the prevailing section. The CSR is benefited for the organizations in
achieving their competitive edge over the competitors and it further helps in attracting more
stakeholders due to their contributions towards societies (Greening & Turban, 2000). The
corporate social responsibility has been considered as the most dynamic tool for the social
and financial performance of the organizations and their contribution towards the societies
(Simpson & Kohers, 2002). Similarly, corporate social responsibility also helps in reducing
the business risks likewise idiosyncratic risks and systematic risks as these risks are mainly
related with the operational activities of concerned organizations and thus corporate social
responsibility acts as the facilitating apparatuses to cater the situation by reducing these
risks.
The corporate social responsibility is beneficial for individuals is societies as this concept
encompasses certain overwhelming packages for the individuals to main their economic as
well as social positions in societies. Similarly, it also provides the employment opportunities
to the individuals who are facing dilemma of unemployment (Norman & MacDonald, 2004).
These responsibilities are also vital for the individuals having poor economic positions as
most of organizations are paying suitable share of their income among the needy individuals
36
to cater their basic needs. Likewise, the corporate responsibility also helpful in attaining the
desired standing and ranking in the contemporary competitive environment (Basil & Weber,
2006). The researchers selected perspective of sustainable as well as everlasting viability to
proceeds when searching that how to practice CSR to sustain the environment, society and
business.
For the long-term financial benefits, corporate social responsibility helps the organizations
to retain stakeholder to be part of organization to enjoy long-term doles from organizational
operations. Before adopting CSR measures, organizations must ensure obligations on part
of stakeholders and then contribute in the welfare of societies (Branco & Rodrigues, 2007).
Similarly, corporate social responsibility also helps in providing knowledge-based services
to the individuals to update their knowledge and skills and to arrange different kinds of
seminars and workshops to aware them about environmental uncertainty and to cater with
the uncertain situations whenever there exist the chances for the disaster risk management
(Amaeshi & Amao, 2009). These measures help the individuals in societies to take certain
well concerted efforts in catering the uncertain situation and to meet the demands of the
environment.
The corporate social responsibility also benefits the organizations including banking sector
to remain the part of the voluntary organizations those who actively participate in societal
development by eradicating environmental risks. Similarly, CSR helps the organizations in
shaping the attitude towards concerned organizations by attracting them towards facilities
offered by concerned banks (Kim & Park, 2011). The banking industry can obtain benefits
from applications of corporate social responsibility measures likewise it helps in developing
incorporeal assets like enriched reputation, developed attractiveness, stakeholder dealings
which provides the long-term benefits to the individuals as well as the concerned banks
(Pérez & Bosque, 2013). In this regard, the banking sector is enjoying various benefits from
applications of the corporate social responsibility to maintain competitive edge over the
competitors.
The corporate social responsibility in banking sector especially in the Islamic banking sector
is more concerned with these measures as they are helping the desired individuals through
the help of financial assistance, contribute in the social welfare schemes and programs and
provide support for environmental constraints to eliminate sprints that effects environment
37
(Rosario, Carmen & Simonetti, 2015). The CSR also helps the Islamic banks to contribute
the communities from different dimensions to maintain the competitive position in banking
industry. It is the basic responsibility of the Islamic banks to take active participation in the
economic, social and environmental constraints to benefit individuals and societies (Sohail,
Durrani & Khan, 2017). Similarly, to maintain the positive image of Islamic banks in hearts
and minds of stakeholders and individuals in the community to command in the competitive
situations.
The benefits of the corporate social responsibility are massive as these responsibilities are
vital in maintaining sustainable competitive position of the Islamic banks. Similarly, some
of the Islamic banks like the Meezan banks are more active towards the CSR and remained
leading Islamic bank due to its active participation in these responsibilities (Islamic Banking
Bulletin, 2018). Similarly, the CSR measures towards employees, customers and societies
were confirmed by various researchers thereby recommending the significant and positive
link towards the performance of the Islamic banks (Rafay & Farid, 2019). Similarly, CSR
is also helpful for the corporate reputation of the banks and having significant impact on the
customers’ identification and satisfaction (Raza, Burney & Ullah, 2020). There are many
customers and stakeholders who are benefitted from successful actions of corporate social
responsibility.
2.3.6 Corporate Social Responsibility in Banking Industry

The corporate social responsibility in banking sector is widely researched through different
parameters with different outcomes. The fair and standardized services in banking sector is
only possible through the applications of affective CSR measures as it not helps in creating
values for stakeholders but also create values for concerned banks to work on recommended
entrepreneurial policies (Chau & Siu, 2000). The corporate social responsibility also assists
the banking industries in provision of excellent goods and services aligned with the basic
needs of the stakeholders. Similarly, it is indispensable for banking sector to consistent with
customer observances as it is foremost issue which makes banking sector as the customers-
oriented sector (Burki & Niazi, 2003). Thus, banking sector is found closer to provisions of
corporate social responsibility measures to facilitate the stakeholders in achieving desired
objectives.
38
The banking sector is also reliable is availability of corporate social responsibility measures
as it helps in competing the banking industries. The fact is that there are number of banks
either public and private and either conventional and Islamic who are considered as active
in the contemporary markers (Menguc & Ozanne, 2005). The banking sector is more visible
to the applications of corporate social responsibility measures from different dimensions to
maintain their edges over competitors. The provision of these corporate measures are also
considered as vital predictors for development of concerned banks (Riel & Fombrun, 2007).
These banks are also critical in performing their basic roles towards the provisions of better
services to stakeholders in addition to their fundamental obligations. The banking sector is
the backbone for national economy thereby showing their basic roles towards the economic
development.
For this purpose, banks are measured as active leaders in the sustainability processes and
often have transferred their determinations in building the better economic change. Banking
system is also more worried about their corporate reputation which can only be possible
when these banks paid more on the availability of the CSR measures in its true and proper
systematic policies and procedures (Decker & Sale, 2009). These procedures then bind the
concerned banks to performance their operational activities within the specified limits to
main their credibility in competitive markets. Similarly, active provisions of CSR measures
are also helpful in shaping the minds of individuals in the societies towards the concerned
banks (Carroll & Shabana, 2010). The banking industry is considered as the most active
players towards national economy thus, banks are required to more focused on corporate
responsibilities.
The banking sector is reliable in the corporate social responsibility performances and it is
believed that the application of these responsibilities is vital in developing the positive
perceptions of the stakeholders about the corporate reputation of the banking sector (Zafar
& Aziz, 2013). The literature revealed that CSR measures are the social and environmental
investments that organizations activate to achieve the desired positions in the marketplaces
thereby obtaining the customers support in the credit rating and the rating of the concerned
banks. These measures are thus helpful in reducing the risks and increasing the credibility
of concerned banks (Rosario, Carmen & Simonetti, 2015). The banking sector introduced
the different measures concerning cultural, educational, health and environmental initiatives
39
to facilitate stakeholders and to improve the customers trust and corporate reputation in the
marketplaces.
The corporate social responsibility is also vital in the times of economic disaster as most of
the banks were worried about the declining trends in their revenue generations due to the
economic changes in financial markets (Yungucu & Saiti, 2016). These variations not only
effect operational activities of concerned banks but also effect the entire economic standing
banks along with said execution of diverse measures from diverse perspectives. The banking
sector is much closer to applicability of the economic measures to overwhelm the situations
and to produce desirable economic positions in financial markets (Goyal & Chanda, 2017).
The corporate social responsibility is also vital in increasing the transparency, accountability
and trust as most of the stakeholders select the banks for their deposits who are much closer
to the CSR measures applications and who are much willing to ensure effective corporate
responsibility.
In Pakistan, the strong banking system is active in contributing towards national economy
and different banks are functional (conventional & Islamic) in producing desired outcomes.
The Islamic banking sector is much dynamic in claiming corporate social responsibility due
to their close alignment with the principles of sharia (Islamic Banking Bulletin, 2018). The
literature indicates the strong and significant connection between the customers’ satisfaction
and service quality when CSR acts as facilitating role in bridging the connection between
these measures (Babar et al., 2019). The CSR is measured as the concept, a mechanism and
business model which requires the organizations to put on the radical transformation in the
attitude, behavior and entire working format of organizations (Raza, Burney & Ullah, 2020).
Consequently, the corporate social responsibility is phenomenal in context of Islamic banks
perspectives.
2.3.7 Corporate Social Responsibility in Islamic Banks

In Islamic perspectives, concept of kindness and benevolence was used as main contributor
towards individuals’ responsibilities in societies. The benevolence denotes to individuals’
well-being in the societies without any obligations form stakeholders and government since
organizations are bound over ethical magnitudes to serve and contribute voluntarily (Archer
& Ahmed, 2003). Consequently, this concept was similar to corporate social responsibility
as both concepts have similar drives in serving societies thus CSR is historic term and its
40
roots are hinges from Islamic principles. Islam teaches learning for serving communities
voluntarily without any discrimination and have serious concerns about welfare of societies
(Maali, Casson & Napier, 2006). Thus, the Islamic banking system is more concerned about
the effective as well as efficient system in the implementations towards the corporate social
responsibility.
In this influences, different researchers those who already worked on the Islamic banking
system claimed that though Islamic banks appliance usually same roles as performed by the
conventional banks however, the Islamic banks are closer towards the corporate social
responsibility as well as the principles of sharia (Hassan, 2007). The important landscapes
of Islamic finance and banking that marks it unique and different from conventional banks
are that Islamic banking deeds for fair, just and stable societies as made-up by economics
from Islamic perspectives (Djojosugito, 2008). Moreover, Islamic banking is built on values
of cooperation and brotherhood which stances for the organism of stake-taking, risk-sharing
and equity-sharing. Islamic system is stranded on moral and ethical structure of the sharia
as classified by social values and ethical norms which are main themes of Islamic banking
system.
Likewise, Islamic banking is mostly entrepreneur-friendly and community oriented which

is stressed on production and corporal development of economic services and production.
Likewise, the Islamic banks functions inside the boundaries that guarantee strength in the
worth of change and reducing destabilized assumptions (Ahmad, Rehman & Safwan, 2010).
In this regard, these are the main features which involved in the significance and relevance
of corporate social responsibility and consider it as universally accepted practice to Islamic
banking system. The CSR also helps in improving corporate image of the Islamic banks
which in turn helps in increasing the customers’ loyalty and trust on Islamic banking system
(Alafi & Hasoneh, 2012). The Islamic banking system has certain inherent aspect that ropes
social errands which are belonging within economic route reinforced by sharia values and
principles.
The corporate social responsibility in Islamic banks acts over sharia compliance all financial
transactions with genuine concerns with socially and ethically responsible undertakings by
excluding participation in unethical and illegal events which are critical to environmental
and social good fortunes (Ali & Rizwan, 2013). Therefore, although the intrinsic worth of
Islam has advocated always social responsibilities, yet, challenge for Islamic banks remains
41
active to overwhelm the situation with the application of effective and efficient corporate
social responsibilities. The respectable CSR measures and practices for the Islamic banks
remained challenging phenomenon for long-term investments in context of Islamic banks
(Rammal & Parker, 2014). Consequently, the Islamic banks through the active involvement
in the corporate social responsibility are able to grip economic situations during economic
change.
The corporate social responsibility is also helpful in the Islamic banking perspective since
it offers various opportunities for entrepreneurship to individuals in the society those who
are interesting in different investment opportunities. The Islamic banking is also responsible
for main activities relating to investments, deposits and sharing of profits on investment as
per Islamic perspectives to maintain competitive edge (Farcane & Bureana, 2015). In the
financial markets, services provided by the Islamic banks has gained momentum and attract
the various customers from conventional banking towards the Islamic banking. The Islamic
banks becomes popular and significant banking entities in both developed and developing
countries (Financial Stability Review, 2017). The same trend is experienced in Pakistan by
emerging various Islamic banks with growing trends to grip strong affordability in financial
markets.
The Islamic banks and corporate social responsibility are directly interlinked with regard to
the provision of quality services to stakeholders. The majority of Islamic banks are exposed
to the effective applications of corporate social responsibility measures thereby providing
better services to stakeholders keeping in view standing role of these measures in credibility
and success of the Islamic banks (Islamic Banking Bulletin, 2018). Along with the motives
of income generations, the Islamic banks are also effective in providing various facilities to
the stakeholders as well as the general public to maintain the trust and corporate reputations
of the Islamic banks (Rafay & Farid, 2019). Thus, CSR helps in removing the undesirable
perceptions of customers towards the Islamic banks as well as in attracting more customers
towards fair and transparent services of Islamic banks so as to facilitate different nature of
stakeholders.
2.3.8 Stakeholders of Corporate Social Responsibility

It is the prime responsibility of the organizations to serve and please their stakeholders as
these are the basic units which counts the credibility and success of concerned organization
42
(Hillman & Keim, 2001). The main theme behind CSR is to facilitate stakeholders through
fair and transparent policies and strategies aligned with desires and hopes of stakeholders.
However, these expectations need to be consistent and reasonable with jeopardies related
with investment (Sen, Bhattacharya & Korschun, 2005). The stakeholders expect economic
security on their invested capitals which can only be possible when concerned organizations
are serious in implementing the submitted procedures (Branco & Rodrigues, 2007). These
stakeholders are usually from various scopes like creditors, debtors, employees, competitors
and general societies those who are directly or indirectly involved with the organizational
activities.
The corporate social responsibility main purpose is to offer better services to stakeholders
through the measures as recommended and endorsed through the corporate responsibilities
in attracting stakeholders over quality approached adapted by organizations (Bhattacharya,
Sen & Korschun, 2011). All these stakeholders are involved in the organizational activities
in one or other ways thus to obtained benefits offered by organizations. In banking sector,
there are various groups of individuals involved in banking operations to content their needs
and show long lasting pledge towards said organizations (Asemah, Okpanachi & Olumuji,
2013). In Islamic banking context, this notion is ignored as Islam totally discards portent of
negligence towards the stakeholders. Consequently, it is foremost responsibility of Islamic
banking system to facilitate their stakeholders thereby contented their desired needs from
banks.
Similarly, the corporate social responsibility helps in ensuring basic needs of stakeholders
and in this link, role of Islamic banks is phenomenal as these banks are trying to please the
stakeholders needs as per teachings of Islam (Jo, Song & Tsang, 2016). The Islamic banking
system is completely focused on the provision of services from Islamic perspectives and
facilitate their customers in nourishing their genuine needs as per the ethical guidelines of
Islamic banks (Venturelli, Cosma & Leopizzi, 2018). There are many stakeholders involved
in the banking operations like the customers, employees, individuals and societies. These
banks are aimed in realizing the needs of these stakeholders from every dimension to make
them committed towards the Islamic banks (Raza, Burney & Ullah, 2020). The stakeholders
in turn also show contentment when they endure that their needs are prioritized by Islamic
banks.
43
2.3.8.1 Employees
The employees are the main stakeholders of corporate social responsibility as the foremost
they have the basic rights on the available facilities whatever offered by the concerned
organizations. The organizations can achieve their desired status only when their employees
are committed with them to show utmost commitment and performance (Ruf, Muralidhar,
Janney & Paul, 2003). When the employees feel that they are ignored in offering the new
facilities then ultimately they show the lesser and least concerns in organizational activities.
Thus, CSR helps organization and employees in nurturing their positive relationships which
might be helpful for organization and employees in prolonged manners (Yamak & Süer,
2005). The organizations are required to put employees as basic units in offering the better
services for long-lasting relationships with notion that employees are valuable assets of the
organizations.
Similarly, the employees are the foremost functionaries which are responsible for the failure
and success of organization. The organizations might be unable to attain desired objectives
when employee realize dissatisfaction that they are sidelined by the organizations in offering
new policies, strategies and packages in facilitating stakeholders (Branco & Rodrigues,
2007). The fulfillment of basic needs of the employees in main responsibility of concerned
organizations including banking sector to sustain their competitive edge in the contemporary
competitive environment. The organizations can perform roles quite satisfactorily when the
ensures applications of corporate social responsibility in letters and spirit in organizations
(Bhattacharya, Sen & Korschun, 2011). Correspondingly, employees are also responsible to
ensure the factual application of the corporate social responsibility in the success of this
phenomenon.
Likewise, the employees are also considered as main beneficiary due to their overwhelming
role in promoting the values of the concerned banks to inspire the individuals to become
part of the concerned Islamic banks (Asemah, Okpanachi & Olumuji, 2013). Similarly, the
role of Islamic banks is also critical in shaping the attitude and behavior of their employees
as per the norms and values of the Islamic banking system to operate the banking activities
as per teaching of Islam and as per guiding values of sharia. Thus, main responsibility falls
upon the shoulders of employees who might be the main beneficiaries towards the corporate
social as well as economic responsibilities offered by concerned banks (Wajdi & Humayon,
2014). The employees can be benefited from the corporate social responsibilities by offering
44
them increased packages, bonuses and perks and privileges as per basic rules of corporate
responsibilities.
The main obligations of organizations including the Islamic banks are towards employees
of the concerned banks/organizations to focus upon basic needs of their workforces. Thus,
the Islamic banks are also much concerned with the availability of various facilities to their
employees towards basic obligation as recommended by corporate social responsibilities in
providing different opportunities to their stakeholders which also implies on the employees
on the Islamic banks (Venturelli, Cosma & Leopizzi, 2018). The Islamic banks are more
affective in the implementations of policies towards welfare of their employees to facilitate
them from diverse dimensions to maintain trust of their employees (Aramburu & Pescador,
2019). The employees are considered by Islamic banks as building blocks for the dynamic
success factor toward corporate image and business concerns of bank along with success in
long-term.
2.3.8.2 Government
The government has been considered as vital stakeholder of corporate social responsibilities
measures as through these procedures government concerned is facilitated with the different
outcomes likewise ensuring the policies as per the guiding principles of the government as
well as the provision and submission of various taxes with effective and honest manners
(Ganesh, Arnold & Reynolds, 2000). Likewise, government also abstain the organizations
from democratic process as well as demeaning personnel from their own hidden interests to
just focus upon the provision of quality measures to the different associated stakeholders
(Burki & Niazi, 2003). The government concerned in turn also facilitate organizations by
providing and ensuring the diverse available opportunities to organization to make sure the
quality measures over CSR to sustain competitive advantages in contemporary competitive
environments.
The corporate social responsibilities are also ensured by the governments concerned thought
the persistent check and balance on government that whether they are adopting the general
and required principles of the corporate social responsibilities or otherwise. The government
conduct different surveys by examining the views of stakeholders about effective provision
of the corporate responsibilities’ measures in letters and spirit (Luo & Bhattacharya, 2006).
Likewise, the government also examine the needs of the concerned organizations about the
45
difficulties and complexities involved in the adaptation of corporate social responsibilities
measures (Peterson & Jun, 2009). The concerned organizations in turn show commitment
in ensuring required measures to facilitate the concerned stakeholders. Thus, organizations
facilitate the governments in fulfilling most of responsibilities which are actuality their main
obligations.
The Islamic banking system as examined the most effective player towards the corporate
social responsibilities applications from different dimensions thereby providing the quality
services to their stakeholders have little glance from the government as these Islamic banks
are serious in provision of the corporate social responsibilities measures (Bhattacharya, Sen
& Korschun, 2011). The Islamic banks are also much closer to these measures as these are
mainly functioning over principles of Islam. Thus, CSR further help them in improving their
performance by augmenting their corporate reputation which ultimately helps in developing
their trust towards said Islamic banks (Agarwal, Osiyevskyy & Feldman, 2015). The Islamic
banks are more concerned about the applications of CSR measures as these banks are most
relied on implementation and provision of Islamic principles in conducting businesses with
stakeholders.
The government as s stakeholder is responsible to closely observe corporate responsibilities

measures to ensure application of CSR in affective manners. The government is responsible
in obtaining various benefits from concerned banks through corporate social responsibility
measures as these responsibilities binds the banks to pay their obligations towards concerned
government (Muzammal, Arif, Khan & Khan, 2017). Though, banks have certain unlimited
liabilities towards governments however corporate social responsibility also focuses on the
certain liabilities which are vital for the societies. Thus, the CSR measures are considered
as the vital predictors in context of government towards the success of concerned banking
system (Raza, Burney & Ullah, 2020). Consequently, the Islamic banking sector is also
more focused on provision and implementation of corporate social responsibility in active
manners.
2.3.8.3 Societies
The corporate social responsibility helps in making sure the balance between the needs of
organizations and requirements of the societies. The organizations are required to commit
with the societies by implementing those measures which are prerequisites for the successful
46
execution of CSR (Calton & Payne, 2003). The organizations including the banking sector
are required to manage their activities as per the interest of the societies. Also, the banking
sector is measured as effective dynamic player in providing better facilities to stakeholders
which thus help them in augmenting their corporate reputation as well as the credibility of
concerned banks (Sen, Bhattacharya & Korschun, 2005). Similarly, these responsibilities
are also vital for the success of banking sector including Islamic banking sector to produce
the desired outcomes as related with the application of responsibilities over concepts Islamic
banking.
The corporate social responsibility measures need to be focused upon strategies and policies
related with pollution control, environmental protection, natural resources maintenance,
rural change, employment of socially handicapped, planning of industrial units in recessive
areas, providing assistance to natural calamities victims and weaker sections of community
and the provision of all other vital facilities towards the development of societies (Branco
& Rodrigues, 2007). The provision of facilities in effective manners significantly influences
the provisions of the products and services offers by these Islamic banks. Thus, the corporate
social responsibility ensured the effective engagement of the Islamic banks in availability
of the corporate and business obligations towards societies (Bhattacharya, Sen & Korschun,
2011). The CSR helps Islamic banks in increasing the customers’ values towards the Islamic
banks.
The Islamic banking system is also considered as the significant actor towards economic
and social development through their services from Islamic perspectives. The Islamic banks
also works as the charity organizations to contribute the societies from different perspectives
thereby keeping in view critical role of these corporate responsibilities (Wajdi & Humayon,
2014). The principles of Islam also ensured the provision of various facilities to stakeholders
within the specified jurisdiction to maintain trust and to increase the loyalty of stakeholders.
The responsibilities become the obligations of Islamic banks like the social responsibility in
donating towards social change (Jo, Song & Tsang, 2016). The economic responsibility
towards economic changes and the environmental responsibility to guarantee environmental
protection from different hurdles faced by societies by playing their overpowering role in
societies.
47
The research reveals that the societies have different obligations on the part of organizations
to maintain the peace and prosperity along with the social and environmental development.
The Islamic banks especially are more concerned with the provision and application of the
services towards the societies from Islamic perspectives thereby keeping in view the vitality
of the said concept towards the development of societies (Islamic Banking Bulletin, 2018).
The Islamic banking sector is concerned with application of corporate social responsibility
measures in the to sustain their competitive position in the societies and to serve the serve
as its obligations (Raza, Burney & Ullah, 2020). The CSR further helps concerned Islamic
banks in improving their operational activities aligned with the development of the societies
along with the individuals those who are in need of certain assistances from the concerned
banks.
2.3.9 Theories of Corporate Social Responsibility

The researchers recommended the corporate social responsibility as the significant tool for
the organizational survival and development as these responsibilities helps in contributing
from diverse angles to maintain environmental and social sustainability (Williams & Siegel,
2001). The researchers endorsed various responsibilities from different models and theories
with the aim to understand phenomenon of CSR in the organizational as well as the societal
contexts (Branco & Rodrigues, 2007). These theories explained the strengths as well as the
weaknesses of CSR in different context with its practical implications for both organizations
and societies (Jurisova & Durkova, 2012). The researcher thoroughly investigated important
theories more comprehensively to understand phenomenon of CSR measures and its vitality
towards the developments of the organizations as well as the societies (Ullah & Karaghouli,
2017).
2.3.9.1 Classical Theory

The main concern of this theory denotes to the corporate social responsibility classical view
in connection to the organization social responsibility in increasing the business revenues
which in turn will help the organizations in maintaining competitive edge in contemporary
and competitive markets (Abouzeid & Weaver, 1978). The organizations and stakeholders
like customers, employees and individuals in societies makes their contributions in social
activities and as contributors for social change (Anderson, Fornell & Mazvancheryl, 2004).
Therefore, this theory was mainly focused on social responsibility of the organizations by
utilizing their available resources by engaging in social activities to contribute the societies
48
(Ullah & Karaghouli, 2017). The classical theory explain that organizations need to ensure
openness towards societies in terms of social contributions towards societies over effective
manners.
2.3.9.2 Social Contract Theory

The social contract theory was developed which aimed at the assurance of ethical decision
as framed by the organizations in conducting their businesses in such a manner that these
activities should be aligned with social and ethical dimensions towards societies (Aupperle,
Carroll & Hatfield, 1985). This theory presented critical role of organizations from ethical
dimensions towards welfares of societies (Garriga & Mele, 2004). This theory ensured the
organizations to adopt perspectives of social contracts from corporate social responsibility
measures as expected by societies in contributing some portion of incomes towards growths
of society (Mordi, Tonbara & Ojo, 2012). This theory focuses on organizational structure
about meeting stakeholders’ social needs from ethical extents (Raimi, 2017). This theory
acclaim that society and businesses have mutual welfares by ensuring socially accountable
behaviors.
2.3.9.3 Instrumental Theory

The instrumental theory was focused upon social responsibility of the organizations thereby
making them socially responsible legitimacy and activities regarding strategic orientation
of the CSR (Bhattacharya, Rao & Glynn, 1995). This theory was focused on organizational
corporate image in societies which respond to maintaining and developing the respectable
reputation in societies over the effective CSR measures (Gond, Palazzo & Basu, 2007). The
instrumental theory further explained the instrumentation of organizations towards societies
in terms of their contributing role regarding social involvement from different perspectives
(Kiran & Sharma, 2011). This theory further examined standing of CSR through its effective
role in societal development (Raimi, 2017). It also has significant contribution towards the
stakeholders’ interests as involved in organizational procedures and processes from diverse
magnitudes.
2.3.9.4 Legitimacy Theory

The legitimacy theory was then introduced which focuses legality and authenticity of certain
measures from organizational perspectives towards societies. Thus, above and beyond the
various obligations like social and economic perspectives, legitimacy philosophy emphases
49
on environmental forces and pressure for organizations to accept CSR measures (Williams
& Siegel, 2000). This legitimacy appeared to be strategic motive for accepting the CSR
measures by corporate organizations which further help them in obtaining the sympathies
from the societies (Ahmad & Sulaiman, 2004). This theory ensures the legitimate actions of
the organizations towards welfares of societies from different dimensions and its impact on
the societies (Bather & Tucker, 2011). This theory considered CSR measures as the actual
motivators in response to development of societies from their operational activities (Raimi,
2017).
2.3.9.5 Stakeholder Theory

This theory was basically focused upon adaptation of CSR measures from the stakeholders’
perspectives thereby focusing on their basic needs (Heath & Norman, 2004). The theory
further stressed organizations to employ all the available resources to benefit the stakeholder
as these are the real assets of organizations and without them organizations would be unable
to find its competitive edge in contemporary markets (Reynolds, Schultz & Hekman, 2006).
Thus, main theme of this theory was solid emphasis on needs and wants of stakeholders and
the efforts of the organizations towards the fulfillment of these desired (Ismail, 2009). The
organizations in turn are also required to show their greater commitment and performance
towards fulfillment of responsibilities in affective manners (Raimi, 2017). The stakeholders’
theory stressed the need to focus upon the development of stakeholders’ acuities towards
organizations.
2.3.9.6 Triple‐Bottom Line Theory

The main theme of theory is related with the commitment of organizations towards society
from social, economic and environmental outlook (Elkington, 1998). These errands make
the organizations accountable for economic influence towards the societies, the social effect
and environmental protection towards the societies which not only influences stakeholders’
perceptions towards organizations but also influences its credibility and success (Norman
& MacDonald, 2004). The triple bottom line theory was considered as the most effective
and wide-ranging used theory with regard to the CSR in respect of its influence towards the
societies (Kim & Park, 2011). Still, the main challenge towards this theory is the difficulty
in measuring environmental and social bottom lines (Raimi, 2017). These basic tasks toward
society were considered as effective measures towards social, economic and environmental
development.
50
2.3.10 Dimensions of Corporate Social Responsibility
The concept of corporate social responsibility was recommended from different dimensions
and viewpoints like four dimensional frameworks (ethical, legal, economic & philanthropic)
angles (Carroll, 1991) and three-dimensional model (social, economic & environmental)
brinks (Elkington, 1998) which are considered as foremost responsibilities of organizations
towards the societies. This study followed the three-dimensional framework by considering
these three dimensions as predictors in predicting customer loyalty. The three-dimensional
model destined the organizations to focus upon the social, economic and the environmental
perspectives with the aim to perform their operational activities thereby serving societies
(Muhammad, 2002). In this connection, corporate social responsibility relates with social
development of the society over organizational quality measured towards wellbeing of the
societies.
The economic dimension of corporate social responsibility related with economic offerings
of the organizations towards the societies by denoting some share of their incomes towards
change in societies (Jamali & Mirshak, 2007). The environmental responsibility denotes to
environmental issues thereby declaring foremost responsibility of organization to execute
its roles in environmental security. These are considered as imperative tasks of organizations
towards societal development which not only helps organizations in reshaping the behaviors
of the individuals in societies but also help them in augmenting their corporate reputation
(Makni, Francoeur & Bellavance, 2009). These errands are considered as complete package
from organizational angles towards societies. The environmental and social responsibilities
are considered as vital predictors in increasing the rating of the organizations in competitive
markets.
The corporate social responsibility from these important dimensions are helpful for the
societies in highlighting the leading issues and offer organizations to show their active roles
in resolving these issues by performing their critical role towards development of societies
(Asemah, Okpanachi & Olumuji, 2013). Thus, these tasks are vital for the organizations and
societies from different perspectives as both of them have advantages from application of
corporate social responsibility measures in effective protocols. These responsibilities are
imitating organizations towards the social issues through coherent posture to take part in the
developmental process of societies (Raimi, 2017). The applications of these responsibilities
51
in effective manners not only help organizations in attracting the stakeholders’ sympathies
but help them in shaping stakeholders’ values of the trust, commitment and loyalty towards
organizations.
2.3.10.1 Economic Responsibility

The organizations, as socio-economic actors, are continuously required to address economic
constraints by considering all together social and the environmental necessities addressed
by the customers. This responsibility denotes to commitments of organization to contribute
in economic sustainable development by working together with workforces, local society
and community to improve quality life of individuals (Williams & Siegel, 2000). The main
objective of organizations is to maximize wealth and economic growth which are contingent
on diverse dynamic factors. These organizations are providing diverse products and services
to their customer with the aim to gain an acceptable portion of earnings from their operations
(Simpson & Kohers, 2002). The proper income generation policy of organization helps them
in making customers committed and loyal to organizations and show trust on product and
services.
The corporate social responsibility from economic dimensions denotes to efforts in shape
of economic contributions towards societies thereby offering their economic shares towards
the welfare of stakeholders and societies (Klein & Dawar, 2004). This responsibility focused
the organizations to offer some portion of income that comes from the profitable operations
thereby investing these shares in the societal issues to resolve the issues and to maintain the
trust of individuals in societies as well as their stakeholders to continue their commitment
in prolonged manners towards the organizations (Anderson & Bieniaszewska, 2005). The
organizations can facilitate stakeholders by reducing cost of operations, by reducing interest
rates and by producing the quality goods and services to their stakeholders. The stakeholders
in turn will show their utmost dedication toward improvements in corporate reputations and
standing.
The economic responsibility is also considered as foremost responsibility as it is concerned

with financial dissemination of economic resources towards the development of societies.
The prime obligations of organizations are to improve the wellbeing of their stakeholders,
individuals in societies and general community by contributing societies over donations and
other financial assistances which are needed by deserving people in community (Becker,
52
Cudmore & Hill, 2006). The economic responsibility represents fair employees’ reward,
rational yield to investors, provision of services and goods at reasonable values to customers
and help individuals by facilitating them from procedural interruptions (Castaldo, Perrini,
Misani & Tencati, 2009). Thus, first-layer is the economic responsibility of the organization
in serving the stakeholders and societies in general from the cost-effective maneuvers of the
organizations.
The economic responsibility is also critical dimension of the corporate social responsibility
as it forces organizations to contribute in development of societies if concerned organization
wish to survive and develop in the contemporary competitive environments. Besides, these
organizations need also to compensate the employees, increase shareholders value and look
out stakeholders’ interests (Ali & Rizwan, 2013). The economic obligation is comprehended
as elementary responsibility of the organizations due to their interactions with the different
stakeholders like competitors, suppliers, employees, community and even the environment.
Thus, the main focus of economic responsibility remains on interests of stakeholders thereby
focusing on the needs and desires (Gonza & Rodrıguez, 2015). The organization, resultantly,
might be able to achieve desired standing and ranking over quality measures in competitive
environment.
The stakeholders of the organizations have certain vested interests when they exchange their
economic wealth with the organizations including the banking sector and in turn the banking
sector is required to prioritize stakeholder interests by providing quality goods and services
to facilitate them at par to the required standards (Pérez, García, Salmones & Bosque, 2013).
During the past decades, banking sector were mainly focused on the profit maximizations
and there were no responsibilities on them towards societies, however, with the introduction
and implementation of corporate social responsibilities, the organizations thus remains
accountable for their stakeholders as well the societies (Gonza, L., & Rodrıguez, M. (2015).
These responsibilities are considered as vital tolls for survival and development of corporate
sector including the banking industry and same responsibilities falls on the Islamic banking
sector.
The Islamic banking sector is more apprehensive towards economic responsibility measure
of the corporate social responsibility. These responsibilities in its effective manners leads to
the stakeholders’ trust and loyalty and further leads to the effective corporate reputation of
53
the Islamic banking system (Muzammal, Arif, Khan & Khan, 2017). The Islamic banks are
required in maintaining competitive lead in financial industries to develop productivities
and to eliminate their weaknesses by focusing on the CSR measures in the effective manners
(Aramburu & Pescador, 2019). Thus, fair and transparent interaction of the Islamic banks
in operations are vital for stakeholders in increasing their trust on the services as provided
by Islamic banks as well as in reshaping attitude and behavior of the stakeholders to interact
them in prolonged manners leads to another concern from Islamic banks known as social
responsibility.
2.3.10.2 Social Responsibility

The organizations, in order to be socially responsible, need to be primarily responsible to
stakeholders. The successful organizations have additional responsibility to become socially
responsible to their stakeholders. The norms and values of the organizations transmit CSR
principles into actions to facilitate stakeholders (Greening & Turban, 2000). Organizations
who are taking to social responsibility are engaged continuously in social and environmental
support of the societies. The desired social support of organization plays the facilitating role
in shaping the attitude and behavior of customer to become committed and loyal customer
of the organizations (Bhattacharya & Sen, 2004). The socially responsible organizations are
expected to be committed to required excellence which further increases trust of customers
on concerned organizations and trust level consequently help customers to become loyal to
organizations.
The effective interactive relationships are the outcome of the social responsivity with respect
to the organizations and societies. The social responsibility denotes to aim benefit societies
from social perspectives by focusing upon the social needs of individuals in societies and
the focus remained important due overwhelming role of organizations towards the societies
(Anderson & Bieniaszewska, 2005). This phenomenon diverges the relationships between
the organizations and the societies. The social issues are the main priorities of organizations
to maintain the social and ethical values in the societies by contributing societies from their
overwhelming measures (Becker, Cudmore & Hill, 2006). This is the main reason why the
researchers endorsed social facet of CSR by keeping in view social issue and organizations
role in protection the said societies from social dilemmas to maintain their reputations in the
societies.
54
The social responsibilities help the organizations to benefit the societies by using resources
in order to act and manage as charitable fundraisers. This responsibility obliges concerned
organizations over their performance and responsiveness by smearing social behavior and
business ethics in managing policies towards the benefits of societies (Renneboog, Horst &
Zhang, 2008). The social responsibility about different perspective like stakeholders, sectors
and groups through evolutionary dimensions are helpful for the concerned societies in order
to manage operational activities which in turn help them in dealing corporate reputations
(Ramasamy, Yeung & Au, 2010). The social responsibility is measured as social and ethical
framework which entails that organizations have certain obligations towards societies which
make them accountable to society for activities in competitive environment to perform these
responsivities.
The social responsibility bridges the organizations and societies towards common interests
which are interconnected with welfare of both as both of them have certain vested interests
which aims at proving and obtaining the desired assistances and advantages (Kim & Park,
2011). The organizations are required to put their emphasis on social issues in societies and
thus contributing through certain quality measured to organize and manage social dilemmas.
The societies in turn contribute in managing corporate reputation of concerned organizations
over quality measures in maintaining organizational activities (Ali & Rizwan, 2013). The
social concern is obligation each individual wherein they have implemented in maintaining
equilibrium between ecosystems and economy. The social responsibility is thus becoming
the challenging tasks for all the organizations including the banking sector in the developing
countries.
The social responsibility concerning the banking sector is also vital for long-term survival
and development as it helps in griping situation at par to the required standards in focusing
on the basic needs of the societies (González & Vilela, 2016). The banking sector is more
vulnerable about social dimension of corporate social responsivity along with its effective
application and implementation of certain measures in managing the social dilemmas are
vital for the corporate reputation of concerned banking sector as well as provision of quality
measures helps in growing customers’ standards, trust and loyalty (Muzammal, Arif, Khan
& Khan, 2017). The social responsibility perspective of banking sector is also vital for the
banking sector in increasing their corporate values in societies. The corporate responsibility
55
is consequently the challenging phenomenon for banking sector including Islamic banking
system.
The Islamic banks are considered as the most effective players towards social responsibility
by providing various social prosperities to societies. The Islamic banks are concerned more
with the adaptability and provision of social welfares measures towards the societies in long-
term interests of Islamic banks (Salman, Noor, Salman & Hafeez, 2018). The social concern
acts as a gauging apparatus in nurturing and measuring corporate image of Islamic banks.
The Islamic banks are active by carrying out the direct participation in the social activities
while it is also passive in avoiding the detrimental activities in societies which thus hamper
credibility and prosperities of the concerned societies (Rafay & Farid, 2019). These tasks of
Islamic banking sector are consequently measured the blessings towards the success of the
Islamic banks and in turn helps in developing their reputation and producing stakeholders’
loyalty.
2.3.10.3 Environmental Responsibility

The globalization has led the societies to challenging jeopardies like unemployment, human
rights violations, drought, flawed education, famine, poverty and environmental pollution.
The organizations, in modern era are required to do substantial work in different areas like
health, child-labor, education and environment by ensuring CSR practices to overwhelm the
situation as per demands of the stakeholders (Mohr, Webb & Harris, 2001). The CSR over
environmental responsibility inspire organizations to include environmental issues in their
strategic programs like operational plan and executional compliance along with the control
systems towards the risk management (Norman & MacDonald, 2004). Thus, global-value
along with chain-analysis is indispensable means which must be used by organizations to
realize diverse evils to native environment lead to individuals physical and mental health in
community.
The environmental responsibility denotes to impact of organizations on environments from

different perspectives. Thus, it becomes the obligations of organizations to focus on issues
related with environmental uncertainty thereby playing their critical roles towards removing
the environmental constraints to protect the concerned environment (Mazurkiewicz, 2006).
The environmental issues are dilemmas that not only influences societies but also influences
corporate image and reputations of organizations (Pomering & Dalnicar, 2007). It becomes
56
the utmost responsibility of organizations to focus on issues that hindrances environmental
development and contribute in developmental protection by paying economic shares over
different perspectives (Pomering & Johnson, 2009). The organizations are required to put
emphasis on societal prosperity from environmental views to uphold their position in viable
markets.
The corporate social responsibility is stately as moving phenomenon towards environmental

protection to safeguard the societies from hurdles which hindrances societal development
(Anghel, Grigore & Roşca, 2011). The organizations are required to put their emphasis on
the provision and arrangements of diverse workshops and seminars aiming to aware general
public about the importance of quality environment and how to protect the environment
from different issues that are critical in hampering the environments. The main objective of
organization is to engage themselves in those practices which are vital and benefited towards
environment (Wang & Juslin, 2012). The organizations are needed to overwhelm situation
by taking active parts in the societal development to maintain the trust of the stakeholders
on organizations leading to undaunted loyalty on the part of stakeholders towards concerned
organizations.
The phenomenon of phenomenon of environmental responsibility becomes foremost aim

for most of organizations while adopting the measures of the corporate social responsibility
(Gonza, Carmen & Simonetti, 2015). The organization has to show the keen interests in the
environmental protections thereby focusing upon the overwhelming activities that are direly
needed by societies to maintain environment and to sustain prosperity is societies from the
environmental dimensions. Protection of environment from diverse issues can be managed
over economic shares by organizations (Farcane & Bureana, 2016). Thus, environmental
protection is main responsibility of each organization whether public and private including
banking sector. Thus, banking sector is focused on environment protection there focusing
upon serious concerns from individuals and groups in societies by looking towards banking
sector.
The banking sector is focused more on environmental protection by sharing their economic
contributions to value the societies to protect them from dilemmas that hampers the situation
and disturb the peace and prosperity in societies (Farcane & Bureana, 2016). Many banks
are considered as the leading contributors towards environmental protections those who are
57
effective to pay their attention towards environmental development. The banking sector in
collaboration with the social sector is paying more on environmental protection in the shape
of donation and economic shares to maintain the corporate reputation of the banking sector
in perspective of the stakeholders as well as the groups of individuals in the societies (Afridi,
Gul & Haider, 2018). Thus, main concern of banking is to increase trust of the stakeholders
on concerned banks and thus role is more concerned and active in context of Islamic banking
system.
The Islamic banking system is active player towards environmental protection with the help
of their stakeholders to donate some portion from their incomes towards environmental and
social concerns which becomes the foremost responsibility of the Islamic banks in modern
competitive banking systems (Aramburu & Pescador, 2019). Among various banks, social
and environmental responsibilities are significantly performed by the Islamic banks through
teachings and principles of Islam towards societies. Islamic banks are active in providing
different facilities to society to maintain active environment and to sustain corporate image
in competitive environments (Raza, Burney & Ullah, 2020). The Islamic banks are required
to put emphasis on environment protection which help them in attracting customers, help
them in increasing corporate reputation and help them in growing stakeholders undaunted
loyalties.
2.4 Customer Loyalty

The customer loyalty is broad and complex phenomenon and its comprehensive definition
becomes a challenge for researchers. However, Dick and Basu (1994) has defined loyalty
as combinational approach comprises attitudinal and behavioral loyalty. It has been defined
as the apprehended commitment to patronize and repeat the preferred services and products
reliably in future, even with situational belongings and marketing efforts having prospective
to cause the changing behavior (Chaudhuri & Holbrook, 2001). The customers’ loyalty is
based on the influential behavioral reaction articulated by customers repeatedly regarding
different products and services over psychological practices. Thus, loyalty is concerned with
positive attitude and emotional commitment to particular products, service and organization
(Sirdeshmukh, Singh & Sabol, 2002). The effective CSR has positive effect on customers’
loyalty.
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The customers’ loyalty is the strong predictor towards the success of organizations as the
increase in the organizational productivity is only due to increase in customers’ values and
satisfaction. The loyal and satisfied customer are considered as the backbone for the success
of organizations in competitive environment (Iwasaki & Havitz, 2004). The organizations
who have perceived customers’ values are expected to survive in prolonged manners in the
competitive markets. The organizations are also vital in achieving their desired values when
there are the persistent increasing trends in the customers. Thus, customers are measured as
building block for long-term organizational development (Jones & Taylor, 2007). Likewise,
the customers’ preferences towards particular brands and particular organizations are vital
in determining the long-term realization where there exists dissimilar nature of the market’s
competitors.
The customers’ loyalty is contingent upon various dynamic factors among which corporate
social responsibility has been considered as vital predictor in determining customers’ loyalty
and commitment. The customers’ loyalty in context of corporate social responsibility has
been widely studied with different outcomes (Cohen, Pham & Andrade, 2008). The satisfied
customers are foremost assets of organizations and organizational success is contingent on
the increase in the perceived values of the customers. The organizations are mainly focused
upon 7 provision of quality services to their customers to make them loyal and committed
towards concerned organizations (Chang & Fong, 2010). The customers are considered as
true stakeholders of organizations as its credibility and success is mainly due to customers.
In this linking, there is a saying in management, and in marketing that customers are always
right.
The customers’ loyalty is vital for all organizations and for this drive, many organizations
are offering loyalty programs thereby keeping in view customers values over appreciation
and rewards to make them committed toward organizations (Bartikowski, Walsh & Beatty,
2011). The loyalty programs help organizations in increasing customers there attracting the
stakeholders from the other organizations. The organizations spent more on the customers’
satisfaction as they know status and standing of customers values in organizational context.
The customers are individuals who are buying products and services of the organizations in
exchange of financial values to remain in touch with organization in prolonged manners
(Amin, Isa & Fontaine, 2013). The customers are thus considered as the real owners of the
59
organizations as organization make incomes over interactions with customers in competitive
markets.
In reshaping customer loyalty, customers’ management toward the experiences in blending

the emotional, physical and value features towards cohesive experiences. In this connection,
retaining customers requires distinctive concentration from the part of the organizations due
to the vitality of the customers’ values as without the customers the organizational existence
might be questionable (Ailawadi, Neslin, Luan & Taylor, 2014). The loyal customers always
put their emphasis upon quality products and services offered by organizations and remains
committed with products offered by organizations. There are certain dynamic factors which
drives customers’ loyalty whenever customers are involved over spiritual intellectual and
emotional levels with services and products in persistent experiences (González & Vilela,
2016). Thus, management of customers experiences are vital for long-term survival of the
organizations.
The loyalty of customers is critical success factor for organizations to compete the industry
and to retain themselves in competitive environments. Thuds, each and every organization
is focusing upon customers’ needs and values and trying to retain them at any cost thereby
introducing and offering various packages to customers (Goyal & Chanda, 2017). Similarly,
customer willingness towards particular organization is important as without customers’
willingness, organizations might not be able to attract and retain the customers in prolonged
manners (Aramburu & Pescador, 2019). The customer preferences are significant factor for
organizations as these organizations are focusing on particular needs and wants of particular
customers (2020). The customer is thus focal phenomenon for organizations and it becomes
critical for organizations to understand meaning and concepts of loyalty in comprehensive
manners.
2.4.1 Definition of Customers Loyalty

The customers’ loyalty has been defined by various researchers however, the main theme
of concept remained the same as it is outcome of perceived values of experiences, physical
attribute-based pleasure and consistent affirmative emotional experience towards services
and products (Chen & Dubinsky, 2003). The customers’ loyalty has both the behavioral and
attitudinal propensities to give preferences to one produce and service over others due to
consummation with service and product, its performance and convenience as well as simple
60
comfort and familiarity with particular trademark (Crespo & Bosque, 2005). The customer
loyalty inspires customers to purchase more reliably, expend more financial shares and have
positive feeling towards brand experience which further help in attracting again customers
in competitive environment thereby becoming important concept in the existing competitive
environment.
The customers’ loyalty is measured as selection of exact brands among many alternatives
by giving preferences in persistent manners. The positive experiences towards certain brand
also inspire the customers to share their views about the particular towards their counterparts
to buy and use certain goods and services of exact trademark (Bandyopad & Martell, 2007).
The customers’ loyalty is wide-ranging concept wherein individuals are giving preferences
to specific goods and services in prolonged manners by praising same products to families
and friends. The customers are dedicated to particular marque since they sense in isolating
consumers’ values to particular brand (Salmones, Perez & Bosque, 2009). The trustworthy
customer expectations that brand will provide accurate objects for them along with values
that they take by consuming particular product in consistent manners by indorsing to other
counterparts.
The customers’ loyalty is built over different measures likewise providing valued services
and products to customers on persistent manners keeping in vies their deed and desired along
with their purchasing power to make them satisfied and to inspire customers to interact with
exact brand in consistent and prolonged manners (Chang & Fong, 2010). These measures
are thus vital not only in retaining the existing customers but also helps in attracting the new
customers. The fact is that each individual in societies have certain desires in exchange of
their financial values with a view to obtain those services and products which satisfies their
needs and desires (Rujirutana & Poolthong, 2011). The customer attraction to particular
brands are holistic concern for organizations wherein different competitors are available to
perform these errands in diverse manners in retaining existing customers and attracting new
customers.
The customers’ loyalty needs some overwhelming responsibilities on part of organizations

as inspiration and motivation of individuals towards particular brands (products & services)
from the particular organization needs some additional competencies to grip the situation
and to maintain the competitive edge (Blut & Backhaus, 2012). Conversely, when customers
are trustworthy, organizations need to spend fewer in satiating and retaining them as these
61
organizations realize that customers are the only success factor for survival and development
of these organizations. The customers’ loyalty is considered as most effective tool towards
the development of businesses as all businesses needs customers and without them survival
of businesses will be at stake (Choi & 2013). This is main reason that why the organizations
are spending more in making customers’ satisfied and serially work more on building their
trustworthiness.
The customers’ loyalty is understanding of consumers’ needs and struggle of organization

in meeting the demands of the customers in desired manners. It is the foremost responsibility
of the businesses to prioritize the needs of customers and to gratifies these needs as per the
desires of customers (Kandampully, Zhang & Bilgihan, 2015). The queries from customers
is also matter of interest for all businesses and businesses are arranging customer services
center to examine the demands of customers about the particular goods and services. On the
other hand, organizations who are not responding to customers’ demands and experiences
are facing the customers’ disloyalties which not only influences the entire working format
of concerned business but also faces losses in shape of losing existing customers (González
& Vilela, 2016). It becomes difficult for them to sustain the existing and to attract the new
customers.
The customers’ loyalty can be developed more by particular organizations when frustrations
from the customers are prioritized and when the businesses focuses on needs and wants of
customers in cultured behaviors (Afridi, Gul & Haider, 2018). The organizations are further
required to put their attention on customers’ values by offering those products and services
which are the outcomes on the need analysis and which are helpful for the organizations in
attaining the competitive lead in the contemporary competitive environment. Therefore, the
organizations might be able to achieve long-term objectives only when they are successful
in fulfilling requirements of customers (Aramburu & Pescador, 2019). In this connection, it
becomes vital for the organizations to realize the customers’ loyalty formation that how it
can be formed and how it can be sustain in prolonged manners in contemporary competitive
situations.
2.4.2 Customer Loyalty Formation

The formation of customers’ loyalty comprised of the various dynamic issues and became
the brainteaser for the organizations with regard to the needs, behaviors and living standard
62
of the customers (Kandampully & Suhartanto, 2000). The trading loyalties emerged as vital
concept in the recent literature wherein the main prerequisite issues concerning the loyalties
have been examined by researchers with diverse outcomes. The organizations are required
to use accurate means in formation of customers’ loyalty and recognize its vitality towards
the long-term survival of the businesses (Bennett & Bove, 2002). The marketing analysts
suggest that the ultimate formation of loyalties taking place from various dimensions like
continuous interaction between the customers and organizations, proposing reimbursements
to customers, increase the customers’ standards thereby nurturing the customers trust and
satisfaction.
The customers’ loyalty is the outcome of customers’ satisfaction as most of the businesses
are focusing on the contentment of customers’ needs which directly tells upon commitment
and loyalty of the concerned customers. This satisfaction is also contingent upon the manner
through which the particular products and services meet the expectations of the customers
(Harris & Goode, 2004). Thus, organizations are required provide in elevation standing to
customers’ satisfaction since contented customers are expected to purchase more and remain
positive perceptions about concerned organizations by recommending others to interact with
particular organizations (Solomon, Bamossy, Askegaard & Hogg, 2006). The researchers
considered that customers’ satisfaction is selection of marginal products and services which
meets certain hopes and criteria for choosing products/organizations in meeting prerequisite
demands.
The formation of customers’ loyalties also demands the organizations to prioritize the basic
needs of the customers and to put their utmost efforts to meet these demands in particular
manner as per requirements of the customers. The loyalty needs the satisfaction from the
particular products and services since satisfaction is precondition for increased customers’
loyalties (Matzler, Kräuter & Bidmon, 2008). Similarly, when the customers are repeatedly
using same products and services in prolonged manners then it directly tells upon customers’
loyalty towards the particular organization. The formation of loyalties is important for the
organizations to sustain and attract the customers towards the products and services being
offered by the concerned organizations (Onlaor & Rotchanak, 2010). This consummation
on the part of customers is considered as the dynamic factor towards credibility of concerned
organization.
63
The customers’ loyalty is also considered as the outcome of the customers’ experiences with
the particular brands. When the customer experiences the positive practices with the specific
product then it leads to customers’ satisfaction and this satisfaction further leads to higher
customers’ loyalty (Bartikowski, Walsh & Beatty, 2011). Thus, formation of customers’
loyalty is indispensable for the organizations in attracting and expanding their businesses
towards the long-tern survival of the organization. The customer loyalty is also the result of
customers’ preferences towards the particular products and services when they have positive
experiences about the concerned products and services and recommend other to buy and use
these products in the prolonged manners (Berg & Lidfors, 2012). Thus, customers’ loyalty
formations become domineering phenomenon for organization to proceed in the competitive
marketplaces.
The formation of the customers’ loyalty is also the result of the fulfillment of the customers’
demands in the required expectations. These expectations are generally dependent upon the
numerous dynamic issues which the organizations should focus while offering the services
and products to particular groups in competitive circumstances (Zhao, Webb & Shah, 2014).
The formations are also the outcomes of various positive experiences of the customers
towards the particular brands thereby keeping in view the commonalities and differences in
product features as offered by diverse competitors (Pérez & Bosque, 2015). The customers’
loyalty is also main predictor towards organizational development as this loyalty leads to
higher level of trust and the commitment on the part of customers towards the organizations
to meet the basic demands of the customers the most sophisticated manners to attract more
customers.
The customer loyalty is also formed due to the increased focus of the organizations towards
the preferences of the concerned customers. It is the foremost responsibility of the concerned
organizations to meet the demands of customer as offered to them (Sindhu, Arif, Khan &
Khan, 2017). When these demands are not fulfilled as offered then organizations might lose
the customers and the customer will never interact with them in future. Thus, organizations
are also required to put more emphasis on how the loyalties is formed and how it can be
maintained in prolonged manners to retain existing customers and in attraction of the fresh
customers (Aramburu & Pescador, 2019). It is the basic responsibility of organization to
grip the competitive environment by offering the quality goods and services keeping in view
64
the vitality and importance of the customers’ loyalty toward long-term success of concerned
organizations.
2.4.3 Importance of Customers Loyalty

The customers’ loyalty is an important concept which has been considered as the significant
contributor towards the organizational success. The importance of the customer loyalty can
be best understood that without loyal customers, organizations may not be able to achieve
their long-term objectives (Ballester & Aleman, 2001). The organizations are spending more
on the loyalty of customers due to its importance in the organizational corporate reputation
as well as development. The organizations are more aware about critical role of customers’
loyalty in competitive environments wherein numerous competitors are active in offering
the same products and services to attract the customers from one organization to another
(Bowen & Shoemaker, 2003). In is imperative to mention that customers’ loyalty is bridging
concept to link customer and organizations within certain defined interests to facilitate one
another.
The importance of customers’ loyalty is understood with the phenomenon that organizations
are offering different packages in the shape of fastest delivery of products and services as
well as the provision of various sales and discount opportunities to their customers to remain
active part of the organizations (Aydin & Özer, 2005). The organizations are more worried
about increase and decrease in number of customers as increase is worsening by fulfilling
their demands and the decrease is anxious for declining their sales. The organizations, thus
more focused on the loyal customers since they are the frequent users of the products and
services offered by the organizations (Bandyopadhyay & Martell, 2007). Conversely, the
customers spent more in investing in the goods and their behavior remains constant due to
utmost care of organizations by fulfilling basic needs and wants of customers in competitive
markets.
The customer loyalty has greater importance for almost all organizations including banking
industry in developed as well as developing countries. The organizations spent most of their
economic and human resources in investigating the strengths and weaknesses that helps in
examining increase and decrease in customers’ values and satisfaction (Vlachos, Tsamakos,
Vrechopoulos & Avramidis, 2009). The customers who have undesirable experiences with
the particular brands of the particular organizations thus these organizations are required to
65
prioritize demands of customers to remove discrepancies and to offer them better services
to make them loyal with organization (Onlaor & Rotchanak, 2010). The customers’ loyalty
is also important as it is only factor that is directly related with the customers’ psychological
affiliation with specific brand as well as organization wherein numerous competitors are in
determinations.
The customers when loosed by the organizations which is actually called churn is the critical
dilemma for the organizations and have certain long-lasting undesirable influences on the
credibility of the organizations (Dehghan & Shahin, 2011). The organizations in turn, thus
focuses more on retaining the customers thereby offering different packages to make them
loyal and committed with concerned organization. In this regard, organizations with disloyal
organizations means that they have to spent more resources by acquiring the new customers
as the existing customer do not need any inspirations from organizations (Berg & Lidfors,
2012). Similarly, loyal customers always recommend concerned brands and organizations
in order to inspire their families and friend to use particular products. The organizations are
also focused on potential complaints of customers and strain to please them from respective
features.
The customers’ loyalty in banking sector is considered as most effective tool in expanding
the banking activities and to attract the customers towards the products and services offered
by the concerned banks (Ailawadi, Neslin, Luan & Taylor, 2014). The customer loyalty can
be easily measuring through persistent interactions of customers with the concerned banks
as these customers are making businesses without any breach in loyalties. In this connection,
customers’ loyalties are undaunted affiliations of customers towards said banks whatever
they offerings are available to them from potential competitors (González & Vilela, 2016).
Due to the increased competition in banking sector, banking industry is more worried about
the customer values as well as standards by focusing upon their desired services that these
customers expect from the customers and this role is also performed by Islamic banks most
effectively.
The customers’ loyalty in Islamic banking system is also the phenomenon of interest for the
researchers and numerous research studies have been conducted on the active role of Islamic
banks towards customers’ loyalties (Afridi, Gul & Haider, 2018). The customers are stately
as loyal and committed towards Islamic banks due to their provision of products and services
66
from the Islamic perspectives wherein the customers’ interests are prioritized and where the
customers are considered are the real assets of the banks (Aramburu & Pescador, 2019). The
customers are more committed to Islamic banks due to their flexible policies and strategies
towards facilitations of customers and further help them in increasing number of customers
there attracting the new customers towards products and services offered to customers by
Islamic banks so as to facilitate and benefited customers from every dimension over quality
measures.
2.4.4 Benefits of Customers Loyalty

The customers’ loyalty brings along some benefits for both the customers and organizations
through their mutual and consistent interaction with each other. The customers’ loyalty is
helpful in increasing the revenues and income as the loyal customers are always remains the
significant part of the organizations in prolonged manners (Ballester & Aleman, 2001). The
continuous interactions of the customers with concerned organizations help them to enjoy
the ultimate benefits as associated with the products and services offered to them. Similarly,
customers’ loyalty also helps organizations in redeemable their resources like the financial
and human as concerned organizations have to invest little of the inspiration and motivations
of customers (Bennett & Bove, 2002). The customers are already aware about norms and
values of concerned organizations to which they are constantly interacting in attaining their
demands.
The customers’ loyalty is also vital for organizations in measuring their corporate reputation
by sharing the information through income statements and balance sheets which also attract
the potential investors to invest in the particular organization (Iwasaki & Havitz, 2004). The
customers’ loyalty is significant as these customers are sharing personalized experiences
with their friends and families and recommend particular organization through their quality
services and products being offered. For this purpose, organization arranges diverse loyalty
programs to aware the customers towards the potential benefits (Crespo & Bosque, 2005).
These programs are mainly concerned with the introduction of organizations, introduction
of their products and services and introduction of potential benefits to the customers. Thus,
organizations can benefit from these programs by increasing the revenues and reducing the
risks.
67
The customers’ loyalty is considered as the significant predictor towards the organizational
values as the organizations feel themselves appreciated when the individuals in the societies
recommend the organizations to other individuals and talk about the values and standards
of the organization (Jones & Taylor, 2007). The customers are considered as the ultimate
beneficiaries in the competition among organizations since the organizations offers various
packages to customers to attract them towards their products and services. The organizations
can be benefited through customers’ loyalty as it is foremost source in increasing customers
and increase in customers means the increase in revenue while increase in revenue means
the increase in credibility of the concerned organization (Chang & Fong, 2010). Therefore,
organizations are the foremost entities who enjoys the ultimate benefits of the customers’
loyalty.
The customers’ loyalty in business sector is critical as it not only acts as source of inspiration
but also increases the potential worth of the service being offered. The customers’ loyalty is
considered thus as the most imperative source for desirable corporate reputations (Berg &
Lidfors, 2012). The organizations, through customers’ engagement and involvement can
achieve the tasks of rehabilitation in order to improve their values in contemporary markets.
The organizations are more concerned with the efficacy of their customers and the provision
of quality services increasing not only confidence level of the businesses but also increases
the trust of customers (Zhao, Webb & Shah, 2014). Organizations and customers are going
hand-to-hand in pleasing their demands by keeping in view their own interests wherein they
are interacting each other for potential benefits associated with provision of required quality
services.
All the organizations are focused on increasing customers’ loyalty and the banking sector is
also performing this role quite efficiently. Though, there are many competitors involved in
this sector, however, only those banks are expected to compete who have sufficient focus
on customers’ loyalty (González & Vilela, 2016). Therefore, banking industry can be more
benefited with the adaptation of all those measures which are considered as building blocks
in nurturing the loyalties of the customers towards banks. The banking sector is responsible
in providing basic facilities to their customers so as to make them committed with concerned
banks along with the provision of all the available facilities to attract them towards banks
facilities (Goyal & Chanda, 2017). The banks are loyal with delivery of quality services to
68
their customer among which the Islamic banking system is considered the most effective
sector.
The customers’ loyalty is vital for the Islamic banks due to their active role in development
of the societies and in facilitating stakeholders to achieve the competitive edge. The Islamic
banks are more concerned with the customers’ loyalty and these banks can lead the markets
by sustaining these loyalties towards long-term interactions between banks and customers
(Raza, Bhutta, Iqbal & Faraz, 2018). The customers undaunted loyalties can benefit Islamic
banks in attaining their competitive edge over competitors through effective communication
with the stakeholders to share their views about improvement in their qualities and in turn
respect their opinions (Aramburu & Pescador, 2019). The Islamic banks are concerned with
loyalty strategies and implement those policies which are vital for the benefits of customers
which conversely help them in achieving their desired market shares and values in banking
sector.
2.4.5 Customers Loyalty in Banking Sector

In economic development, the banks are playing important role in increasing the customers’
values and thus defining economic growth of concerned country. The main responsibility of
the banks is to contribute in the economic development thereby converting savings into
investments (Bloemer, Ruyter & Peeters, 1998). These investments are measured as major
contributions towards the economic development. In this regard, customers are considered
as the nucleus around which these economic activities are surrounded. The customers are
the most precious asset of the banking sector and most of the economic shares are possible
due to customers (Chakravarty, Feinberg & Rhee, 2004). Therefore, the customers’ loyalty
is an important factor for economic credibility of banking sector. The banking sector along
with customers are considered as main phenomena around which economic development is
encircled.
The customers’ loyalty for banking sector is as important as for the other organizations with
the fact that the customers are considered as the nucleus around which the banking activities
are hinged. The customers are the precious asset of the banks and this can be strengthened
more when the banks have loyalties of their customers (Maharsi, Sri & Fenny. 2006). The
loyal employees are the main and leading concerns for the organizations including the banks
and most of their revenues have generated through continuous interactions between banks
69
and customers (Alam, & Khokhar, 2007). Thus, the banks and customer are measured as
building block for economic development of concerned countries. The customers’ loyalties
are important predictors for success of the organizations as loyal customers are always the
main sources of economic growth in times of economic change through their overwhelming
responsibilities.
The customers’ loyalty is critical success factor for the banks as it is the most significant
sources for revenue generations through diverse exchange opportunities between customers
and organizations as both are interconnected over certain desired objectives. The customers
are further aggravated when they feel that their demands are prioritized and pleased by the
organization (Lam & Burton, 2008). These interactions among customers and organizations
are the main source of revenue generation as both of them are strongly linked with certain
hidden interests. The customers’ main objective is to obtain the quality services and products
from the organization while the organizational objectives are to provide quality services and
to produce more revenues (Khattak & Rehman, 2010). These are the leading parameters
which are functional in the overwhelming interactions between the concerned banks and the
customers.
The banks are the financial intermediaries and institutions who receive deposits and invest
these deposits in certain available investment opportunities that are contingent upon indirect
capital markets as well as direct loaning activities to generate revenue for themselves and to
share the incomes among the stakeholders (Kocoglu & Kirmaci, 2012). This sharing when
managed on equal proportion then shapes the attitude and behavior towards the concerned
banks and which further makes the customers as loyal as the organization desires (Pasha,
Ahmad & Ahmad, 2016). This loyalty is considered as leading issue in determining standing
and ranking of the banks as the banks needs continuous interaction between the stakeholders
and customers and this can only be possible when there is an undaunted interaction between
customers of banks which is directly related with the customers’ loyalty towards concerned
banks.
The banks need the customers’ loyalty in prolonged manners as banks long-term survival is
contingent upon the customers while the ultimate development is dependent on customers’
loyalty. Therefore, the loyal customers are basic need of the banks as concerned banks are
emphasizing more in making the attitudes of the customers towards concerned banks (Goyal
& Chanda, 2017). These attitudes are then vital for customers in long-lasting relationships
70
between customers and banks. The banks are focusing upon the strategies and policies which
are flexible and transparent towards the demands of the customers thereby facilitating them
in their services and products overwhelmed at the increased values and standards (Afridi,
Gul & Haider, 2018). Hence, the banks are considered as the critical success factor towards
economic development and this milestone can be better achieved through role of customers’
loyalty.
The customers’ loyalty is important phenomenon with regard to the banking operations as
the banks are functioning their activities on mutual trust between the customers and banks
(Aramburu & Pescador, 2019). In modern banking system, the focus is more on adaptability
of those measures which focuses on the customers due to their critical role in overwhelming
economic situation and this can only be possible when the banks have committed and loyal
employees and customers. Thus, the customers’ loyalty is as vital as existence of concerned
banks ass these banks cannot achieve their desired objectives unless and until they have
more loyal customers (Raza, Burney & Ullah, 2020). This function is performed by Islamic
banks as these banks are vital in determining customers’ satisfaction as well as commitment
in modern competitive situations to overwhelm economic changes and to lead competitive
markets.
2.4.6 Customers Loyalty in Islamic Banking

The customers’ loyalty is important as well for Islamic banking system as these banks are
direly needed the loyalties on the part of their customers and other stakeholders in order to
maintain their competitive positions in competitive situations (Ahmad & Kamran, 2000).
The Islamic banks are providing different facilities to their stakeholders from the Islamic
perspectives likewise trade finance, investment opportunities, real estate and commercial
backing services and all other services which conventional banking system offers. In current
scenario, Islamic banking system is progressively making corporate reputation and diverse
conventional banks are rotating their interests toward adaptation of Islamic banking (Archer
& Ahmed, 2003). But still Islamic banks are undergoing over strong competition with not
only with non-Islamic banking sector but also within Islamic banking sector in competitive
markets.
The Islamic banks are concerned with the customers’ loyalty from different dimensions as
it is considered as the foremost predictor towards the credibility of Islamic banks in markets
71
wherein there exists different competitors focusing on only one dynamic interest like the
generation of revenues (Maali, Casson & Napier, 2006). The Islamic banks and customers’
loyalties when combined can grip economic situation at par to required level. The loyalties
are important for the Islamic banks as it is the most effective tool in determining the standing
and rating of Islamic banks. The Islamic banks are critical success sector for contributing
economic share towards national exchequer and this phenomenon is more effective when
the banks concerned dealt with committed and loyal customers (Gait & Worthington, 2008).
The customers’ loyalty is vital for Islamic banks due to facility of value services in financial
markets.
In modern competitive situation, the economic changes as well as the change in technologies
worried the banking sector to make sure the excellence in their services and products thereby
working more on loyalties of their stakeholders to maintain the financial standing of banks
and in this drive, the Islamic banks are considered as the dynamic player to achieve the task
of rehabilitation and to grip economic situation (Ahmad, Malik & Afzal, 2010). Around the
globe, the Islamic banks not only attract the Muslims but the non-Muslims are also attracting
in huge number towards Islamic banking system. Thus, the Islamic banks are required to
put their emphasis more on customers’ loyalties to main their competitive positions (Butt,
Saleem, Ahmed & Mahmood, 2011). The customers’ loyalties are thus becoming critical
element towards customers’ satisfactions as well as Islamic banks reputation in competitive
scenario.
The customers’ loyalty is defined simply as customers’ intentions and willingness to remain
the everlasting part of the concerned banks which is the main concern for the managers and
the policy makers while forming and implementing strategies and policies concerning the
customers to maintain customers trusts and to sustain its credibility (Amin, Isa & Fontaine,
2013). The customer loyalty is vital for Islamic banks as these banks are ensuring services
and products customers as per principles and teaching of Islam. The Islam is comprehensive
religion and focuses on providing different facilities to the individuals in societies thereby
focusing on their needs and desires (Rammal & Parker, 2014). Thus, the Islamic banks are
also significant in providing available facilities to stakeholders to ease them from banking
operation and to make them committed towards the Islamic banks by fulfilling their genuine
demands.
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The Islamic banks over customers’ loyalty becomes the strong competitor towards financial
players thereby proving the innovative services to their customers on marginal shares with
the aim to make their committed towards Islamic banks. The Islamic banks are also critical
in facilitating customers by offering diverse nature of facilities to maintain the competitive
edge in the financial market (Ullah & Karaghouli, 2017). In Pakistan, due to liberalization
of economic sector, customers have varieties of options to pick and choose the most suitable
banks for investments among the several available opportunities (Rahman & Anwar, 2016).
Similarly, due to changing nature of customers, the banking sector is more focused on the
provision of quality services to their customer to attract and retain the customers by offering
them different opportunities to inspire customer to remain active part of concerned banking
sector.
The Islamic banks are more concerned with the bank reputation to offer the bank services
from the religious perspectives to augment the customer satisfaction and to increase loyalty
of the customers. Thus, the customers’ satisfaction is the significant contributor towards the
customers’ loyalty due to the critical role of the loyalties in improving the credibility of the
concerned banks (Salman, Noor, Salman & Hafeez, 2018). Similarly, fair and transparent
strategies on the part of concerned banks are also vital in increasing customers’ satisfaction
leading to increased loyalties. Thus, Islamic banks are more apprehensive towards execution
of fair policies towards the customers’ satisfaction without any discriminations (Aramburu
& Pescador, 2019). Thus, to understand the loyalty carefully, different researchers suggested
different theories of loyalty among which leading theories are presented in the current
framework.
2.4.7 Theories of Customer Loyalty

The loyalty has been comprehensively described by different researchers through different
models and theories. There are certain discrepancies stressed by analysts which in turn give
birth to another theory to cater these inconsistencies (Dick & Basu, 1994). Each theory has
its own merits and demerits, however most suitable theory depends on situations wherein
these theories are being applied (Bennett & Bove, 2002). These theories attempt to describe
what drives loyalty can characterize effective means for retaining and acquisition towards
hard-won clienteles. These theories described critical factors which increase or decrease
loyalties towards certain phenomenon (Chang & Fong, 2010). These identified behavioral
and emotional ideas (trust, satisfaction and commitment) that succeed life cycle connection
73
which build the individuals loyalties from the different perspectives (Aramburu & Pescador,
2019).
2.4.7.1 Exchange Relationship Theory

The exchange theory mainly focused on the transactional interactions between individuals
and the concerned organization due to the exchange processes which are repeated eventually
based upon mutual relationships over inspiring willing partnerships (Morgan & Hunt, 1994).
In this theory, the trust has been considered as vital predictor for determining these relations
as this interaction is contingent upon the expectations of both the parties. The trust remained
precarious dynamic towards change from distinct dealings towards uninterrupted exchange
relations (Cropanzano & Mitchell, 2005). This theory further clarified that trust is viewed
as significant relative experiences t collaborative and stable relationships (Muzammal et al.,
2017). Thus, exchange relationships theory was focused on interactional relations between
customers and organizations in response to exchange their mutual concerns for the particular
purposes.
2.4.7.2 Marketing Theory

The customers’ loyalty has been further examined through marketing theory wherein the
main focus was remained on satisfaction of customers by explaining loyalty and satisfaction
has direct relationships with each other. The customers who are satisfied are loyal while the
customers who are dissatisfied are vendor (Lawler, Edward & Shane, 1999). The customers
when satisfied from services and products as offered by organizations are remained loyal
due to their level of satisfaction (Maignan & Ferrell, 2004). The attitude and behavior of the
customers towards particular products matters a lot while making the purchase decisions
(Qayyum & Anwar, 2011). In marketing research, it is agreed that when customer behavior
is affirmative towards the services provider organizations, then customers are understood as
loyal customers as these customers desired to interact with concerned organization over and
again.
2.4.7.3 Social Comparison Theory

This theory indicate that individuals compare naturally themselves with other individuals in
societies respecting commonalities and differences in their personalities and social status
and interactions. The relative classifications unwavering from social links requires apparent
characteristics and actions for change in relations (Stock & Gregory, 2003). These mutual
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comparison leads individuals towards mutual understanding between the individuals. This
theory directed towards evolutionary social cognition concept (superiority, prestige, elitism)
which determines individuals’ mindset toward the particular eventualities (Jones & Taylor,
2007). This theory indicates that when individuals are dealt with equal representation then
they will show higher loyalties (Muzammal et al., 2017). Thus, the main theme of this theory
is concerned with the social comparison that the individuals experiencing in their mutual
interactions.
2.4.7.4 Social Identity Theory

The social identity theory indicates that individuals needs to strengthen their self-perception
which inspires their desires to feel right with among the group of high-status. The positive
self-esteem of individuals leads to higher level of confidence which further leads towards
the undaunted loyalties (Ballester & Aleman, 2001). Consequently, loyalty plans help the
customers to evade such complications by providing certain benefits to the customers which
make them committed towards the particular substances (Chang & Fong, 2010). Similarly,
identifications help individuals in specifying their needs by sharing their interests towards
attainment of certain well-defined aims leading to the augmented loyalties (McLeod, 2019).
Some individuals are willing to endeavor for position which they search for certain social
situation wherein individuals are enjoying cultured status in societies matched with their
personalities.
2.4.7.5 Schwartz's Value Theory

The value theory indicates that each individual has certain values which they need at every
cost to maintain their social position in the contemporary societies wherein these individuals
are living and have certain shared wellbeing (Ballester & Aleman, 2001). This theory further
indicate individuals needs the values and moral support in societies which directly tells upon
their social status and their mutual fair interactions which leads to higher loyalty on the part
of individuals (Jones & Taylor, 2007). The value theory supports in providing understanding
into these enigmatic outcomes by unfolding individuals’ desires for receiving higher values.
The individuals with self-determining understanding lean to respond clearly to opportunities
which improve their native status in societies (González & Vilela, 2016). Thus, customers
with interdependent self-construal might avoid actually practices those hampers values and
confidence.
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2.4.7.6 Typological Loyalty Theory
The researchers suggested the loyalty from different dimensions as some believed that it is
single aspect phenomenon while other believed that it is multidimensional concept includes
both attitudinal and behavioral dimensions (Bennett & Bove, 2002). The typological loyalty
model is smart conceptualization of the mutual dynamic effects of attitudinal and behavioral
aspects. The researcher suggest that loyalty is outcome of interaction between the individual
over virtual attitudes towards objects in connection to repeated practices (Crespo & Bosque,
2005). This theory divides loyalties into different categories and described customers with
in elevation attitudinal and behavioral loyalties thereby describing customers as true loyal
while individuals with high behavioral loyalties are described as spurious loyal (Aramburu
& Pescador, 2019). Both these dimensions when combined then develops loyalty on part of
customers.
2.4.8 Dimensions of Loyalty

The researchers examined the customers’ loyalty as two-dimensional model comprises the
attitudinal and behavioral loyalty. These loyalties indicate the emotional and psychological
aspects of the customers towards particular things likewise attitudinal aspect denotes to the
interim variations in customers’ attitude towards particular objects, products and services
while the behavioral aspects examined everlasting change in the attitude of the customers
(Dick & Basu, 1994). Both these dimensions then framing the framework for overall loyalty
of the customers towards specific thinks. Thus, these dimensions evidently indicate that the
customers’ loyalty is an imperative concept since it has an understanding towards the hopes
of the customers (Sirdeshmukh, Singh & Sabol, 2002). The overwhelming responsibility of
organizations in fulfilling these hopes for the best interest of both the customers as well as
organizations.
The customers’ loyalty is an important phenomenon in the context of business organizations

as all the businesses are focusing on increased level of loyalties towards particular products
and services offered by particular organizations. Similarly, the loyalty programs have been
introduced by organizations in order to reshape the attitude and behavior of the customers
towards particular products (Jones & Taylor, 2007). These programs are vital in determining
standing as well as antecedents and consequences of loyalty towards the particular products
and services. Similarly, attitudinal and behavioral loyalties can be augmented over building
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certain strategies in increasing the loyalties of the customers (Chang & Fong, 2010). In this
connection, the cross-classification is also the significant predictor for defining the attitude
and behavior of individuals/customers in making them loyal/committed towards particular
organizations.
The customers’ loyalty is significant contributors towards the economic change in modern
competitive environment. Similarly, the loyalty has been classifying into spurious loyalty,
latent loyalty and lower loyalties which are contingent upon the circumstances as well as
antecedents which are vital for determining loyalties (González & Vilela, 2016). Similarly,
the loyalties are also considered as the emotional attachment of the customers towards the
particular products and services. The organizations are offering diverse services to make
their employees committed and loyal thereby contributing towards success of organizations
(Aramburu & Pescador, 2019). These loyalties are significant by exhibiting truncated levels
the patronage, though customers grip resilient attitudinal obligation towards organizations.
Thus, these loyalties are vital in determining attitude and behavior of customers towards
organizations.
2.4.8.1 Attitudinal Loyalty

The attitudinal loyalty has been defining as customer’s psychological affiliation, readiness
to acclaim the services provider and engagement in affirmative interaction with specific
product and service in a prolonged manner. Thus, attitudinal loyalty is degree of undaunted
assurance related with customers repeated usages behavior towards particular product/
service (Ballester & Aleman, 2001). Equally, this loyalty type is exposed by customers when
they buy and use frequently particular brands/product/service in which customers have trust
regarding consistent attitudes resulting in habitual obtaining behavior (Iwasaki & Havitz,
2004). The attitudinally loyal customers are measured as vital source for businesses since
they enhance strength positive attitude towards benchmark of particular brand in addition to
word-of-mouth elevations that might help in fascinating other customers towards particular
organization.
The attitudinal loyalty is concerned more with the prevailing state of mind of the individuals
wherein these customers are uncertain in specific situation while consuming the particular
products and services. The attitude is concerned with provisional obligations of customers
towards certain things (Jones & Taylor, 2007). There is still uncertainty exists in customers’
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minds concerning attitudinal loyalty whether to continue or to more towards certain other
opportunities. In this connection, the attitude of the customers’ matters lot while measuring
the loyalties. The organizations, in this context, are required more to focus on the customers’
attitude thereby turning their attitude towards controlled behavior (Chang & Fong, 2010).
The attitude is also concerned with particular circumstances wherein customers are engaged
by providing meaning to their perception about specific things which needs the concluding
decisions.
The customers’ loyalty from attitudinal dimensions are also critical with regard to decision
making about certain surrounded things. These are the most critical perspective which helps
in shaping the attitude of customers towards the behavioral contents. The attitudinal contents
are more daring due to the persistent variations in the responses of the customers and also
due to the changing demands along with changing situations (Berg & Lidfors, 2012). The
customers in this drive are concerned with their attitudinal contents due to their interests
which are contingent with some overwhelming demands. The customer needs the quality
products and services in the prolonged manners which thus helps in providing the space for
shaping their attitude towards behavior (Zhao, Webb & Shah, 2014). Therefore, attitudinal
aspects are critical factor in determining customer behavior towards particular brands of the
organizations.
The loyalty attitudinal measures comprise various dynamic issues comprises the emotional
commitment/attachment, trust and ignorance of substituting opportunities. Thus, in order to
develop and sustain the loyalty in prolonged manners, the customers need extraordinary care
from the organizations to meet their genuine demands (Pérez & Bosque, 2015). Similarly,
loyal customers are rare who enthusiastically perceives towards products and recommend
the said products to their families and friends. Thus, customers’ loyalty is considered as the
outcomes of dynamic measures (González & Vilela, 2016). The antiquity of activities in
addition to intentions and feelings towards commercial relationship through certain products
and services which are offered to them by the organizations in meeting and satisfying their
demands over standardized manners to shape their behavior towards particular products and
services.
The customers’ loyalty from attitudinal perspective is thus vital for the organizations to meet
their developmental phases and to meet the competitors in competitive markets. Likewise,
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the customer loyalty is also important for the successful operations of the business activities
wherein different competitors are ready to provide the same facilities from different aspects
so as to attract and retain the customers towards the particular brands as well as particular
products (Goyal & Chanda, 2017). The attitudinal loyalty is vital in banking sector as there
are many banks who are focusing on attitude and behavior of their customers and those who
are working persistently in shaping customers’ attitude by providing the different packages
to their customers in viable markets (Afridi, Gul & Haider, 2018). The attitudinal content
are significant issues for concerned banks in order to maintain and sustain loyalty of their
customers.
The customers’ loyalty from attitudinal concerns is also significant for the Islamic banking
system due to their critical role in shaping the attitude of customers from Islamic views and
perspectives (Raza, Bhutta, Iqbal & Faraz, 2018). The Islamic banks are more focused about
the attitudinal concerns of customers and always remained in interest about the antecedents
and concerns related with attitudinal concerns of customers. The Islamic banks are critical
in offering the services which are helpful in building customers positive perceptions about
products as well as concerned organizations (Aramburu & Pescador, 2019). The attitudinal
dimensions are also vital for Islamic banks as these banks are ensuring their services from
Islamic perspectives and which are further vital for creation of the optimistic consequences
those which are vital for long-term standing and reliability of both the customers as well as
organizations.
2.4.8.2 Behavioral Loyalty

The behavioral loyalty is an important attribute of overall customer loyalty which are vital
for organization in shaping the permanent change from attitude to behavior. The behavioral
loyalty is based on certain features which are vital for organizations to consider while taking
into account phenomenon of loyalty (Dick & Basu, 1994). The behavioral loyalty is vital
critically for the business organizations since it provides the means for customers to change
attitude to consistent behavior concerning particular products and services (Kandampully &
Suhartanto, 2000). Though, customers who have little desire towards specific brands might
be lured easily to acclaim future and current challengers along with other eventual customers
over undesirable word of mouth. The behavioral loyalty denotes to persistent repetition of
specific product and services with emotional and psychological concerns by mitigating such
behavior.
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The behavioral aspect is imperious towards the customers’ loyalty when mentioning overall
loyalties which are significant predictor in reshaping the customer behavior. The customers
are considered as the significant source for maximizing the businesses and to lead the market
and this can only be possible when customers have undaunted behavior towards concerned
organizations regarding their service deliveries which are vital in maintaining competitive
edge of organizations (Bowen & Shoemaker, 2003). The behavior establishes with repeated
consumptions from customers towards particular business organization which are helpful in
making the perceptions of customers towards undisturbed behavior (Aydin & Özer, 2005).
These behaviors are thus the main concerns for organizations thereby focusing their entire
focus to grip the situation and therefore maintaining customers’ satisfaction in prolonged
manners.
The behavioral contents are also vital due to the technological changes as the adaptation of
various technologies helps the organizations in attracting shaping the customers’ perception
about certain services. The organizations who are more attractive in offering diverse quality
products are focused on qualities instead of the quantities (Jones & Taylor, 2007). Likewise,
some customers are always remained the focus of interest for organizations with the target
options so as attract the customers through different online marketing and businesses. These
entities are only for revenue generation and once the customer interact with them then these
customers never interact with them in future (Matzler, Kräuter & Bidmon, 2008). These are
only by reasons that these entities failed to shape customers’ behavior as per required values.
The applications of certain measures in this connection are vital for organizations to manage
situations.
The organizations are emphasis on the customers’ satisfaction which is the foremost aspect
of the customers’ loyalty. The customers’ satisfaction is the matters of greater importance
in shaping the behavior of the concerned customers (Chang & Fong, 2010). These customers
are only success factor for organizational survival and ultimate expansion as organizational
activities are contingent upon the loyalties of their customers. The customers’ loyalty from
the behavioral contents is significant as it focuses upon emotional strength of the customers
(Rujirutana & Poolthong, 2011). The strong emotional strength is significant contributor
towards the customers’ satisfactions which pay the ways towards optimist loyalties on the
part of customers. Thus, customers’ behavior is an important attribute towards the customer
80
commitment toward the particular products and services presented by particular business
organizations.
The behavioral aspects are also critical in shaping the customers’ behavior in prolonged and
consistent manners as these loyalties need certain overwhelming measures from concerned
organization to maintain their positions in markets (Ailawadi, Neslin, Luan & Taylor, 2014).
In the banking sector, the behavior of the customers is also predicted through the qualities
of the services that these banks are offering to customers and which are helpful in reshaping
their ultimate behavior toward particular objects, therefore, banks are more concerned with
the adaptations of quality measures towards the customers which thus help the concerned
organizations in shaping attitude and behavior of the customers (González & Vilela, 2016).
The behavioral contents towards the banking sector is also ensured over the CSR measures
as it hinges upon the behavioral contents of the customers towards particular services being
offered.
The behavioral aspects are critical for Islamic banks due to their critical role in satisfying
the needs of the customers. The customers who are satisfied with the services of the Islamic
banks are showing their optimistic behavior towards the concerned banks which thus helps
in nurturing satisfaction which further helps in shaping their commitment (Raza, Bhutta,
Iqbal & Faraz, 2018). The Islamic banks are fervent in providing quality measures towards
the customers with the aim to shape their behavior and to maintain competiveness in their
services deliveries to maintain competitive edge over competitors (Aramburu & Pescador,
2019). The Islamic banks over certain measures like augmented dealing towards customers,
provision of offered services, and availability of required standards are significant predictors
towards customers’ loyalties which have certain long-lasting consequences towards Islamic
banks.
2.5 The Corporate Reputation

The corporate reputation is vital phenomenon which become the leading issue for the public
and private organizations to survive in competitive environment. It is the utmost and leading
responsibility of the organizations to maintain their corporate image in competitive markets
to sustain their positive image in eyes of their stakeholders (Fombrun & Riel, 1997). Thus,
image is an importance concept which is aligned with the reputation to sustain the goodwill
of organizations. The corporate image is considered by researchers as bridging phenomenon
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in linking the corporate social responsibility and the customers trust and loyalty in different
organizations including banking sector (Fombrun, Gardberh & Sever, 2000). The corporate
image is shaped over prolonged evolution by interconnecting things that provide optimistic
worth to customers to maintain positive image of organizations by focusing upon customers’
needs.
The organizations are fronting emergent expectations from the stakeholders towards social
and environmental issues to perform their active role in contributing towards these issues.
When organizations concerned show their utmost efforts in eliminating the environmental
and social constraints then the organizations might be able to attain desired tasks, standing,
viability and corporate reputation in prolonged manners (Nguyen & Leblanc, 2001). These
are main attributes that organizations required in order to maintain their competitive edge
over the competitors in the competitive environment. The organizations are also required to
show their efforts towards customers’ satisfactions by offering and providing the excellence
(Roberts & Dowling, 2002). They ensure provisions of products and services as per required
standards to meet expectations and desires of the customers and development their corporate
reputations.
The corporate reputation is the outcome of various effective dynamic contributions and the
concerned organizations with respect to the societies, stakeholders and customers. Likewise,
the transformation of goods and services grounds into the strategic values leading towards
corporate reputations over great significances (Brammer & Pavelin, 2004). The corporate
reputation as the concepts and as strategy gained momentum during past few decades and
numerous organizations focus their attention thereby adapting this concept as the strategy
to develop their corporate image in competitive markets as well as in societies (Brammer,
& Pavelin 2006). The corporate image is vital for organizations to attain their competitive
edge in competitive markets. The organizations who are concerned with reputation are intent
more on application of certain strategies which are vital in building positive perceptions of
stakeholders.
The stakeholder has constructing role towards growing corporate reputation of organization
as stakeholders are considered as real shareholders of the organizations since without their
contributions, organizations would not be able to achieve desired standards (Bebbington,
Larrinaga & Moneva, 2008). Thus, corporate reputation not only helps in increasing existing
82
stakeholders’ values but it also helps in attracting the new customers along with the facility
of nurturing the loyalties. The corporate reputation is thus imperative for the organizations
to maintain their competitive edge and to sustain their strong position in the markets (Bear
Rahman & Post, 2010). This is possible when organization emphasized on their operational
activities from each dimension keeping in view the customers’ satisfaction and loyalties to
grip the situation and to overwhelm in increasing competition among the different market
players.
The corporate reputation is thus vital phenomenon for all organizations including banking
sector as the banking sector is also considered the backbone towards the national economy
(Lee & Roh, 2012). In this connection, due to increased competition among banking sector,
the banks are more concerned with provision of excellence in their public service delivery
so as to please the needs of their stakeholders as per their wins and wishes and to maintain
their competitive position in the markets (Hashim, Abdullateef & Sarkindaji, 2015). There
are numerous banks in Pakistan who are functional and performing their role wholeheartedly
so as to provide different products and services to maintain customers trust and their ultimate
loyalties. When banks are enthusiastic in performing these roles effectively and efficiently
then it will lead to higher trust level and undaunted commitment which further leads to kind
reputations.
The corporate reputation is also vital for Islamic banks as these banks are more apprehensive
in dealing with their stakeholders in order to meet their expectation and to improve their
image in the banking industry due to the emergence of various banks in public and private
sectors (Stefano, Trotta, Iannuzzi& Demaria, 2017). Therefore, the main purpose of Islamic
banks is to build image and reputation of these banks through formation and implementation
of those policies and strategies which are helpful in meeting the customers’ demands as well
as in developing the corporate image and reputation of Islamic banking system (Aramburu
& Pescador, 2019). The corporate reputation is considered as the outcome of the successful
implementation of the CSR along with its measures to improve the credibility and success
of Islamic banks in the modern banking system wherein each bank is trying to lead through
excellence.
2.5.1 Concept of Corporate Reputation

The corporate reputation has been developed as an important concept during the past decade
due to its standing towards the organizational role towards stakeholders as well as societies.
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The corporate reputation is the outcome of various actions and eventualities on the part of
the organizations due to their critical role towards the societies (Fombrun & Riel, 1997). In
this drive, it has been accepted as significant phenomenon keeping in view organizational
actions and their ultimate impact on stakeholders and societies as well. Similarly, the brands
durability (resilience) and excellence in provision of services are the main parameters of the
corporate reputation for organization (Kotha, RajgopaL & Rindova, 2001). For this purpose,
the organizations are focused upon the availability and implementation of various strategies
which are helpful in determining organizational corporate reputation in modern competitive
situations.
The concept of corporate social responsibility is thus becoming significant predictor towards
the organizational log-term survival and ultimate development. In this connection, corporate
reputations summarize the diverse features of business strategies so as to develop corporate
image of concerned organizations (Wang, Lo & Hui, 2003). Thus, corporate reputation has
thus become elusive phenomenon as several elements are responsible in counting corporate
image of concerned organizations. However, different researchers defined the corporate
reputation in different aspects wherein some relates with the organizational actions and other
relates to ultimate reactions of stakeholders (Scott & Walsham, 2005). Conversely, inclusive
definition of corporate reputation is still questionable. Therefore, it becomes imperative for
the researchers to examine the critical parameters concerning the corporate reputations for
organizations.
The corporate reputation directs towards the prestige and esteem which counts the goodwill
of the organizations in an identical and measurable dimension in shaping their corporate
image and reputation (Hillenbrand & Money, 2007. Thus, corporate reputation is inclusive
assessments through which organizations are held responsible by stakeholders (external and
internal) based upon their eventualities and possibility of their imminent performance. For
the credibility of organizations, the corporate reputation has been considered as an important
concept keeping in view their actions and ultimate interests behind these actions (Walsh,
Mitchell & Jackson, 2009). Although the reputation is an immaterial conception, however,
universally research confirms that virtuous reputation evidently rises corporate values and
offers persistent viable lead which further acts as imperative predictor for development of
organizations.
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The corporate image is responsible for the businesses in attaining their objectives as well as
in sustaining their competitive edge wherein numerous dynamic elements are involved like
the stakeholders, increased customers, effective business leadership, retailers, suppliers and
other potential parameters which are allied with the organizational actions (Gillet, Hübner
& Plunus, 2010. Therefore, good reputation caused both vendors and customers to become
more loyal and trustworthy toward concerned organizations (Abratt, & Kleyn, 2012). The
corporate reputation is not only helpful for organizations but it is also encouraging for the
stakeholders as well as the potential customers those who aims to interact with the concerned
organizations (Galbreath & Shum, 2012). Consequently, the corporate image and reputation
which results in corporate reputation is significant predictor towards the organizational
success.
The corporate reputation is also significant for the banking sector as these banks are mostly
functional through the mutual trust of the banking sector as well as the stakeholders when
the corporate reputation exists in effective manners (Fiordelisi, Soana & Schwizer, 2013).
In developed countries, banking sector prioritized the corporate reputations at first glance
as it not only helps in increasing the banking sectors values but also increases the trust of
the stakeholders over concerned organizations in prolonged. Keeping in view these trends,
the banking sector in developing countries are following these trends to main the credibility
of the banking sector in an effective manner to achieve the desired tasks of competing the
industries (Famiyeh, Kwarteng & Dadzie, 2016). In Pakistan, same trend is active and all
banks including Islamic banks are effective in managing corporate images in competitive
markets.
The corporate reputation in Islamic banking sector is vital due to many dynamic parameters
like provision of excellence in products and services, implementations of Islamic principles
in banking sector, safeguarding customers’ values, execution of banking norms and values,
provision of required facilities and maintaining the trust of their customers (Stefano, Trotta,
Iannuzzi & Demaria, 2017). This trust thus leads Islamic banks towards customers’ loyalties
leading to suitable corporate reputations of Islamic banks. The Islamic banks recognizes the
standing of stakeholders along with their trust and commitment as major prognosticators to
development of Islamic banks (Aramburu & Pescador, 2019). The Islamic banks becomes
incredible in banking industry due to their effective role in providing excellence in existing
85
products and services offered to customers showing the corporate reputation in prolonged
protocols.
2.5.2 Importance of Corporate Reputation

The corporate reputation is an important concept and leading phenomenon for development
of the organizations in maintaining competitive lead. The corporate reputation is intangible
asset of organization which is outcome of corporate effective actions and ultimate prospects
leading to respectable image of organizations (Fombrun, Gardberg & Barnett, 2000). The
organizations are required to be concerned with their reputation by contribution through
services in those manners which they actually deal in competitive markets. The organization
are required further to develop consensus of their stakeholders about image of the concerned
organization along with provision and endurances of the quality measures which are aligned
with existence of the concerned organization (Fuente & Puente, 2003). Thus, the corporate
reputation is vital concept in determining the organizational success in the most competitive
environments.
The corporate reputation is also considered as the outcome of the effective management and
utilization of available resources in order to come across the demands of their stakeholders.
The corporate reputation is the amalgamation of organizational corporate activities and the
effective efforts of organizations which are turned into the goodwill of organization which
further leads to corporate image thus overwhelmed at effective corporate reputation of the
concerned organization (Brammer & Pavelin, 2006). Thus, having good reputation means
that the organization is executing glowingly and is capable to offer stakeholders what they
desire as fulfillment of these desires helps in shaping their perception and attitude towards
organization (bebbington, Larrinaga & Moneva, 2008). The organizations are required to
focus on their corporate goodwill and corporate reputation when they desire to survive and
develop.
The importance of corporate reputation is imperative for the organizations in managing their
activities in the competitive markets if these organizations need to grow their standing in
connection to competitors. Thus, undoubtedly, corporate reputation leans toward the utmost
significant feature to grow businesses (Bear, Rahman & Post, 2010). From the customers’
perspectives, the corporate reputation is the actual presentation of the organizational actions
towards welfare of their stakeholders. From the business perspectives, the corporate image
86
and reputation is the presentation of services as per the wins and wishes of stakeholders
(Maden, Arikan, Telci & Kantur, 2012). From individual perspectives, corporate reputation
is concerned with the role of organizations towards societies. In this connection, CSR is
measured as the most significant phenomenon in determining the corporate reputation of
organizations.
The corporate reputation is significant for the businesses while growing in markets where
lot of competitive are ready to perform these functions. The organizations are direly required
to put emphasis on provision of quality services so as to maintain competitive lead which in
turn help them in measuring corporate reputation (Lourenço, Callen, Branco & Curto, 2014).
This phenomenon then leads organizations in reshaping their attitude and behavior towards
the specific situation where customers feel honored to be the part of particular organization
(Lin, Zeng, Wang, Zou & Ma, 2016). This situation is more overwhelming for the banking
sector due to their critical role in the economic contribution towards national economies by
providing products and services to facilitate their customers and to generate more wealth to
contribute the economic change in contemporary economic where undesirable situation as
experienced.
The corporate reputation in context of banking sector is also imperative due to their active
in performing various responsibilities towards customers as well as the societies. The banks
are considered as the active players towards the economic development and this is possible
only when the concerned banks are successful in managing their activities as per the desires
of their stakeholders (Stefano, Trotta, Iannuzzi & Demaria, 2017). The preceding actions
and eventualities of banks are major parameters which helps in determining bank reputation.
These reputations are actually outcomes of banks efforts in serving stakeholders in effective
manners which thus helps in nurturing positive behavior of customers leading to respectable
corporate image and reputation (Shankar, Dash & Chakraborty, 2018). Thus, banking sector
is overwhelmed at active role of their functionaries in studying and satisfying the needs of
stakeholders.
The corporate reputation in Islamic banks is also the phenomenon for the stakeholders of
the concerned Islamic banks as well as the potential customers. It not only helps in providing
the know-how about the concerned banks but also helps in examining the perceptions of the
stakeholders about the concerned banks (Aramburu & Pescador, 2019). The Islamic banks
87
are apprehensive in provision of quality goods and services keeping in view the demands of
the customers and in meeting the expectations of the customers as well as stakeholders. The
corporate image and reputation not only help the Islamic banks in expanding their resources
and assets but also help them in increasing the customers thereby attracting the individuals
to become the stakeholder of the banks (Rafay & Farid, 2019). However, there are certain
factors which are vital for Islamic banks to examine best corporate reputation of concerned
banks.
2.5.3 Determinants of Corporate Reputation

There are certain determining factors which are vital for the organizations in growing their
corporate image as well as reputation. Due to the technological changes, the corporate image
and reputation becomes challengeable for the organization in growing their businesses and
to maintain their competitive lead (Kotha, Rajgopal & Rindova, 2001). Thus, the experience
and information are the most significant attributes towards corporate reputation as these two
elements helps organizations in nurturing behavior of customers towards the products and
services being offered. The organization are required to share the accurate information about
their products and services which thus counts experiences of customers towards future deeds
(Wang, Lo & Hui, 2003). The undesirable experiences of the customers lead to undesirable
reputations of the organizations which thus creates problems to survive in the competitive
environment.
The communication is also considered as the vital determinant for the corporate reputation
as the effective communications helps in interacting the stakeholders and organizations in
sharing their views about the issues of different nature. The effective communication is thus
considered as determining factor towards corporate reputation (Brammer & Pavelin 2006).
In this connection, the organizations are required to use different communication techniques
to interact with stakeholders by sharing their views about gratification of certain demands.
Similarly, attentions towards customers’ complaints and ultimate reaction is also vital for
the organizations in measuring their corporate reputations (Decker & Sale, 2009). Likewise,
effective and efficient customers care centers are vital factor in determining the corporate
reputation of concerned organizations by focusing upon the demands of the customers and
stakeholders.
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The corporate reputation is also formed through the effective commitment of organizations
towards their stakeholders while it can also be formed through the emotional attached of the
customers towards the organizations. Thus, it the outcome of mutual cooperation between
organizations and their stakeholders as both of them have certain desires which are fulfilled
through mutual collaboration (Gillet, Hübner & Plunus, 2010). The examination of existing
offers and their upgradation are also significant in nurturing the behavior of the customers
towards organizations. The corporate reputation is helpful for the organization in increasing
their sales and attracting customers towards their products and services (Trotta, Dellâtti,
Iannuzzi & Cavallaro, 2011). It is kind for the successful operation of business activities in
emerging markets where there are several competitors are equipped to overwhelm business
marketplaces.
The corporate reputation is built through the trust of the customers towards the concerned
organizations as trustworthy organizations are able to attract more customers and to achieve
their desired standings in markets. The trust is vital for nurturing the behavior of customers
which further helps in building the commitment and loyalties (Melo, & Morgado, 2012).
Thus, the loyalty and commitment are also the determining factors towards the corporate
reputation (Tischer & Hildebrandt, 2014). Similarly, the customer demands prioritization is
also the significant contributor towards the corporate reputation as it helps the organizations
concerned in pleasing the genuine demands of the customers thereby analyzing the situation
(Walker & Dyck, 2014). Similarly, the corporate reputation helps in attracting the investors
from the dissimilar sectors to invest their capitals and to becomes the part of the concerned
organization.
The corporate reputation has thus many advantages for stakeholders as well as organizations
in the long-term interests of both the parties. These determinants are considered as the vital
forecasters in measuring the corporate reputation of the concerned organization. This role is
also direly needed in banking industry wherein the corporate reputation is most significant
attribute for banking sector development (Famiyeh, Kwarteng & Dadzie, 2016). Thus, banks
are more worried about their corporate image in the societies as positive image is significant
contributors towards corporate reputation of concerned organization. Similarly, individuals’
perception about banks is considered as effective determinant in attracting new customers
towards banking sector (Stefano, Trotta, Iannuzzi & Demaria, 2017). Thus, it is imperative
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for commercial banks to maintain and sustain their attractiveness in the emerging business
marketplaces.
The corporate reputation is momentous also for the Islamic banking sector as these banks
are ensuring their actions as per teaching of Islam. The Islamic banks over Islamic teaching
are more worried about the corporate reputation as these banks are functioning the activities
within jurisdiction of Islamic principles (Shankar, Dash & Chakraborty, 2018). The Islamic
banks are thus more focused towards the caused and factors that lead to effective corporate
reputation. The fact is that the Islamic banks are ensuring their operational activities are per
the wins and wishes of the customers and adapt only those policies which are beneficial for
the development of both, the Islamic banks and stakeholders (Aramburu & Pescador, 2019).
Thus, Islamic banks are concerned with provision of quality services to make satisfied their
stakeholders and to maintain trust of stakeholders leading to higher reputation of the Islamic
banks.
2.5.4 Corporate Reputation in Banking Sector

The corporate reputation conception in banking sector has gained popularity during the past
decade and almost all the banks have shown their apprehension towards the effective image
of the banking sector which thus helps in building the corporate reputation. The corporate
reputation is significant phenomenon in context of banking industries and numerous banks
have adapting certain effective strategies in forming their corporate reputation (Roberts &
Dowling, 2002). The banks are most concerned with satisfaction of their customers thereby
considering the customers as vital source of development. The banks are trying to increase
benefits towards the stakeholders by reducing the costs and by increasing the incomes which
in turn helps concerned banks in increasing their customers (Wang, Lo & Hui, 2003). Thus,
corporate reputation is measured as major predictor towards development of the concerned
banks.
The banking industry has serious concerns about the corporate reputation and thus the banks
are ensuring their operational performances as per the directions and antecedents which are
vital for the corporate reputation. The banking sector is concerned with stakeholders’ wealth
wherein trust remains active elements in determining their mutual relationships (Scott &
Walsham, 2005). The stakeholders trust on concerned banks leads to higher and respectable
reputation of the concerned banks. The banks are more apprehensive about the implications
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of certain measures which are vital in determining bank performances as well as reputations
in the prolonged manners (Hillenbrand & Money, 2007). These trusts lead the stakeholders
towards undaunted loyalties towards the concerned banks which further acts as procedural
extents towards forming commitment level of concerned stakeholders towards concerned
banks.
The corporate reputation in banking sector is outcome of various determining factors like
the reputational crisis, bank status and reputational threats. The banking sector is concerned
with the capabilities of forming the risk management strategies with are vital for required
procedures and processes in dealing the stakeholders (Decker & Sale, 2009). The banks are
further showing efforts in examining the factors which are responsible for reputational crises
and implemented strategies which are imperative in managing the allied risks. The banking
sector is also responsible in bringing banks reputation at par to the required standards and
in this drive, the banking sector is more concerned with the provision of desired objectives
with stipulated framework (Gillet, Hübner & Plunus, 2010). The banks are thus significant
in managing risks and also in managing the crises through their effective planning and its
implementation.
The banking sector is also concerned with the availability of all those necessary measures
which are considered as the dynamic factors towards the success of the concerned banks as
well as corporate reputation for their future deeds. For financial intermediation, corporate
reputation performs the facilitating role in inspiring the investors to invest their capitals in
available investment breaks (Trotta, Dellâtti, Iannuzzi & Cavallaro, 2011). The corporate
reputation mediates towards customers’ satisfaction, trust and ultimate loyalty when their
needs are treated in priorities and when their desires are met accordingly. For the financial
equalities, trust and loyalty are considered as the major contributors towards the success of
the banks (Fiordelisi, Soana & Schwizer, 2013). The provision of the services without any
discrimination is an important attributing factor towards corporate reputation of concerned
banks.
The corporate reputation is considered as dynamic tool in managing customers’ preferences

thereby providing the accurate services to their customers. The customers’ loyalty in this
regard acts as mediator to determine economic vertical of concerned banks (Fiordelisi Soana
& Schwizer, 2014). The provision of superior services to the customers is considered as the
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significant aspect in the competitive advantage. The concerned bank is required to prioritize
their activities towards the facilitation of their customers. Similarly, the perceived values of
the customers are also important which needs further considerations on the part of the banks
(Famiyeh Kwarteng & Dadzie, 2016). The corporate reputation is also vital for several limits
on the part of the banks like strategic, economic, organizational, marketing, accounting and
sociological those which are vital in determining the corporate reputation of the concerned
banks.
The corporate reputation in banking sector is also vital for the stakeholders with regard to
the awareness, resources estimation, income estimation and potential increase in the future
incomes of the concerned banks. The corporate reputation is also helpful in managing the
decisions towards investment with positive outcomes (Stefano, Trotta & Demaria, 2017).
The corporate reputation is vital for investors in making their decisions towards the available
investment opportunities along with their potential outcomes. The corporate reputation of
the banking sector is vital for customers and stakeholders to interact with concerned banks
in prolonged manners so as to attain the better opportunities (Aramburu & Pescador, 2019).
For generating more and more wealth from the actions taken by the concerned banks in the
best interest of their own and in the best interests of their customers as well as the concerned
stakeholders.
2.5.5 Corporate Reputation in Islamic Banks

The corporate image, credibility and reputation are considered as dynamic gears towards
the survival and sustainable developments of the Islamic banks. There exist various practical
implications as associated with corporate reputation of Islamic banks which measured as
significances of these reputations (Metawa & Almossawi, 1998). The corporate reputation
helps in increasing the market values of Islamic banks since customers are interacting when
they have comprehensive analysis of contemporary markets and then decide best available
option to interact with them for investment opportunities (Fombrun, Gardberg & Sever,
2001). The corporate reputation has gained momentum in Islamic banks due to their long-
lasting effects of the performance and perceptions of their stakeholders to carefully select
best available options and to take the decisions thereby examining corporate reputations of
banks.
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In Islamic banking system, the corporate reputation is an important phenomenon which not
helps in increasing the norms and values of the concerned banks but also helps the customers
in attaining the long-term benefits from the services offered by the concerned banks (Fuente
& Puente, 2003). These banks are also required to put their emphasis more on the customers’
demands be keeping their needs on priorities to maintain trust and sustain their reputation
in the competitive markets (Brammer & Pavelin, 2006). With the emergence of the Islamic
banking system in comparison of traditional banking system (commercial & conventional),
there is an evident in the shift of customers’ perceptions from conventional banking system
towards Islamic banking due to overwhelming responsibilities that these banks are playing
in the best interest of the stakeholders as well as the societies to maintain their corporate
reputation.
The corporate reputation in Islamic financial system nurtures by using Islamic ideas towards
the business by offering finances as free-interest, encourages social prosperity and justice,
and strains social accountability in the business and commercial practices (Decker & Sale,
(2009). The Islamic banks are considered as the Islamic windows in the prevailing banking
system which gained their overwhelming place in the banking industries and which further
reveals the situation at par to the required level. The Islamic banking system is more visible
to the Islamic principles and teaching in their business operations as most of the customers
desires to interact with these banks in their best interests (Ahmad, Rehman, Saif & Safwan,
2010). The Islamic banks are apprehensive about perception of their stakeholders about their
business interactions and always need customers’ satisfaction and loyalty in sustaining their
reputations.
The Islamic banks have faced different challenges in maintaining their corporate reputation
as this reputation is consequence of various overwhelming responsibilities that these banks
are performing in maintaining their corporate image. In this connection, various challenges
and problems give the impression to prevent the Islamic banking the industry from realizing
its bursting prospective in fetching as a main player in financial markets globally (Amin, Isa
& Fontaine, 2013). The image of the Islamic banks matters a lot while attracting the new
customers and retaining existing customers as customers is main source for generating the
revenues and for sustaining corporate reputation of Islamic banks (Osman et al., 2015). The
Islamic banks are vital players in satisfying customers as these banks ensures all operational
93
undertakings as per sharia by offering products and services to maintain trust and loyalty of
customers.
The Islamic banks and corporate reputation are directly linked as the success of the Islamic
banks are contingent upon glowing reputation of these banks. The Islamic banking products
not only attracted the Muslims but the non-Muslims are also interacting with these banks in
doing their businesses (Famiyeh, Kwarteng & Dadzie, 2016). The trust of non-Muslims on
the Islamic banks is the evidence of the respectable reputation of Islamic banking system.
The reputation is bringing together certain well concerted measures towards the banks like
loyalties and the trust of customers on Islamic banks (Stefano, Trotta, Iannuzzi & Demaria,
2017). However, run-through of certain Islamic financial institutions has convinced statuses
players elongated shades of uncertainties on integrity of experimentation to the extent where
some Muslims commenced to take serious issues in trading their loyalties with financial
institutions.
The Islamic banks in this connection have certain challenges as Islamic banking sector has
not made hitherto any substantial influence on countries’ economies wherein, they operate
and the development of innovative economic structure that includes Islamic values of fair
play and equality in dealing financial matters (Shankar, Dash & Chakraborty, 2018). Thus,
the main theme behind the Islamic banking system is to maintain the trust of customers on
banks which is considered as the outcomes of various dynamic contributions of the Islamic
banks towards the welfare of their stakeholders and the general public in societies over
corporate social responsibility measures which are considered as vital tool in determining
the corporate reputations of concerned Islamic banks (Aramburu & Pescador, 2019). Thus,
to recognize corporate reputation, researchers presented different theories toward corporate
reputation.
2.5.6 Theories of Corporate Reputation

The researcher presented different models and theories from time to time to understand the
concept of corporate reputation more comprehensively (Davies & Miles, 1998). In this link,
various theories are available like resource-based theory, role theory, institutional theory,
game theory, transactional theory and signaling theory as presented by different researchers
in the different contexts (Balmer & Greyser, 2006). The researchers presented the corporate
reputation from package of theories which are vital in determining the significance of the
corporate reputation in the context of business and service industries that how it helps in
94
developing the corporate image of business organizations in the contemporary competitive
marketplaces (Agarwal, Osiyevskyy & Feldman, 2015). Consequently, the researchers also
presented some available and accessible theories to understand the concept of the corporate
reputation.
2.5.6.1 Resource-Based Reputation Theory

This theory was mainly focused on the allocation and implementation of resources in order
to maintain the reputation of concerned organizations. The effective utilization of available
resources in order to meet the demands of stakeholders in the main theme behind this theory
(Davies & Miles, 1998). The resources which are rare, valuable, non-substitutable and in-
imitable requires additional competencies from the organizations to manage the resources
efficiently and effectively which then provide the competitive advantages for the concerned
business organizations (Bartikowski, Walsh & Beatty, 2011). Thus, the resources and their
effective implementation serves as the key elements towards successful undertakings of the
business activities to maintain corporate image of the organization (Aramburu & Pescador,
2019). Thus, reputation is measured as valuable asset in measuring the profitability of the
organizations.
2.5.6.2 Game Theory

This theory was focused mainly on strategic analysis in dealing with competitive situations
wherein the reaction of the stakeholders has been considered critical element in determining
organizational actions (Balmer & Greyser, 2003). The information accuracy in marketplaces
and recurring activities with the probability to perceive previous behaviors were considered
as main underpinning elements towards the corporate reputation. The reputation has been
measured as the substitute for predicting the adversaries’ strategies for the future actions
(Bartikowski, Walsh & Beatty, 2011). This theory considered reputation as the game play
towards organizations actions and ultimate reaction of stakeholders (Shankar et al., 2018).
The organizations who are strategic in their policies and strategies are measured as effective
organizations in response to reputations in competitive markets in attracting stakeholders’
sensitivity.
2.5.6.3 Institutional Theory

The culture and environment of organizations were the main elements of this theory which
were focused to examine reputation of the organizations. The environment of organizations
95
is considered as strong predictor of overall organizational structure as well as the reputation
of concerned organization (Carter & Deephouse, 1999). The conception of the institutional
theory is the organizational processes and structures towards to obtain implication and attain
immovability in organizational activities which are bases for achieving desired objectives
efficiency and effectively (Buckley & Nixon, 2009). This effectiveness is thus vital for the
mission and reputation of the concerned organizations in order to meet the demands of the
stakeholders (Aramburu & Pescador, 2019). Likewise, to meet the vision and objectives of
the concerned organization to obtain the better consequences for both organization and the
stakeholders.
2.5.6.4 Signaling Theory

The signaling theory was focused on the information available and accessible to customers
and stakeholders should be complete and accurate on all respect in order to examine needs
of stakeholders (Gotsi & Wilson, 2001). The organizations are required to remain focused
on application of active communication strategies to obtain and share accurate information
which in turn not only help in building stakeholders trust but also help organizations in
building corporate image and reputation (Khattak & Rehman, 2010). This theory stressed
further that strategic corporate decisions acts like signals shared by concerned organizations
with their stakeholders to maintain their trust which thus help in nurturing their loyalties in
response towards the undaunted commitment with the concerned organization in prolonged
manners to attain desired objectives of both stakeholders and organization (Shankar et al.,
2018).
2.5.6.5 Role Theory

The role theory was focused more on the expectations, duties, rights, behaviors and norms
which are considered as the building block in nurturing the attitude of stakeholders towards
concerned organizations (Davies & Miles, 1998). The role theory is related with reputation
of the organizations on the multidimensional reputational grounds due to its overwhelming
role in meeting the expectations of stakeholders and organization concerned (Walker, 2010).
Consequently, the business organization might be able to hold multiple reputations due to
their critical role in meeting the demands of the stakeholders and the societies (Aramburu
& Pescador, 2019). The role theory also defined reputation as it is created over clarifications
of preceding behavioral forms and corporate reputation is argued also as possible instrument
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for standing agility of organizations in meeting the demands of the stakeholders in effective
manners.
2.5.6.6 Transaction Cost Economics

This theory proposed that attracting other organization those who have suitable reputation
also helps the organizations in sharing their norms and values as per the required standards
in meeting prerequisite demands (Balmer & Greyser, 2003). In this drive, this theory further
explained that trustworthy organization have less risk in sharing their information and in
attracting customers toward products and services. Likewise, interaction with highly reputed
organizations reduces the risk management as well as reducing the cost of governance
(Bartikowski, Walsh & Beatty, 2011). This theory explained that there exist certain driving
forces which acts as dynamic issues in nurturing the behavior of stakeholders in increasing
trust and loyalties towards particular organizations (Shankar et al., 2018). Thus, reputation
is helpful for organizations from different dimensions which are critical to examine more
comprehensively.
2.5.7 Dimensions of Corporate Reputation

The corporate reputation is the multi-dimensional construct which enfolds the diverse views
of different players who are directly and indirectly involved with concerned organizations
like customers, stakeholders, competitors and other organizations as well as organizations
(Davies & Miles, 1998). There are certain dynamic factors involved in forming reputations
which have direct influence on stakeholders’ abilities making their decisions that whether
to leave or to remain the part of the concerned organizations. In this connection, customers’
perception matters lot while taking the decisions for interacting with particular organization
due to their experiences with concerned organizations (Nguyen & Leblanc, 2001). These
perceptions make them loyal and committed with concerned organizations when they have
positive experience due to their persistent interactions and fair treatments from respective
organizations.
The reputation management is also the critical part of the corporate reputation as it requires
the organization in managing their corporate responsibilities towards the stakeholders and
the societies in maintaining the trust of stakeholders. This management requires additional
competencies from management of concerned organizations in order to meet the demands
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of the stakeholders and to meet the requirements of the concerned organizations (Roberts &
Dowling, 2002). Thus, the good reputation is considered as the sources for the competitive
lead and the goodwill of the concerned organization. The economic situations are also the
critical dimension for the corporate reputation as it acts as significant tool during economic
change to maintain the corporate image reputation of organizations (Brammer & Pavelin,
2004). Thus, strategic approaches are also supportive for corporate reputation of concerned
organizations.
The corporate reputation is also considered as the intangible asset which helps in creating
the values for the organizations through different economic approaches. It is also helpful in
implementing marketing strategies to maintain viable position in contemporary markets
(Brammer & Pavelin, 2006). The corporate reputation is sympathetic component towards
the organizational undertakings in prolonged manner so as to provide prerequisite facilities
to the stakeholders to make them loyal towards the concerned organizations. Similarly, the
effective communication is also considered as the significant source for the implementation
of effective strategies focusing upon the development of corporate reputation (Hillenbrand
& Money, 2007). In this connection, the corporate reputation as per the organization theory
is the main concern for the organizations in order to meet expectations of stakeholders and
societies.
The corporate reputation is also formed through the active participation in social activities
thereby proving social benefits to the individuals in the societies. The reputation is formed
due to the contributions towards the environmental development by concerned organization
to contribute their roles in environmental protection by considering environment from each
dimension (Buckley & Nixon, 2009). Similarly, from customers’ perspectives, corporate
image and reputation in formed when customers’ have positive perception about concerned
organizations thereby recommending the same organizations to their families and relatives.
The customers are considered as main sources for revenue generation as well as devolving
corporate reputations of the organization (Krueger, Wrolstad & Dalsem, 2010). Thus, the
constructive behavior of customers towards the organization is inspirational in building the
reputation.
The corporate reputation from the stakeholders’ dimension is critical due to overwhelming
role these stakeholders in interacting with the concerned organizations. The corporate image
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and reputation are built through the effective interactions with the stakeholders in meeting
their genuine demands and in providing those services in letters and spirit which are being
offered to stakeholders (Fiordelisi, Soana & Schwizer, 2013). The corporate reputation is
thus outcome of positive interaction between the stakeholders and concerned organizations.
The role of competitors is also critical in determining corporate reputation of the concerned
organizations as customer decisions after market analysis is directly related with goodwill
as well as corporate reputation of the concerned organization (Zhu, Sun & Leung, 2014). It
is vital for organization to focus on competitors while developing and realizing corporate
strategies.
The organizational perspective is critical for corporate reputation as this enables concerned
organizations to focus on other organizations with regard to their strengths and weaknesses
which thus help them in framing their policies and strategies (Forcadell & Aracil, 2017).
For this drive, each and every organization has keen interests on what is being offered by
other organizations in order to maintain their competitiveness in competitive environments.
The organizations in this connection are more responsible in their undertaking towards the
other organizations and stakeholders while implementing strategic approaches (Aramburu
& Pescador, 2019). The Islamic banks are also effective players on focusing the competitive
markets by offering those products and services which are outcomes of the market analysis
thereby analyzing the strengths of competitors and customers to compete banking industry
effectively.
2.6 Customers Trust

Trust is used as predicting as well as criterion variable in different research studies however,
in current study, trust is used as mediating variable. Trust is well-defined as the expectations
of individuals towards positive outcomes due to certain transaction based upon the probable
actions between individuals (Morgan & Hunt, 1994). The customers trust is the key factor
which is responsible for success of organizations. Trust is the confidence of the individuals
on the organizational processes and products and services provided by organizations. The
literature reveals that trust is the transaction of integrity and credibility of individuals over
some products offered by organizations (Chaudhuri & Holbrook, 2001). The responsibility,
experience and honesty are the foremost attributes of trust which the customers expects from
organizations wherein they are interacting in order to meet their expectations effectively and
efficiently.
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The customers trust is dynamic factor which helps organization over different dimensions
in order to increase the viability and trustworthiness in competitive markets. It is the only
dynamic issue which helps in shaping the attitude and behavior of the customers as well as
enhancing the loyalties of the stakeholders towards concerned organizations (Sirdeshmukh,
Singh & Sabol, 2002). The trust of customers is outcome of various dynamic considerations
of the organization in facilitating the needs and desired of concerned customers which in
turn helps the concerned organizations in increasing their trustworthiness in societies (Harris
& Goode, 2004). The organizations are further developing the consensus of customers by
offering them qualities in their products and services to make them committed towards the
organizations which can be augmented from various aspects to bring success in professional
markets.
The customers trust is also vital for the organizations in nurturing the behavior towards the
particular objects that the concerned organizations are offering through different packages
to attract the individuals to become the part of the organizations. The organization attracts
the individuals in societies through these offerings which them helps in producing more
stakeholders for their operational businesses (Ennew & Sekhon, 2007). This is main reason
why the organizations and the stakeholders are relying upon the phenomenon of trust. These
organizations are required to put stakeholder interests on priorities to serve them effectively
and to inspire them to remain committed and loyal with organizations (Swaen & Chumpitaz,
2008). The trust is also considered as the willingness of the stakeholders to have confidence
on products and services offered to them by organizations so as to maintain their sustainable
credibility.
The customers trust is the expectation and drives of the stakeholders which they need to be
fulfilled precisely through certain transactions/exchanges in the businesses by ensuring the
required principles of dependence. This dependence encourages the beliefs of concerned
stakeholders towards effective and efficient management of resources to ensure conviction
in their operations (Decker & Sale, 2009). Trust is abilities of organization to manage their
activities as per desires of their stakeholders to ensure fair and transparent exchanges in their
persistent interactions with customers. These transactions help in imprinting the experiences
of the customers towards the concerned organization through risk management strategies
effectively (Jiménez, Shannon, Shainesh & Komor, 2010). Thus, constructive experiences
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of the customers are helpful in maintaining the trust of the stakeholders over the concerned
organization.
The customers trust is thus vital for all the organizations however; its effective role is more
phenomenal in the context of banking sector. The banks are more overwhelmed with trust
as these organizations are dealing with the wealth of the customers and customer deals only
with organizations who are effective in their submissions (Ercis, Unal, Candan & Yildirim,
H. (2012). Thus, trust is expectancy of restraints and parameters with explicit circumstances
that are necessary for the organizations to encourage their business operation in effective
manners. Similarly, in the banking context, trust is the level of expectancies which is the
outcomes of positive consequences that customer receives in shape of different undertakings
on part of concerned organizations/banks (Jan & Abdullah, 2014). The positive interactions
of banking sector with the stakeholders in key miracle with helps in augmenting level of
trust.
The customer trust in banking sector requires some extraordinary efforts from the concerned
banks due to their undertakings towards the economic proportions of customers. This trust
level is also vital for the Islamic banks as the customers have certain beliefs that they would
be share out as per the teaching and principles of sharia (Yadav & Singh, 2016). Therefore,
maintaining the trust of customers is challenging for Islamic banks due to their expectations
from the sharia rules and principles. In Islamic banking context, trust is the consequence of
various dynamic issues like the satisfaction, service quality, loyalties, commitment, and trust
values that are associated with the services and products offered by Islamic banks (Haroon
& Qureshi, 2019). The services quality is the vital factor which helps in nurturing optimistic
behavior of the customers in their interactions with concerned Islamic banks in prolonged
manners.
2.6.1 Conceptual Background of Trust

The trust has a long-lasting history which can be traced back in the ancient times when the
people in societies depositing their previous things in the custody of these individuals who
have tendencies to look after their deposited goods with certain conditions. Then the trust
has been gradually developed and now around the world, all the businesses are taking places
with the phenomenon of trust (Singh & Sirdeshmukh, 2000). Trust is the most significant
tool in determining the consensus of individuals about certain things like other individuals,
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businesses and organizations. Thus, trust has been developed as significant attribute for the
businesses to survive in current competitive environment (Ballester & Aleman, 2001). It is
the trust which enable individual and organization to interact with each other for their own
interests and its contentment as per desired aimed leads to higher level of loyalties towards
organizations.
The trust has been considered as the significant element towards the customers’ satisfaction
and loyalty as the trust is nurtured over some experiences which the individual feels while
interacting in the business environments. The trust is measured as individual feature, a part
of relationship and economic and social exchange phenomenon (Bouckaert & Walle, 2003).
Therefore, trust is the main concern for the individuals and for the societies to survive and
develop in contemporary complex situations. Thus, trust is effective feature and components
of the contemporary businesses as without trust, organizations might not the able to achieve
their desired status and standing (Flavian, Guinaliu & Torres, 2005). Thus, there are certain
factors which can affect the trust of the individuals and the stakeholders positively as well
as negatively. However, optimistic construct is contingent upon mutual agreement of the
parties.
The trust is considered as the significant predictor towards the development of the business
organizations as it is the trust which makes the behavior of the individuals towards particular
organization with regard to their products and services those which are vital in determining
their main concerns (Zboja & Voorhees, 2006). It is thus responsibility of organizations to
take care of the basic needs of the stakeholders while in turn, it is also the responsibility of
stakeholders to take care the norms and values of concerned organization. Therefore, trust
can be maintained through mutual interaction between the stakeholders and organizations
(Swaen & Chumpitaz, 2008). Trust at the individual level is related with emotional strength
towards an object behind which an entity is operational as it is considered as readiness and
willingness of individuals to interact with other individuals and entities for their desired
interests.
The trust is the individuals’ enthusiasm towards certain expectations and possibility that is
reciprocated with certain dependencies that needs the concentration and consideration from
the parties involved in transactions. This transaction thus needs some challenging aspects to
overwhelm the situation to maintain the trust and to continue in long-term sustainability
(Castaldo, Perrini, Misani & Tencati, 2009). The trust is nurtured over fair and constructing
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interactions amid customers and organizations. Thus, trust is depending upon interactional
relationships between the stakeholders and businesses for their own benefits which are allied
with the situations wherein they are interacting (Ercis, Unal, Candan & Yildirim, 2012). The
trust is thus related with expectation and beliefs of individuals towards products as presented
by organizations in order to attract customers and to share their mutual interests over certain
transactions.
The trust is considered as the sociological feature instead of psychological as trust is firstly
related with the mutual interaction in the societies and then the psychological aspect comes
when the individuals desired to fulfill their psychological needs. Therefore, trust is vital for
all the organizations but it vitality is foremost for the banking sector due to their critical role
in meeting the economic demands of the individuals (Rasheed & Abadi, 2014). The banking
sector is ensuring their all the transactional activities on mutual agreement of stakeholders
and the concerned banks. Thus, banking sector stakeholders needs additional opportunities
for trust as these banks are mostly functional on phenomenon of trust (Bögel & Hall, 2016).
The trust is significant contributors towards the development and standing of banking sector
as trust is vital part of banking system as all operational activities are performed over mutual
trust.
The trust is the confidence of the customers on the banking activities as without trust the
customers might not be ready to interact with concerned banks in their economic and capital
sharing (Shankar, Dash & Chakraborty, 2018). The same is the situation in the context of
Islamic banking system wherein the individuals interact with Islamic banks as these banks
are operating on principles and teachings of Islam and where Islamic teachings are strongly
focused on concept of trust. Thus, trust is the most significant attribute of Islamic banking
system. Thus, trust is strongly ensured by Islamic banks in their interaction with customers
as without trust the stakeholders might not be interacted with the concerned banks (Haroon
& Qureshi, 2019). Thus, banks are operating their businesses activities with the stakeholder
on the mutual trust of both the stakeholders and the Islamic banks in attaining their desired
demands.
2.6.2 Importance of Customers Trust

The fair and positive interaction between the customers and organizations are vital so as to
retain them and to sustain their trust on each other. The strong relationship is thus critical
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factor for the promotion of trust and to maintain the trustworthiness in business community
and to sustain long-lasting relationships (Morgan & Hunt, 1994). The organizations, in this
connection, are required to provide the better services and product to sustain the positive
relationships and to sustain the undaunted commitment towards each other. The trust is thus
active component in businesses to maintain their competitiveness and to grip situation on
attracting customers towards presented opportunities (Chaudhuri & Holbrook, 2001). Also,
trust is nurtured through positive experiences of customers and organizations in conducting
their interacting undertakings to maintain affiliations in the prolonged manners in business
environment.
The importance of trust can be better understood over the persistent interaction of customers
with the concerned organizations. Although, in the business markets, there exists numerous
competitors who are attending the different products and services however, the customers’
interactions towards particular organizations is the outcomes of trust (Sirdeshmukh, Singh
& Sabol, 2002). The trust is also the significant predictor for the long-term sustainability of
the constructing relationships in between customers and organizations. Therefore, treating
the customers and helping the customers are the important features for the organizations to
focus on the reliable affiliations and interactions (Bouckaert & Walle, 2003). The literature
shows that trust is the main parameter in determining success of organizations as without
trust, organizations might not be able to compete businesses and sustain their standings in
markets.
The organizations are required to augment the customers’ trust level which requires certain
overwhelming responsibilities from the organizations to perform and to survive in business
environment (Flavian, Guinaliu & Torres, 2005). Thus, keeping brands promises and values
at par to the required standards as well as maintaining the corporate image and reparations,
the organizations are required to put their emphasis more on trust level to retain the existing
stakeholders and to attract new customers towards their businesses. To gain customer trust,
it depends upon additional care for constructing respectable relationships with the customers
so as to maintain the competitive lead in the competitive markets (Swaen & Chumpitaz,
2008). In modern businesses, almost all the organizations are offering different packages to
attract the customers and to please their demands to maintain their loyalties towards the
organizations.
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The customers trust is important for the survival of the businesses as once the organization
pause the trust level in their interactions thus it will be difficult for them to reconstruct the
commitment and enthusiasm of the concerned customers (Decker & Sale, 2009). Therefore,
trust is the main theme behind the success of each organization to perform their endeavoring
undertakings in most competitive situations and to maintain their positions in the business
communities. It becomes the challenging task for organizations to examine the factors which
are responsible in maintaining trust and to sustain their strong position in viable situations
(Jiménez, Shannon, Shainesh & Komor, 2010). The promise is the main concern when an
organization reassure customers with certain qualities and failed to produce these qualities
in actual then these situations leads organizations towards the undesirable situation in the
markets.
The responsiveness of the organizations towards customers is also considered as the vital in
maintaining the trust of the customers as organizations response towards customers’ needs
and wants is important aspect that helps customers in increasing their trust and maintaining
their loyalties (Choi & La, 2013). This concept is also vital for the banking industry as these
banks are offering their services through trust and also these trustworthy situations are the
outcome of the certain quality measures that the concerned organizations are ensuring in the
best and utmost priorities of their customers (Saleem & Gopinath, 2015). Consequently, the
businesses need the honest customers while the customers need the honest entities/banks to
interact with each other and to fulfill their desired demands. Thus, trust is important for the
banking sector in order to sustain their competitiveness in banking industries due to existing
competition.
The banks are also responsible for maintaining the trust thereby considering the customers
trust as the top most priorities. The trust is the only phenomenon which helps the banks in
expanding their activities and gaining their customers in the prolonged manners so as to grip
the situations as per the desired standards (Raza, Bhutta, Iqbal & Faraz, 2018). The same is
the challenge for the Islamic banks as these banks gradually becomes the leading industry
in financial markets due to their offering and due to strong reputations in economic sharing.
Islamic banks are required to preserve innovation and to improve experiences of customers
to grow customers trust (Haroon & Qureshi, 2019). The agreement towards the customers’
expectations success is foremost responsibility of Islamic banks which these banks desires
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to continue without any interruption in meeting their expectations and in maintaining their
trust.
2.6.3 Competitive Advantages of Customers Trust

The trust has certain advantages for the organization in the competitive situation wherein
each organization is trying to show their efforts in increasing the loyalties of their customers
leading to higher level of business interactions. The organizations are further focusing on
how to increase the number of customers and this might be possible only when concerned
organization prioritize the customers’ values at the first glance and then set their trends for
the desired incomes (Kennedy, Ferrell & Leclair, 2001). Thus, customers trust is the most
advantageous phenomenon for the organization to sustain their businesses in the competitive
environments where lot of competitors are offer and ensure same responsivities (Bouckaert
& Walle, 2003). The customers trust brings along well concerted and restrained advantages
for organization to continue business activities and to sustain competitiveness in sustainable
markets.
The customers trust is advantageous for the organizations as these organizations are mainly
focused on the customers’ values by considering the customers as the foremost sources for
the revenue and income generations. The trust is also benefited organization from different
dimensions to expand their business activities in achieving desired standing and ranking
(Zboja & Voorhees, 2006). The organizations are required to provide kind environment to
their customers by facilitating them towards the better undertakings in their operations to
interact with customers. The customer has certain interests in interactions with concerned
organization and thus have certain expectation in attaining their demands (Matzler, Kräuter
& Bidmon, 2008). In turn, the organization in bound to show their potential and commitment
to maintain their trust and loyalty and to sustain their competitive position in the competitive
environment.
The customers are also direly concerned with their priorities while interacting with the said
business entities as these entities have certain desired to interact with particular firms and
businesses from their own securities. The organization can benefit through trust by availing
investment prospects as higher customers, greater will be chances for increase in revenue
generations (Vlachos, Tsamakos, Vrechopoulos & Avramidis, 2009). The organizations can
be benefited from trust due to fair interactions with customers thereby sharing actual picture
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of products and services that these organizations are offering to customers in exchange of
financial transactions (Jiménez, Shannon, Shainesh & Komor, 2010). These transactions
require mutual trust from both parties as these exchanges brings along certain overwhelming
trends for both the customers and organizations to sustain their confidence in their business
activities.
The trust, on the part of organization, can also be increased with the adaptation of new tools
related with the technological changes to adapt certain well concerted measures in order to
attain the customers’ demands (Amin, Isa & Fontaine, 2013). Similarly, the trust is vital for
the credibility of the business organizations as offering and producing the reliable products
and services are the foremost responsibility of concerned organizations to develop the trust
and to maintain the loyalties of the customers. These are main benefits that the organizations
attain from the effective management of the trust and from the efficient availability of the
desired services (Hartmann, Klink & Simons, 2015). The trust is beneficial for organizations
in conducting their businesses at regional, national as well as at the international platforms.
Thus, trust is main factor that increase sureness and satisfaction of customers in competitive
environments.
The trust, on the part of customers, is significant due to its critical role in shaping the attitude
and behavior of the customers towards particular brands as well as particular organization.
The trustworthy business organizations are expected to expand their businesses, attracting
new customers and retaining the existing customers by ensuring what they are offering and
what they are actually delivers to their customers (Yadav & Singh, 2016). The trust is thus
act as the critical element in the context of banking industry as these banks needs customers
trust in effective manners to attain desired credibility. In creating customer values, trust acts
as an intermediary in the connecting the customers and the organizations (Shankar, Dash &
Chakraborty, 2018). The trust is thus most precious asset of the organizations which requires
additional competencies from organization to survive and develop services in the prolonged
manners.
The trust in banking sector is imperative due to their dealings with the financial matters as
the customers trust on the banking services is critical in expanding the banking services by
generalizing the outcomes towards whole communities (Afridi, Gul & Haider, 2018). The
trust is also considered as the significant parameter in gauging the credibility of the banks
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and this role is more imperative in context of Islamic banking system. The Islamic banks
are direly needed to overcome the economic situation by offering the better services to their
customers in order to ensure Islamic principles and teachings in their interactions with the
customers (Haroon & Qureshi, 2019). The customers trust is critical for Islamic banks as
trustworthy customers is best source for attracting the new customers towards the concerned
organizations. Thus, trust and its maintenance is the most effective tool in context of banking
sector.
2.6.4 Customers Trust in Banking Sector

The banking sector is more exposed to the phenomenon of trust as around the world, the
banks are operating their activities on the mutual trust between the customers and the banks.
The banking activities are related with the provision of quality services and goods to their
customers in the way as the customers’ desires (Beckett & Hewer, 2000). The banks are the
foremost financial entities and their operational activities needs the additional competencies
from the banks to obtain the desired reputation through increased loyalties. The banking
system is more concerned with the provision of different services related with financial
perspectives as the economic touch is essential in all the banking activities (McKnight &
Chervany, 2002). Thus, reliability and trust are key gears of banking activities and all banks
are focused on ensuring main concerns in effective manners to maintain trustworthiness in
markets.
The banking sector has confronted different challenges due to increased economic changes
and in this scenario, it becomes difficult for them to maintain customer trust. The customers’
needs the potential care from the banks as these banks are mainly dealing with the economic
wealth of the customers which requires additional care from the concerned banks (Khattak
& Rehman, 2003). The banking sector is reliable in maintaining the trust due to the increased
and overwhelming competition in the banking sector. The banks, around world, are mainly
functioning thought the trust as it is confidence of concerned banks in interacting with the
banks to attain their desired aims (Flavian, Guinalíu & Torres, 2005). The trust is also the
confidence of the customers to attract with the particular bank in order to provide them their
deposits to obtained certain additional benefits from deposited wealth in modern complexed
situation.
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The banking system is continuously working on the development of the banking activities
and introduced the various packages to attract the customers. The banks are also effective
in managing their financial activities as per the wins and wished of the customers and in this
connection, numerous banks are effective in managing situations (Ennew & Sekhon, 2007).
In this drive, during initiation and adaptation of certain strategies in the complex situations
in businesses environment, it is beneficial for banks to develop consensus of their customers
in which the trust plays an important role in shaping the attitude of customers towards the
particular brands and organization (Decker & Sale, 2009). The banking sector is therefore
responsible for their activities and in managing the financial constraints due to the increased
competition in the banking sector to maintain customers trust and to increase credibility and
success.
The customers while depositing their capitals with the banks are always anxious about their
wealth and have certain concerns those which are allied with their desired aims to interact
with particular bank in meeting their desired demands (Amin, Isa & Fontaine, 2013). The
banks are also required to put their emphasis on fulfilling the demands of the customer as
desired due to the fact that dealings with the customers’ wealth needs strategic approaches
from customers so as to maintain trustworthiness of customers. These strategic approached
creates the balance between the customers’ demands and the banks performance in meeting
these demands (Fatima & Razzaque, 2014). In this scenario, it is the foremost responsibility
of the concerned banks to maintain the trust level of customers and sustaining their needed
as per their demands. Thus, trust is effective tool in increasing the customer satisfaction and
loyalty.
The trust is significant predictor towards the bank performance as higher the trust level, then
greater with the responsibility of the concerned banks to maintain the trust. Similarly, the
trust is also vital in determining the credibility of the banks as these trust maintenance needs
extra care and abilities from the concerned banks (Ashraf, Robson & Sekhon, 2015). The
literature revealed that the banking sector is more exposed to the nurturing and maintaining
the trust as these banks are most operating and functioning to expand the economic values
of the customers’ wealth which is further aggravated by the phenomenon of trust (Bögel &
Hall, 2016). Likewise, due to technological revolution, the banking sector is also responsible
in managing their economic affairs more effectively in managing demands of the customers
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and in satisfying their needs in which trust acts as facilitator to effectively manage economic
activities.
The trust in banking sector is more concerned to the needs of different groups of individuals
those who are directly or indirectly involved in banking operational activities. These banks
are more anxious in maintaining their corporate reputation and in this drive the trust is the
main concern and leading factor in maintaining corporate image and reputation of banking
sector (Tabrani, Amin & Nizam, 2018). Similarly, effective implementation of the corporate
social responsibility measures is also critical factor in maintaining the trust and corporate
reputations leading to higher loyalties. These loyalties are thus helpful in achieving the main
standing of banking sector in competitive situations (Haroon & Qureshi, 2019). The banking
sector is also responsible in managing the queries from customers by initiating the customers
care services for the better understanding towards the preservation of customers trust and
loyalty.
2.6.5 Customers Trust in Islamic Banking

The Islamic banking system has gradually developed as challenging sector for conventional
banking system as most of customers show increasing trends in turning from conventional
naming system to Islamic banking system. These trends overwhelmed the situations for the
conventional banking system to continue and develop their banking activities (Chaudhuri &
Holbrook, 2001). The Islamic banking sector, due to effective management of the customer
wealth from the principles and teachings of Islam in maintaining the customers’ confidence
and trust in attracting with the Islamic banks (Thurau, Gwinner & Gremler, 2002). Islamic
banking system is considered as dynamic segment of economic system and established as
the sector wherein traditional marketing rules of banking sector may not need the strategic
application due to fact that banks are functioning activities as per Islamic principles and
teachings.
The Islamic banks are more responsive towards the customers trust with the notion that in
Islamic practices, when the individuals want to invest in the business undertaking then these
individuals are required to show their willingness to share their profit and income in relation
to invested opportunities (Mukherjee & Nath, 2003). The Islamic banking system is further
exposed to the provision of quality services and goods to customers which needs additional
abilities from the banking sector to increase the awareness of the customers towards Islamic
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banks. The Islamic banks are required to examine the critical dimensions that are necessary
for proving different edges to the customers in order to maintain the competitive advantages
in the competitive environments (Martín, Gutierrez & Camarero, 2004). The customers are
required to adapt certain strategies which are critical in determining banks reputation and
ranking.
The banking sector and the customer trust are interacting mutually as customers’ satisfaction
is the foremost responsibility of the Islamic banking sector in order to maintain the trust of
customers and maintain loyalties in prolonged manners (Flavián, Guinaliu & Torres, 2005).
The customers are also the critical asset of the Islamic banking sector as most the operational
activities of banks are related with customers’ satisfaction leading to undaunted loyalties.
The Islamic banks placed the trust at utmost priority and considered that being an obligatory
and trustworthy entities that Islamic banks have certain predetermined liabilities towards
customers by considering their personality trait (Kassim & Abdulla, 2006). Thus, the trust
remained the phenomenon of interest for Islamic banks by keeping in view confidence as
and esteem of customers towards their interactions with the Islamic banks in the prolonged
manners.
The trust is also considered as the significant attribute towards the operational activities of
the Islamic banks as these banks perform all their activities by ensuring Islamic principles
in dealings with customers. The customer trust is the sign towards customers’ loyalty and
customers’ loyalty is the sign for corporate reputation of Islamic banks (Amin & Isa, 2008).
Thus, customers trust is foremost predictor towards the success of the Islamic banks in
modern competitive environments. Consequently, the basis of philosophical dimensions of
the trust in Islamic banks is concerned as symbol of honesty, trustworthiness, equality and
equities among the individuals along with the ethical values which are recognized to develop
the relationship between the customers and the Islamic banks (Cho & Hu, 2009). Therefore,
the Islamic banks are mainly operating through these dimensions which are vital in nurturing
trust.
The Islamic banks are significant contributors towards the economic development and this
task can be better attained through application of trust in performing the required operational
activities (Kayed & Hassan, 2011). The trust is the leading factors that nurtures the attitude
of the individuals towards the particular objects and entities and inspire them to interact with
these entities in prolonged manners when customers believes that their demands are fulfilled
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by banks in the most sophisticated manners (Amin, Isa & Fontaine, 2013). Islamic banks
ensure all activities as per direction, compliance and ethics with Islamic lessons are regarded
exceedingly and persistently activated as main pillars in administrating banking activities
based upon the phenomenon of trust (Ashraf, Robson & Sekhon, 2015). Thus, trust acts as
man pillar of Islamic banking activities thereby facilitating the customers towards banking
operations.
The Islamic banking system is also effective in managing the trust of the customers as these
banks are functioning their main activities through confidence, honesty, trustworthiness and
integrity thereby ensuring all the functions as per the teaching of sharia (Amin, Rahman,
Razak & Rizal, 2017). The Islamic banks are also considered as the socio-religious entities
which is measured as sole distinctive feature of Islamic bank with the resilient fascination
for community and customers in connection to financial services (Haroon & Qureshi, 2019).
These tasks reinforce Islamic banks role where Islamic banks become entities of transitional
sponsoring to businesses and further helps in facilitating to show their efforts to rise the
wellbeing of societies through informal economies by supporting the needs on deserving
individuals so as to maintain corporate image and reputation of Islamic banks in competitive
situation.
2.6.6 Theories of Customers Trust

The customers trust has gradually become leading phenomenon is expanding the businesses
thereby reshaping the attitude and behavior of the customers towards the particular goods
and services offered by organizations (Morgan & Hunt, 1994). Thus, diverse researchers
proposed diverse model and frameworks behind which certain theories are functional with
the aim to better understand the phenomenon of trust in competitive environments (Eckel &
Wilson, 2004). Different researchers proposed different theories to examine the traits and
features of trust more comprehensively (Olekalns & Smith, 2009). These theories mainly
focus the development of trust, causes of declining trust and main parameters which helps
in determining augmented trust in different contexts (Chuan, Mai, Tsai & Dai, 2018). Thus,
some of leading theories are presented in this study to understand customers’ trust in broader
protocols.
2.6.6.1 Commitment Trust Theory

The commitment trust theory was established by researchers with respect to the marketing
relationship highlighted two important and dynamics issues likewise commitment and trust
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with the interpretation that these two parameters are critical in determining the relationships
between the customers and businesses (Shapiro & Kessler, 2000). This theory was focused
on formation of bonds with stakeholders in meeting demands and veneration commitments
instead of pursuing short-term incomes to interact with the customers in prolonged manners
(Cho & Park, 2011). As the result, the customers trust gets developed which further leads to
shared loyalties that benefits both the parties (customers & business) in fulfilling needs and
wants (Chuan, Mai, Tsai & Dai, 2018). The commitment and loyalty are considered as
outcomes of effective and undaunted trust leading to better understanding among both the
parties.
2.6.6.2 Trust-Based Marketing Theory

The trust-based marketing theory was later on introduced by the researchers focusing upon
the main dimensions of trust. This theory suggests that all the functions of the businesses
should be aligned with the needs and requirements of the customers in production as well
as distribution of goods to maintain trust of customers (Shore, Newton & Thornton, 1990).
This theory established ideas that businesses are required to adapt certain strategies which
are honest and open when interacting with customers over certain exchanges (Cropanzano
& Mitchell, 2005). The originators of this theory further urged that the businesses need to
inspires honest procedures thereby disseminating unbiased practices in mutual interactions
with customers (Chuan, Mai, Tsai & Dai, 2018). The customers are valued over reward,
sincerity and validity in offering goods and services which is likely to lead toward higher
responsibility.
2.6.6.3 Inducement-Contribution Theory

The initiators and followers of inducement contribution theory recommend that trust is the
outcome of the social and economic exchange over viable channels leading to higher level
of moralities and contribution on the part of businesses towards customers (Shore, Tetrick
& Lynch, 2006). This theory mention that trust is social phenomenon which promotes the
positive relationships, create encouraging arbitrating situations for negotiation, easing the
costs of transactions in between customers and business and ensures the conflict resolutions
whenever happens (Jia, Shaw, Tsui & Park, 2014). The trust, at organizational level, it is an
operational interpreter towards workforces’ positive behaviors like OCB, employee loyalty
and commitment towards concerned organization (Chuan, Mai, Tsai & Dai, 2018). These
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are the main parameters which determines the trust and loyalty of the customers towards the
businesses.
2.6.6.4 Social Exchange Theory

The social exchange theory denotes that trust is functioning like a nucleus around all the
activities that the businesses carries out in meeting demands of the individuals in societies
(Settoon, Bennett & Liden, 1996). The trust helps in developing behaviors of the individuals
toward particular object to interact with them through certain exchanges that are conditional
in their mutual interactions. Trust is measured as the mutual interaction between business
and customers in order to facilitate themselves in meeting specific demands (Molm, Collett
& Schaefer, 2007). The trust as per the theory is a prodigious feature of businesses to attract
the customers to engage themselves in transactions that are prerequisites for the successful
interactions (Chuan et al., 2018). Thus, trust is the main facet on the part of customers and
organizations in order to survive in the business community to obtain desired reputation and
standing.
2.6.6.5 Sociological Theory

The trust has been broadly recognized as the psychological characteristic of the individuals
however, the researcher later on affirmed the trust as the sociological feature of individuals
(Robinson, 1996). This theory suggests the trust as task of uncertain activities on the self-
assured expectations wherein individuals involved in certain activities should be responsible
and enthusiastic. This theory further explained that trust is the coherent excellent perception
that bargains the influential features with regard to an understanding towards trust as well
as its implications (Shapiro & Kessler, 2000. The decisions of customer matter a lot while
counting their social needs which is also related with the psychological dimensions (Chuan
et al., 2018). Trust is related with internal values system of individuals about certain objects
wherein individuals are required to pick and choose the best available option for their need
fulfillment.
2.6.7 Dimensions of Customers Trust

The trust has been explored from different measurements by researchers from organizational
behavior domain and came to the conclusion that trust is the significant contributors towards
various organizational outcome variables like the organizational commit, customer loyalty,
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organizational citizenship behavior, corporate reputation and organizational performance
(Morgan & Hunt, 1994). Trust has been widely recognized as major variable in connecting
the various consequential variables. The main dimensions of the trust which are recognized
by the researcher are the integrity, honesty, consistencies, reliabilities and loyalties which
are measured as the significant contributors on part of trust (Singh & Sirdeshmukh, 2000).
The trust is thus considered as the foremost element towards the customers’ satisfaction and
loyalties by suggesting that it is the trust facilitates individuals in societies towards decision
making.
The trust is measured through integrity that whether the customers and organizations are
ethical and honest to each other or otherwise. Thus, integrity and honesty are the foremost
dimensions of trust as without integrity, trust is useless (Sirdeshmukh Singh & Sabol, 2002).
When the organizations are unable to provide the accuracies in their offering then it becomes
problematic for them to maintain the trust and to sustain the loyalty of customers. Similarly,
when integrity is missed on the part of customers then it becomes difficult for organization
to deal with such customers. Thus, honesty and integrity are measures as the critical success
factors for higher level of trust (Harris & Goode, 2004). The organizations are direly needed
to comprehend the situation through honesty and this role is direly needed on the part of
Islamic banks as these banks are functional due to the teaching wherein the integrity is most
prioritized.
The trust is measured also through competence as when the organizations are offering some
facilities to their customers them it becomes their responsibility and capability to ensure the
desired facility as these measured thus helps concerned customers in increasing their trust
level leading to higher loyalties (Zboja & Voorhees, 2006). The capabilities of organizations
matter when there is certain promising featured are associated with the mutual agreements
between the customers and the organizations. Thus, the abilities of organizations to maintain
their trust in the business community is vital phenomenon with regard to the expansions and
success of the businesses in competitive environments (Swaen & Chumpitaz, 2008). These
capabilities are thus helpful for the organizations in managing the uncertain situations and
catering desired situation thereby fulfilling customers’ demands though their overwhelming
capabilities.
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The trust is also measured through the reliability dimensions as when the organizations are
succeeding in providing the reliable goods and services then it ultimately leads to the higher
level of trust and loyalties on the part of customers and organizations (Decker & Sale, 2009).
Therefore, the trust is dependable upon the reliabilities and these are further dependent upon
the ability of organizations to cater the situations. The reliability is mostly concerned with
the support, resources and direction to nurture the abilities of the organizations to meet the
demands of customers (Ercis, Unal, Candan & Yildirim, 2012). The customers are mostly
concerned with reliabilities in offered goods and services which thus nurture experiences
towards the trustworthiness of organization with whom these customers are continuously
interacting so as to meet their demands thereby obtaining reliable goods and services from
organizations.
The customers trust is measured through the concerns of the customers toward the particular
products that the organizations are offering in order to meet the demands of the customers
(Jan & Abdullah, 2014). The organizations are mostly concerned with the wellbeing of the
individuals in societies and stakeholders over genuine concerns by showing vulnerability
towards the issues that customers are facing while interacting with particular organizations.
In this drive, customers and businesses are required to be reliable in their mutual interactions
with each other to obtain the desired aimed from both the ends (Yadav & Singh, 2016). The
trust thus remained active phenomenon in connection to businesses including banking sector
wherein the customer is facilitated with the better care thereby keeping in view their utmost
concerns to offer best available opportunities to make them committed and to nurture their
trust.
The trust is thus the significant contributors towards the loyalty of customers as it not only
increases the customers’ confidence but also increase the potential of the businesses to meet
the demands of customers with prolonged manners (Tabrani, Amin, Nizam, 2018). The trust
is the ability of organizations to fulfilled the genuine demands of customers with who the
customers are engaging and interacting with the mutual cooperation of both the parties in
agreement. trust is significant for the loyalties and commitment of the customers as when
organizations are able in showing their capabilities in fulfilling the demands of customers
in the way that customers are required then it ultimately leads to higher level of trust and
loyalty on the part of customers and organizations (Haroon & Qureshi, 2019). Thus, trust
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denotes to various interactions amid customer and organization from diverse outlooks and
dimensions.
2.7 Relationships among Research Variables

The success of social responsibility ingenuity not enhance only the recognition of consumers
towards the organization but it builds also the strong and long-lasting relationship between
organization and customers (Wang, Lo & Hui, 2003). The CSR validates the effective role
of organizations in social activities so as to activate substantially skepticism and cynicism
among stakeholders (Bebbington, Larrinaga & Moneva, 2008). The literature reveals that
CSR has optimistic impact of service quality which further helps in developing customers’
trust, commitment, and satisfaction (Amin, Isa & Fontaine, 2013). The CSR is dynamic for
developing customer trust which in turn increases customers’ loyalty (Haroon & Qureshi,
2019). Thus, corporate reputation and trust has been widely recognized as facilitator in the
diverse contexts by playing mediating role in the relationships between CSR and customers’
loyalty.
2.7.1 Corporate Social Responsibility and Corporate Reputation

The corporate social responsibility is vital tool in determining the credibility of organization
and also considered as the significant predictor towards various organizational outcomes. In
this connection, there exists strong connection is between the CSR measures and corporate
reputation (Wang, Lo & Hui, 2003). These measures help in defining stakeholder perception
about corporate reputation of concerned organizations as the organizations who are effective
in implementation of these measures by contributing the societies from the social, economic
and environmental dimensions are expected to have respectable reputation in the business
communities and societies (Hillenbrand, & Money, 2007). This respectable reputation is the
outcome of various dynamic and effective measured of the organizations and thus effective
tool in determining the credibility and success of the concerned organizations in competitive
environments.
The corporate reputation is the overwhelming attribute of the organizations and this role is
mostly effectively performed by different organizations to succeed in competitive markets.
The measures of corporate social responsibility are effective parameters while gauging the
corporate performance of the organizations (Bebbington, Larrinaga, Moneva & 2008). Both
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the corporate responsibility and CSR are vital elements which are responsible to the decent
performances of organizations. The corporate social responsibility and corporate reputation
when combined together can bring the situation at par to the required level of the businesses
(Decker & Sale, 2009). Therefore, CSR is the most effective phenomenon which is solely
responsible in making or breaking the reputations of the organization. The CSR is measured
as imperative phenomenon in measuring corporate performance and corporate image of the
organization.
The corporate reputation is the outcome of the stakeholders social and economic demands
when these are satisfied by organization. The expectation of the stakeholders towards the
environmental values is also significant and when realized by organizations thus helps them
in nurturing and the developing the perceptions on the stakeholders leading to higher level
of corporate image and reputation (Decker & Sale, 2009). The CSR helps the concerned
organization in the attainment of these reputation as the customers’ values and expectation
towards the social and economic values matters their determinations towards the concerned
organizations (Bear, Rahman & Post, 2010. The organizations are required to develop the
consensus of the stakeholders about positive and effective behavior of organizations towards
the CSR measures in order to attract them towards offered products and services in effective
procedures.
The organizations are direly needed to participate in the social affairs of the community to
inspire the individuals and stakeholders about their active participation in the social issues
as well as their contributory role in removing these dilemmas (Galbreath & Shum, 2012).
This effective participation thus shapes stakeholder attitude towards concerned organization
and thus develop the positive perception about concerned organization reputation. The CSR
measures are also vital in increasing the awareness of stakeholders and organizations about
the critical role of these measures in development of the societies (Zhu, Sun & Leung, 2014).
These are the outcome of the positive attitude of the stakeholders which results in effective
reputation in concerned societies leading to corporate image in the business community.
The corporate social responsibility is critical as it trials organizational performance towards
societies.
The corporate reputation is dynamic issue in the banking sector as it helps concerned banks
in shaping the behavior of the customers about the reputation of the banks. The banks in the
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modern era are more concerned with corporate reputation as banking system are active in
dealing with economic prosperity of individuals as well as societies (Bögel & Hall, 2016).
These responsibility measures thus mark banking sector to be accountable for their business
operations towards societies. The societies are mostly concerned with their burning issues
which needs critical attention from the organizations in paying their role in the development
of the societies (Stefano, Trotta, Iannuzzi & Demaria, 2017). The organizations are required
to develop the perception of their customers about the organizational positive role which in
turn helps banks in attracting the new customers towards goods and services offered by the
banks.
The CSR measures and the corporate reputation are also vital in the context of Islamic banks
as Islamic banks are more worried about development of the societies (Forcadell & Aracil,
2017). The literature show that Islamic banks continuously involved in developmental issue
of societies by contributing significantly over their economic contributions in diverse social
and environmental plans (Shankar, Dash & Chakraborty, 2018). The researchers praise CSR
and corporate reputation are positive associated with each other as both of them reinforce
each other. The corporate reputation is critical success factor of Islamic banks as these banks
are focused upon social and environmental responsibilities in effective manners (Aramburu
& Pescador, 2019). The social contribution is main priority of Islamic banks to which these
banks have shown their concerns by contributing in social issues more effectively and
efficiently.
2.7.2 Corporate Social Responsibility and Customers Trust

The corporate social responsibility along with its critical measures has also been considered
as imperative concept in determining customers’ loyalty as it is most leading phenomenon
in gauging assurance of the customers (Flavian, Guinaliu & Torres, 2005). When customers
realized that organizations are effective in implementation of certain responsibilities toward
stakeholder and society then they show trust, commitment and loyalty toward organizations
(Baumann, Burton, Elliott & Kehr, 2007). These measures are thus considered as building
block for nurturing customers’ behavior and ultimate trust. Thus, trust is customers’ positive
perception about overwhelming actions of the organizations towards the development of the
societies (Swaen & Chumpitaz, 2008). It not only increases organization ultimate corporate
reputation but also helps in augmenting customers’ behavior and trust towards particular
organization.
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The corporate social responsibility measures are thus vital to reshape the customers’ attitude
towards particular substances which are active in the background of certain actions as well
as certain eventualities that lead towards the standards of the organizations and towards the
customers’ values (Swaen & Chumpitaz, 2008). The CSR inventiveness offers information
and attractiveness of organization as these undertakings are valued for growing trends of the
trust towards the organizations (Vlachos et al., 2009). The CSR measures are considered as
the identifications through different dimensions delivered by the organizations towards the
societies to ease indecision that affects customers’ decisions towards certain eventualities
and the future events (Castaldo, Perrini, Misani, & Tencati, 2009). The CSR is useful for
the customers in growing their confidence and potential in the decision making towards the
organizations.
The corporate social responsibility and customers trust are directly related as the increase in
one side brings rising trends in other however, decrease in the corporate social responsibility
measures will decline the customers trust (Decker & Sale, 2009). The customers trust is the
outcome of the quality measures that organization are taking in response to welfare of the
societies and stakeholders in order to facilitate them from the business eventualities. These
corporate responsibilities are vital for the corporate reputation of the organization as well as
for positive attitude of the customers leading to higher level of trust and loyalties (Abdullah,
Shahimi & Ismail, 2011). The trust has been considered as vital element in determining the
performance of the organizations towards societies as higher the performance, greater might
be trust of customers as both of them are reinforcing each other for certain interest at both
ends.
The corporate social responsibility signifies the efforts of the organization towards societies
which in turn shape the attitude of customers beyond the considerations. The positive deeds
from the organizations towards the welfare of societies is the significant phenomenon which
helps in determining performances of the organizations as well as helps in nurturing the
attitude and behavior of customers towards the particular organization (Vlachos, Tsamakos,
Vrechopoulos & Avramidis, 2009). In modern competitive environment, all organizations
whether public or private are focusing on critical measures of corporate social responsibility
to improve behavior of their stakeholders and to develop the reputation of the organizations
(Choi & La, 2013). The organizations are required in this drive to improve their working
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formats in order to facilitate their stakeholders in providing them better opportunities for the
development.
The connection between the corporate social responsibility and customers trust have been
widely recognized in different contexts. There exists strong conviction about the corporate
social responsibility and customers trust in the banking sector as these are critical issues that
inspire banking sector to perform their role wholeheartedly and to improve their reputations
in the customers’ minds (Bögel & Hall, 2016). The customers have diverse desires while
interacting with the bank and have certain well concerted aims to fulfill their needs as per
their desires. Therefore, it is responsibility of the banking sector to improve the perceptions
of customers and to develop their consensus about the reputation of concerned organization
(Raza et al., 2018). Similarly, the corporate reputation is also helpful for the development
of organizational capability in managing the situations and to provide better services to the
clienteles.
The corporate social responsibility is thus critical for all the organizations and its role is also
dynamic in the banking sector due to the active participation of the banks in the development
of the societies (Afridi, Gul & Haider, 2018). However, this role is phenomenal in context
of Islamic banking system as these banks are carrying out their activities as per the wins and
wished of the customers from Islamic perspectives to shape their attitude and behavior and
to make them loyal towards the concerned Islamic banks (Haroon & Qureshi, 2019). These
quality measures not only help in improving the behavior of the stakeholders but also helps
in developing corporate reputations of concerned Islamic banks. Hence, this study examines
the relationships between the corporate social responsibility and customer trust in context
of Islamic banks due to vital role of these significant concepts in context of Islamic banking
system.
2.7.3 Customer Loyalty and Corporate Reputation

The customers’ loyalty is an important concept which gained momentum due to its critical
concerns with the credibility of the organizations. The corporate social responsibility is vital
in determining the loyalty of the customers as it needs the continuous interactions from the
concerned organization with regard to needs and desired of the interacted customer (Wang,
Lo & Hui, 2003). The loyalty is the outcome of various dynamic issues and organizational
reactions towards these issues so as to maintain customers trust and loyalty. The customers
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are much anxious with needs for which they are worried in contacting different available
opportunities to overcome these needs in better manners (Bolton, Lemon & Verhoef, 2004).
The organization are always concerned with their customers regarding their needs and their
ultimate solutions for which they choice the attracting opportunities to fulfill their needs and
demands.
The organizations are required to stress on the qualities while offering the customers in the
competitive situations to shape the customer attitudes towards the reputation of concerned
organization. The corporate reputation is the imperative phenomenon for the organizations
and needs additional attention as the customers interact only with those organizations who
have respectable reputations (Maharsi. Sri, & Fenny. 2006). The goodwill and the decent
corporate reputation are the signs for the customers trust and loyalty. The reputation is also
formed through loyal customers’ persistent interaction and degree to which these customers
relied on organizations. The customers’ loyalty is thus outcome of the good and acceptable
reputation towards the concerned organization (Balmer & Greyser, 2006). Thus, there exists
strong evidence in literature that customers’ loyalties and corporate reputation are strongly
interlinked.
The corporate reputation is one of the strong predictor towards the customers’ loyalty as the
corporate reputation not only inspires prevailing stakeholders to accept promising approach,
but correspondingly to prospective customers those who intends to interact with concerned
organization (Tang & Weiwei (2007). The customer perceives hollow about organizations
from the offerings and other cradles likewise word of mouth from the existing stakeholders.
For services organizations, building strong corporate reputation since these organizations
are not offering tangible products (Keh & Xie, 2009). So, services providing organizations
practices corporate reputations as the critical tool in nurturing behaviors of the consumers
for uninteresting acquisitions from the concerned organizations. Consequently, customers’
loyalty is significant dynamic issues towards the respectable reputations of the concerned
organizations.
The loyalty is formed due to the contentment of the needs that the customers desire behind
which certain interests are functional that requires additional concentration and commitment
from the organization and customer to attain the desired mutual transaction (Bartikowski,
Walsh& Beatty, 2011). The customers are concerned with their need attainment which is
the outcome of their trust on available services that the organization is offering in exchange
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of certain aims on both ends. The customers are considered as main asset for organizations
as most of activities that are performed are aligned with wins and wished of the customers
(Trotta et al., 2011). The customers are responsible to produce positive image of concerned
organizations when their needs are fulfilled as per the desired standards which ultimately
helps organizations in building their corporate image and corporate reputation in desired
manners.
The organizations are showing their efforts by working hard to build their good reputation
and respectable image in community as well as in the business markets and this role is also
actively performed by banking sector due to increased participation in welfare of societies
(Maden, Arikan, Telci & Kantur, 2012). The research reveals positive relationship between
corporate reputation and customers’ loyalty as when customer feels honored then reputation
of the concerned banks gets increased. The loyalty is also top priorities for banking sector
as there all operational activities are hinged upon the satisfaction of the customers as these
banks are conscious about the effectiveness of customers’ values towards the expansion in
businesses (Fiordelisi, Soana & Schwizer, 2014). The banks are anxious about critical role
of reputation in attracting potential customers towards the goods and services offered by the
banks.
The decent reputation and image in vital in increasing the market values and decreasing the
risks associated with the customers’ dealings as these activities needs additional skills and
competencies from the banking sector to overwhelm the situation (Kircova & Esen, 2018).
The customers’ loyalty and corporate reputations are critical in the context of Islamic banks
as these banks are more worried about corporate image in societies due to their dealing from
perspectives of Islamic teachings. The financial performance of the Islamic banks is strongly
related with customers’ loyalties and corporate reputation as the Islamic banks are ensuring
business activities as per Islamic teachings (Aramburu & Pescador, 2019). Thus, favorable
and strong perceptions of customers are widely recognized as the strong predictor towards
the decent reputation of Islamic banks in the prevailing competitive situations in financial
markets.
2.7.4 Customer Trust and Customer Loyalty

The customer trust and loyalties are vital in defining the positive perceptions of individuals
towards the particular organizations. The trust is the individuals’ confidence of the offerings
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of concerned organization while loyalties are individual desires to interact with concerned
organization in long manners (Ballester & Alemán, 2001). When the customers are satisfied
from products and services, offered to them, then customers will show their confidence and
esteem towards concerned organizations and when customers attain feelings in prolonged
manners then it will lead towards commitment and loyalties (Sirdeshmukh, Singh & Sabol,
2002). These loyalties and trust are vital in determining the corporate image of organization
which further helps in developing the customers’ positive perceptions about the organization
that is caring for prolonged interacting and constructing relationships between customer and
organization.
The trust and loyalty are the critical attributes of the customers’ long-term commitment and
strong relationships between the customers and organizations. The trustworthy organization
is the sign of inspiration and encouragement for the individuals who are interacting in the
competitive environments and those who aimed to manage certain objectives matched with
values of concerned organization (Harris & Goode, 2004). The organizations are responsible
in providing the acute information as well as accurate products and services so as to make
attitude and behavior of the customers in an optimistic manner to realize the existence of
the organizations (Maharsi. Sri & Fenny, 2006). The business organization are required to
develop their strategies as per the demands of customers and take only those actions which
facilitate the customers in their decisions about organizations where there exist numerous
competitors.
The trust and loyalties are the leading concerns for the organizations as with the loyal and
trustworthy customers, the organizations might not be able to even survive. The customers
are feeling honored when their needs are chanced as per their demands since there are certain
exchanges and these exchanges needs the trust and loyalty from both ends (Matzler, Kräuter
& Bidmon, 2008). The customer prioritized only those organizations who are capable to
show their efforts in fulfilling the demands of customers as per the required standards. The
customers are also the asset of the organization as the organizational credibility and success
is hinges upon commitment and loyalty of customers (Vlachos et al., 2009). The customers
and the organizations thus needs mutual support from each other as both critical in satisfying
needs of each other and both are unavoidably interacting with each other for overpowering
interests.
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The organizations are further stressed on the qualities in their services so as to facilitate their
stakeholders in meeting their demands and to contend their needs as per desired standards.
The customer on one hand is responsible for promoting the values of concerned organization
while in turn, organizations are responsible to meet demands of customers (Hoq, Sultana &
Amin, 2010). Therefore, trust and loyalties are helpful in developing mutual relationships
between the customers and the organizations. The attainment of higher demands on the part
of customers increases customers’ satisfaction which in turn helps in augmenting customers
trust and loyalties (Choi & La, 2013). The literature shows significant relationship between
customers trust and customers’ loyalties with respect to the performances of organizations
and this is further developed with the assurance of the demands acts as facilitator in this
connection.
The customers trust is measured as the consequence of the service quality through service
confidence in connection to loyalties leading to the higher satisfaction of the customers from
organizational eventualities (Amin, Isa & Fontaine, 2013). The customer trust and loyalty
when combined all together develop undaunted commitment leading to higher level of trust
towards the concerned organizations. The banking sector is also experienced the sane trust
and loyalties of their customer due provision of goods and services (Jan & Abdullah, 2014).
The banks who are enthusiastic in providing excellence in their undertakings are expected
to attain higher level of loyalties and trustfulness on the part of customers (Yadav & Singh,
2016). Both these are thus measured as the significant attributes toward the success of the
concerned organizations so as to maintain and sustain their competitive standing in financial
markets.
The trust and loyalties are considered as the building blocks in nurturing the behavior of the
customers and this role is more overwhelmed in the context of Islamic banking system. The
Islamic banks are more conscious in serving their customers which leads to higher level of
loyalties on the part of customers towards concerned organizations (Afridi, Gul & Haider,
2018). The Islamic banks have unlimited liabilities towards customers due to the teaching
of sharia as principles of Islam are concerned in facilitating customers. The customers are
focus of teaching of sharia thereby providing them the vast rights and these rights are better
confirmed by Islamic banks due to their strong convictions towards the teachings of Islam
(Haroon & Qureshi, 2019). The loyalty and trust are widely recognized as comprehensive
125
elements of the Islamic banking system wherein customers’ rights and duties are strongly
ensured.
2.7.5 Corporate Social Responsibility and Customer Loyalty

The corporate social responsibility and customers’ loyalty are the main themes of this study
as both of them are considered as effective components towards higher performances and
greater reputations. The organizations over successful implementation of CSR measures are
helpful in attaining desired reputations further leading to higher level of trust and loyalties
(Sirdeshmukh, Singh & Sabol, 2002). The customer who have strong conviction about these
measures are expected to have strong psychological affiliation to concerned organizations.
In this drive, the organizations are widely recognized on the adaptation of CSR measures in
undertakings to ensure customers trust and loyalties leading to higher level of commitment
towards concerned organizations (Iwasaki & Havitz, 2004). The organizations are further
needed to comprehend the situation at par to the required level in the best interests of the
customers.
The customer loyalty is well-thought-out as customers’ faithfulness towards the particular

organization which is the outcome of various dynamic efforts on the part of organization in
shaping attitude and behavior to make them loyal and committed. The organizations who
are enthusiastic in their dealings with the customers are expected to have full supports from
their customers in both the certain and uncertain situations (Crespo & Bosque, 2005). These
customers are showing loyalties and commitment and never prioritize their interests on the
interests of their customers. These are the main parameters why the organizations are relying
on customer trust and loyalties as these are considered as dynamic factors towards the long-
term success of concerned organization (Vlachos et al., 2009). The loyalties, commitment
and trust are dynamic issues that needs strange efforts from organizations in serving the
customers.
The existing literature provide substantial evidence about the positive relationships between
the corporate responsibilities and the customers loyalties as the higher the effectiveness in
the corporate responsibilities, greater is the chances for the increase in the customer loyalty
(Mandhachitara & Poolthong, 2011). The CSR is used by the organizations as strategic tool
in inspiring the customers and nurturing their behavior leading to the higher loyalties. The
organizations in this drive, are more concerned with customers’ loyalties as these loyalties
126
are considered as dynamic phenomenal dimensions for success of the organization (Berg &
Lidfors, 2012). The customers who are satisfied and fervent are expected to show higher
commitment level and greater dedication toward organizations. The service organizations
are more concerned with the customers’ loyalty and trust as compared to the merchandizing
businesses.
The organizations who are able in managing their available resources in serving customers
are expected more to attain the desired objectives as the customers choose only those objects
which are successful in defining their needs. The organizations who are effective in meeting
the demands of their customers as the customers’ desires as considered as the effective and
efficient organizations in competitive markets (Choi & La, 2013). The customers, in turn,
remains in touch only with those organizations who are successful in meeting the demands
of the customers. The customers and organizations are linked over mutual interests wherein
both are showing will and readiness to interact with each other (Dahlstrom et al., 2014). For
this drive, both these entities are functioning in achieving their genuine demands where one
party is paying for the goods and other party is receiving for quality services to concerned
customers.
The organizations can be benefited through customers’ loyalty when these organizations are
able to provide the customers identification, trust, product quality, satisfaction and image
which have significant and positive impact over trust and loyalties of customers (Ailawadi,
Neslin, Luan & Taylor, 2014). It becomes vital for the organizations to focus on the loyalties
of customers to achieve long-term objectives and to turn their trends towards developmental
processes. Similarly, the loyalty is also measured in the banking sector through the quality
measures from corporate social responsibility dimensions to maintain the trust of customers
on the concerned banks and to attaint their aims by interacting with these banks (González
& Vilela, 2016). These banks are also critical in determining success of the banking sector
in the competitive situation where there are numerous competitors exists by offering same
responsibilities.
The corporate social responsibility and customer loyalties are vital in every context however
its role in Islamic banking system is phenomenal due to their strong convictions with the
Islamic principles in conducting the businesses. These businesses require trust and loyalty
of customers to survive and develop in competitive markets (Afridi, Gul & Haider, 2018).
127
Along with the corporate reputation, the CSR measures are also critical in determining the
performances of the Islamic banks as these banks are mostly concerned with the provisions
of goods and services as per the teachings of Islam. The corporate social responsibility helps
in nurturing the behavior of the customers while corporate reputation furthered grave the
situation by playing easing role towards desirable loyalties (Aramburu & Pescador, 2019).
Therefore, the Islamic banks are more concerned with the corporate duties and customers’
loyalty.
2.7.6 Corporate Social Responsibility, Corporate Reputation and Loyalty

The corporate social responsibility, corporate reputation and customers’ loyalty are the most
significant parameters in determining the performance and success of the organizations. The
organizations who are effective in providing the quality measures through corporate social
responsibilities are expected to have respectable reputation and thus succeeds in loyalties of
their customers (Kotha, Rajgopal & Rindova, 2001). The customer’s loyalty is the outcome
of the corporate effective responsibilities and decent corporate reputations of organizations
as customers are real assets of the organizations and execution of initiative towards social
responsibility enhances the recognition of customers with concerned organization (Wang,
Lo & Hui, 2003). Likewise, building durable and last-lasting relationship and values to
connect customers with organizations in order to attain desired aims of both customers and
organizations.
These important conceptions are considered as the transactional activities from the social
and economic dimensions to establish significantly in activating skepticism and cynicism in
the stakeholders of the diverse nature. These measures thus help organizations in increasing
corporate reputation and also help them in increasing customers’ loyalty (Schlegelmilch &
Pollach, 2005). Likewise, organizations who are successful in attaining desired reputation
is possible only over successful implementation of corporate social responsibility measures
along with the augmentation of the loyalties which are vital in determining the performances
of concerned organizations (Hillenbrand & Money, 2007). The loyalty is vital in increasing
the confidence of the customers in attracting with the customers by following the norms and
values of concerned business organizations to attain desired needs and demands as per their
requirements.
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The variability and intangibility features of the organizations leads to higher risks towards
the customers which is the foremost responsibility of the concerned organizations to reduce
these associated risks with the ability to minimizing risks their augmenting the attitude and
behavior of customers towards values of organizations (Bebbington, Larrinaga & Moneva,
2008). The CSR helps in materializing social, economic and environmental responsibilities
the vigorous aggression in the corporate activities of the organizations. These are dynamic
issues that helps in nurturing the behavior of the customers as per the norms and values of
concerned organization to survive and develop capabilities in the contemporary competitive
markers (Naeem & Welford, 2009). The organizations are required to develop consensus of
their customers according to the desired standards to maintain the competitive grip on the
markets.
The responsibility and reliability in organization contributions is vital in shaping customers’

reliance over organizations thereby pleasing their obligations towards the customers which
make then accountable for their products and services offered to the customers. The trust
and loyalty are thus significant contributors towards corporate reputation which is further
supported through the quality measures in terms of corporate social responsibility (Kolk &
Tulder, 2010). Likewise, the moral promises of the organization matter a lot in counting the
reputation which thus helps in nurturing loyalty and trust of customers. The environmental
issues and their ultimate solution from the organizations are helpful in increasing loyalties
of customers (Melo & Morgado, 2012). The economic contribution of organizations towards
the societies are also dynamic in determining the corporate reputations of the concerned
organizations.
The corporate reputation and customer loyalties are critical for the banking sector to inspire
the customer towards the concerned organizations. Moreover, the corporate responsibilities
are also important for the banking sector to sustain the competitive lead and this is further
supported by reputation and trust of customers (Walsh & Bartikowski, 2013). The economic
responsibility of the banks is vital in satisfying the customers and in nurturing their behavior
towards the particular organizations. The organizations are required to maintain trust and
loyalty by contributing societies from different dimensions like the social and environmental
so as to maintain the credibility of the organizations (Jarvinen, 2014). The banking sector is
more concerned with commitment and enthusiasm which are the dynamic tools for nurturing
129
the loyalties of the customers towards the organization to continue in the most competitive
situations.
The customers’ loyalties and trust are critical for the organizations in constructing towards
the socio-economic and socio-cultural prosperities. This responsibility is widely performed
by the Islamic banks more effectively due to their active participation in different social and
environmental constraints (Bögel & Hall, 2016). The Islamic banks are ensuring banking
activities as per the teachings of the sharia therefore these banks are more worried about the
corporate reputation and customers loyalties due to fact that these banks are maintaining
Islamic perspectives in communities as well as in business markets (Aramburu & Pescador,
2019). The Islamic banks are also effective players towards corporate social responsibility
measures as these banks more anxious about their overwhelming role in the development of
the stakeholders as well as societies thereby contributing the societies through the possible
contributions.
2.7.7 Corporate Social Responsibility, Customer Trust and Loyalty

The important concepts in organizational perspective are the corporate social responsibility,
customers trust and loyalties which are considered as the critical success factors for survival
and ultimate development of the organizations (Sirdeshmukh, Singh & Sabol, 2002). The
organization are mostly concerned with the application of these responsibilities in effective
manners to increase the trust and loyalty of customers on organizations. The organizations
who are able in nurturing the behavior of customers in positive manners are expected to be
successful in their business activities in the competitive markets (Bouckaert & Walle, 2003).
The organizations who are effective in managing the CSR from diverse dimensions likewise
the social, economic and environmental are considered as the successful organizations in
competitive markets and have the capabilities to maintain their competitive edge over the
competitors.
The trust and loyalty are thus the critical success factors for the organizations to maintain
the competiveness in the business markets. The organizations who are effective in managing
these responsibilities effective are considered as the leaders of the competitive markets as
these organizations are considered as successful in managing their business activities as per
the demands of customers and as per needs of societies (Flavian, Guinaliu & Torres, 2005).
The trust increases the confidence of customers over operational activities of organizations
130
and loyalty increases the organizational values in the markets. Thus, both trust and loyalties
are the significant predictors towards the organizational performance and success (Swaen
& Chumpitaz, 2008). The trust and loyalties along with the endurance of corporate social
responsibility measures are vital parameters in gauging performance and reputation of the
organizations.
In the developing countries, organizations are surviving with limited resources in markets
wherein these exists numerous challenges that the organizations are facing while conducting
their businesses with the customers (Castaldo, Perrini, Misani & Tencati, 2009). In these
situations, it becomes difficult for organizations to maintain trust and loyalties of customers
however, these businesses are still functioning well to maintain competitive positions. For
these businesses, it is dynamic to participate actively in the corporate social responsibility
to maintain their competitive lead in markets (Vlachos et al., 2009). However, organizations
in developing countries are continuously working on increasing their standards to meet the
demands of customers as per their desired standards to sustain their strong positions in the
competitive markets in the modern uncertain circumstances and the technological changes
situations.
The corporate social responsibility is considered as the foremost priority of the organizations
in developing countries like Pakistan. In Pakistan, almost all the organizations are ensuing
these responsibilities to nurture behavior of their stakeholders and to make them committed
towards the organizations (Ercis, Unal, Candan & Yildirim, 2012). The organization knows
better the vitality of customers trust and loyalties along with the quality measures towards
the CSR to maintain their trust in competitive markets. The organizations are also concerned
with the adaptation of modern technologies to facilitate their stakeholders through online
services to ease their customer to access the organizations (Choi & La, 2013). These are the
vital parameters that makes organizations as successful as the desires by contributing the
societies and facilitating the stakeholders to achieve their desired objectives, standing and
ranking.
The banking system is Pakistan is actively functional by providing different facilities to their
customers and this responsibility is performed significantly by various banks among which
the conventional and commercial banks are more effective. Both public and private banks
are functional by posing diverse services to customers (Saleem & Gopinath, 2015). These
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banks are working under the direct control of stake banks of Pakistan. Along with, Islamic
banking system is more effective by proposing financial services to the customers in order
to facilitate the customers by conducting their businesses from Islamic perspectives (Afridi,
Gul & Haider, 2018). For these banks, applications of CSR measures are vital to nurture the
behavior of the customers to make them committed and loyal with the Islamic banks. These
loyalties are the outcomes of the various quality measures and efforts offered by the Islamic
banks.
The Islamic banks are operational in realizing the corporate social responsibility measures
by providing different eminence services to their customers and these measures are vital in
nurturing the behavior of the customers. The customers’ loyalty is measured as the foremost
outcome of the effective execution of corporate social responsibility in the Islamic banking
context (Raza et al., 2018). Similarly, the customers trust and corporate reputation are also
critical thereby providing facilitating role in determining customers’ loyalty. These are most
indispensable factors which increases customers’ loyalties in optimistic manners (Haroon
& Qureshi, 2019). Therefore, this study aimed at examining the mediating role of customers
trust and corporate reputations in relationships between the corporate social responsibility
measures and the customer loyalty in the context of Islamic banks in Khyber Pakhtunkhwa,
Pakistan.
2.8 Demographic Impacts

This study has to examine the group mean differences concerning the demographics with
regard to differences in opinions regarding corporate social responsibility, customers trust,
corporate reputation and customers’ loyalty. For this purpose, test of significant will be used
to examine the desired group mean differences. The demographic variables, comprises the
qualification, designation, experience, residence, gender and age with are used to explore
its impact on the corporate social responsibility, customers trust and loyalty. The literature
revealed that personal attributes have significant influence in group variations concerning
the loyalty, CSR, reputation and trust (Basil & Weber, 2006; Bear, Rahman & Post, 2010;
Bartikowski, Walsh & Beatty, 2011; Wajdi & Humayon, 2014; Haroon & Qureshi, 2019).
Therefore, this study examined these variations in the respondents’ opinions through test of
significance.
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2.9 Working Concepts (Research Variables)
Tables 2.1 Research Variables

S.N Variable Definition Code
1 Corporate Social The CSR is manner over which CSR
Responsibility organizations take responsibilities for
economic, social and environmental impacts
due to their business operations.
1a Economic Responsibility It is one of the strong pillar of CSR aimed at ERS
economic management and considered as
vital tools towards the economic sustainable
development.
1b Social Responsibility It is second pillar of CSR aiming to become SRS
organizations socially accountable to offer
“safe and high-quality products and services
to” stakeholders.
1c Environmental responsibility It is third pillar which pushed organizations ERS
to consider the impact of their operations on
the environments and societies by focusing
on the environmental issues.
2 Corporate Reputation It is the corporate status and image of the CRP
concerned organization which is outcome of
organizational changes to customers.
3 Customer Trust It is customers’ reciprocal behavior towards CTR
certain goods/services. Trust comes from the
understanding when customer’s needs and
expectations are fulfilled.
4 Customer Loyalty Customer loyalty denotes to trustworthiness CLY
of customers towards products and services
offered by organizations/firms by keeping in
view the customers’ demands.
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2.10 Working Concepts (Demographics)
Tables 2.2 Demographic Variables

S. No. Variable Definition Code
1 Qualification It is process of succeeding for attainment of academic QUA
credential.
2 Designation It is procedure of defining and obtaining professional DSG
position.
3 Experience Experience is the mastery or knowledge over diverse EXP
positions.
4 Residence It is the original place of residence where individual RES
resides.
5 Gender It is the state/condition of individuals being female or GEN
male.
6 Age The number of the years an individual spent during his AGE
lifespan.
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2.11 Theoretical Framework
Figure 2.1 Theoretical Framework of the Study
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2.12 Operationalization of Concepts
Table 2.3 Operationalization

SN Variables Demographic Operationalization Questions
1 Education 1: Bachelor, 2: Master, 3: M. Phil 1
2 Profession 1: Businessman, 2: Services-provider 2
3 Experience 1: 1-10, 2: 11-20, 3: 21-30 3
4 Residence 1: Local Residence, 2: Non-local Residence 4
5 Gender 1: Male, 2: Female 5
6 Age 1: 20-35, 2: 36-50, 3: 51 & Above 6
SN Variables Variables Operationalization Questions
Economic 1. Try to maximize profits to guarantee stability Q7 to Q14
1 Responsibility 2. Aims to build solid relationships with customers
3. Showing efforts to expand quality of services
4. Trying to have competitive policies in market
5. Trying best to improve financial performance
6. To do best to be productive in viable situation.
7. Offering sufficient share to benefit societies
8. Paying in providing edge towards societal issues
Social 1. Contributes in reducing the unemployment. Q15 to Q20
2 Responsibility 2. Seeks for sponsoring health programs.
3. Contributes in providing training programs.
4. To be highly committed to ethical principles.
5. Trying to make donations to social activities.
6. To help in improving quality of life.
7. Enthusiastic about the social issues of societies
8. Dynamic in offering finances in social issues
Environmental 1. Sponsor the pro-environmental programs. Q21 to Q24
3 Responsibility 2. Contributes campaigns to preserve environment.
3. Supports projects towards green environment.
4. Contributes into environmental pollution.
5. Improve the appearance of cleanliness.
6. Allocate resources to offer compatible products.
7. Paying ample in social issues over fiscal shares
8. Dynamic over reducing environmental constraints
4 Corporate 1. Try to ensure long-term economic success. Q25 to Q34
Reputation 2. Try to do everything possible to be productive.
3. Try to make rational use of natural resources.
4. I habitually use really the Islamic Banks.
5. Say positive things about bank/Islamic bank.
6. Islamic Banks transmits good sensations
7. Try to have ethical code of conduct.
8. Try to carry out activities to reduce pollution.
9. Try to make economic donations to social causes.
10. Try to sponsor activities that favor environment.
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5 Customers 1. The banking services in bank are safe. Q35 to Q44
Trust 2. Clients based relationship on mutual trust.
3. Clear language in provision of banking services.
4. Performs obligations towards clients satisfactorily.
5. Accounts processing system is trustworthy.
6. Fairness & justice constitute in bank transactions.
7. Credibility in maintaining confidentiality.
8. Consistency and continuity in providing services.
9. Employees have the knowledge and skill.
10. Ensuring the corporate social responsibilities.
6 Customers 1. Continue with bank due to its technologies. Q45 to Q54
Loyalty 2. Recommend bank services to friends & family.
3. Consider to be loyal to bank in future.
4. Bank become brand in the market.
5. Recommend this bank if asked for advice.
6. Discontinue bank if its rates highly.
7. Change bank if another offered better services.
8. Talk about the bank in positive way.
9. Intend to increase my financial transactions.
10. Will not turn towards another bank.
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2.13 Research Hypothesis
Tables 2.3 List of Hypotheses

Hypotheses Tools Code
There is significant association between corporate social Correlation H1
responsibility (economic, social and environmental), customer
loyalty, corporate reputation and customers trust.
There is significant “impact of corporate social responsibility” Regression H2
(economic, social & environmental) on customers’ loyalty.
The association between economic “responsibility and Mediation H3
customer” loyalty is mediated by corporate reputation. Analysis
The association between social “responsibility & customer” Mediation H4
loyalty is mediated by corporate reputation. Analysis
The association between environmental “responsibility and Mediation H5
customer” loyalty is mediated by corporate reputation. Analysis
The association between economic “responsibility and Mediation H6
customer” loyalty is mediated by customers’ trust. Analysis
The association between social “responsibility & customer” Mediation H7
loyalty is mediated by customers’ trust. Analysis
The association between environmental “responsibility and Mediation H8
customer” loyalty is mediated by customers’ trust. Analysis
Both the mediators (corporate reputation and customers trust) Multiple H9
significantly mediate the relationship between economic Mediation
responsibility and customers’ loyalty.
significantly mediate the link between social responsibility and Mediation
customers’ loyalty.
significantly mediate the link amid environmental responsibility Mediation
and customers’ loyalty.
The respondents about education have significant group mean ANOVA H12
differences concerning research variable under study.
The respondents as regards to profession have significant group T-test H13
mean differences concerning the research variable under study.
The respondents regarding experience have significant group ANOVA H14
mean differences concerning research variable under study.
The respondents about residence have significant group mean T-test H15
The respondents about gender have significant group mean T-test H16
Respondents about age have significant group mean differences ANOVA H17
concerning research variable under study.
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CHAPTER No. 3 MATERIALS AND METHODS
The research methodology refers to the complete package of the methods and procedures
for conducting the research study. Though, research design specifies the particular methods
used for particular study as per their requirements. Usually, the methodology encompasses
the different research concepts such as research philosophy, research approach, qualitative
and quantitative techniques, questionnaire design and measurement, reliability and validity,
ethical considerations and mediation analysis by presenting different models extracted from
theoretical framework. These tools and techniques are used for conducting research study
systematically.
3.1 Research Philosophy

The research philosophy is the justification towards dealing with the nature, sources and the
development of knowledge based on certain theories. It is concerned with researcher belief
about the phenomena towards the protocols that how the data about phenomenon might be
collected, analyzed and used (O'Leary, 2004). All these are requirement of the philosophy
of positivism which further explains that how predictions can be made towards the existing
realities along with inter-relationships by applying different statistical tools and techniques
(Mackenzie & Knipe, 2006). Thus, the positivism is research philosophy adapted in present
research as positivism suggests that reality should exists and further measured and analyzed
by using the quantitative tools and techniques to reach the conclusions in a comprehensive
manner.
The positivists take responsibility that the social phenomena might be approached through
the systematic research procedures, over building assumptions, perceiving and computing
in order to make predictions and draw conclusion (Cohen & Antonio, 2007). The positivism
philosophy is bringing into line with deductive method or confirmatory approach wherein
researchers set forth theories about under study phenomena, create assumptions and develop
hypotheses that are aimed to be tested through empirical examinations (Saunders, Lewis &
Thornhill, 2012). The research philosophy is approach wherein quantitative analysis and
empirical investigation are used to develop explanatory and formal theory. Thus, positivist
approach is commonly used related with quantitative procedures about data collection and
analysis.
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3.2 Inductive vs Deductive Research
The inductive and deductive methods are used as per the requirement of the research design
of research study. Inductive research is related with phenomenological and constructivist
paradigm while deductive approach is closed linked with the positivist approach (Mukherji
& Albon, 2010). In social research, exploratory approach relates with the inductive method
wherein researchers commenced by creating observations about existing realities and search
for the particular design for explaining realities backed by certain theoretical support while
confirmatory research relates with deductive method wherein research starts with theories
about realities backed by certain predictions (hypotheses) which are developed about the
possible relationships about these realities tested through empirical procedures (Johnson,
2012).
Likewise, inductive approach demands for data collection analysis and planning to postulate
design which might propose connections between research variables leading to theoretical
development of the models and theories while the deductive approach involves hypothesis
development for realistic examination so as to refute or confirm theories (Saunders, Lewis
& Thornhill, 2012). In fact, under some conditions (longitudinal research/cross-sectional),
both deductive and inductive methods in research might be used interchangeably to benefit
the problem identification and phenomena understanding (Gray, 2014). For this purpose, as
the positivist approach was adopted in this research so as to determine relationships among
diverse constructs over statistical procedures, deductive approach was estimated to be more
suitable.
3.3 Research Approach

The approach is generally related with procedural plan towards methods for data collection,
analysis/reasoning and explanation/interpretation based upon the nature of study together
with and aligned with problem statement (Ader, Mellenbergh & Hand, 2008). It elaborates
that how primary data for study has to be collected by approaching the population of study.
As per recommendations of various researchers in existing studies, survey has been widely
used in social research for primary data collection from population through sample thereby
generalizing findings obtained through sample towards population (Saunders et al., 2012).
In positivist approach which usually involves analysis of relationships over a representative
sampling from population by collecting and analyzing data over statistical measures, survey
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is suggested as the best tool (Bryman & Bell, 2015). Thus, survey method was used to access
population where they are questioned about research variables by labeling their views about
phenomena.
3.4 Research Design

The researchers recommended diverse research designs based upon the nature of research
study likewise the qualitative design imbedded in constructivism and quantitative design
rooted in positivism (Johnson and Onwuegbuzie, 2004). However, pragmatism design has
also been used based upon the nature of study wherein both the qualitative and quantitative
approaches are used. The combination of multi-methods denotes to data collection more
than one approach which usages of quantitative and qualitative procedures in mixed method
techniques (Velez, 2008). Thus, the approach of mixed method allows triangulations which
recognizes data collection with different sources at different times as it helps in balancing
the possible weaknesses in single method and possible biasness in data collection (Kumar,
2014). The questionnaire was used as data collection tool while statistical analysis was used
for corresponding analysis so as to test hypotheses in the particular context over particular
framework.
3.5 Population of Study

The population comprises all the elements (respondents) in which researcher is interested
and plan to collect their views, analyze their responses and generalize the views of sample
towards the entire population of study (Sekaran & Bougie, 2013). The population of present
study comprises all customers of Islamic Banks in Khyber Pakhtunkhwa, Pakistan. There
are total 210 functional Islamic Banks in all the districts of Khyber Pakhtunkhwa (Islamic
Banking Bulletin, 2018). However, when measuring the huge population likewise customers
in particular context, researcher do not need always to gather data from every member of
population, therefore the said job is done generally over the sample-size and then researcher
generalize the finding obtain from sample towards population as each research studies has
certain constraints like time and cost which limits the researchers to rely on the selection of
sample-size.
3.6 Sampling Technique & Sample-Size

In social research, different sampling techniques are used in which some are good while
other are weak. In quantitative studies, sampling methods denote to how to select members
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from the population (Malhotra, 2009). The probability sampling denotes to select sample
from population randomly while sampling in non-probability context denotes to sampling
procedures which do not use chance selection however as substitute that relies on researcher
convenience and decision (Francis, Johnston, Eccles & Grimshaw, 2010). The researcher
used non-probability sampling method that not rely on the randomization. This technique is
dependent upon the ability of researcher to choose elements for sample. In non-probability
sampling, researcher used purposive sampling which is based upon purpose of study. In this
technique, the researcher chooses only those elements which suits towards the purpose of
study.
As a primary step, before the conduction of main study, the pilot study was conducted by
using thirty five (35) questionnaires with intention to test instrument (variables, attributes
& items) to get field data which was then used in formula for sample size determination in
case of infinite population (((A2*A2)*(C2*C2))/(B2*B2)). The data was analyzed in SPSS
and the obtained results (standard error & standard deviation) were used to examine the
sample-size of the study by using standard formula recommended by Black and Champion
(1976) [(SD2)/(E2/Z2) + (SD2/N))] for sample size determination which is widely used in
research studies. Therefore, sample of 355 was selected and questionnaires were distributed
among sample size wherein 340 questionnaires have been recollected with response rate of
96%.
Table 3.1 Sample-Size Computation

Sample-size Determination [(SD2)/(E2/Z2) + (SD2/N))]
SD SE Z n
0.58 0.06 1.95 355.3225
The pilot study aimed at examining various expectations about instrument to get valuable
information from experts about various assumption like to test instrument in the field study
thereby identifying problematic issues concerning the design of questionnaire with respect
to variables, their attributes and questions which are asked from respondents and through
which research variables have to measured. The pilot study is helpful in quantifying errors
which are expected in respondents’ replies. The reason behind is acceptance of respondents
that whether they are accepting questions which are asked from them to measure research
variables.
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3.7 Data Collection Methods
In social research, data collection is process of collecting relevant data from appropriate and
accurate sources to find the reactions towards the research problem, hypotheses testing and
evaluation of outcomes (Monagahn & Hartman, 2007). Mostly, two types of data collection
are used in social research comprising primary and secondary data collection. The secondary
data is more related with the existing studies and published materials on the issues under
study. While, primary data is mostly collected through different methods like observation,
interview and questionnaire to muster the first-hand views of respondents about the research
variables (Lescroel et al., 2014). In present study, researcher used questionnaire for primary
data collection which was adapted from the previous studies conducted on similar research
variables in different contexts as mentioned in the questionnaire design and measurement
section.
3.8 Data Analysis Methods

The analysis of collected data is most significant phases in research process, since, without
analysis (examining, cleansing, transforming & modeling), the researcher might not be able
to achieve the desired objectives (conclusion and judgment) (Tabachnick & Fidell, 2007).
Similarly, data analysis has various approaches and methods including diverse techniques
like descriptive and inferential tools to analyze the collected data (Xia & Gong, 2015). The
descriptive analysis provides data about mean, average and standard deviation while the
inferential provides information about the relationships among research variables through
the tools and techniques of correlation, regression, mediation and the test of significance.
The researcher used both descriptive and inferential methods to analyze the data and to reach
conclusion.
3.9 Time Horizon

To explore the relationship, at specific time, cross-sectional research study was conducted.
The longitudinal parameters where not suitable as present study is not intending to examine
transformation in theory and its application but relatively the relationship among variables
in constructs in banking sector (Saunders et al., 2012). In this drive, cross-sectional research
is considered as less time consuming, less costly and is appropriate for use in comparatively
greater sample-size. However, paralleled to cross-sectional, longitudinal study usually used
in smaller sample-size which might create problems as it is matter to time-based deviations
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that might influence seriously the results values (Bryman & Bell, 2015). Therefore, cross-
sectional research design has been widely recommended by the researchers which is usually
used to conduct research studies thereby examining the possible variations in views of the
respondents.
3.10 Instrumentation (Design & Measurement)

As mentioned earlier, for primary data collection, researcher uses questionnaire for primary
data collection. The questionnaire has been adapted from previous research studies which
were used by researchers in their studies conducted in different studies thereby obtaining
different statistical outcomes. Similarly, for corporate social responsibility, researcher has
adapted questionnaire presented by Kolk & Tulder (2010); for customer loyalty, measure
presented by Dick and Basu (1994) has been used while for the customer trust, questionnaire
presented by Morgan and Hunt (1994) and for corporate reputation, the measure of Fombrun
and Shanley (1990) has been adapted/used. Thus, questionnaire includes personal features
as well as research variables which are used to measure variables by using 5-point Liker
Scale.
Table 3.2 The Likert Scale (5-point)

Strongly Disagree Disagree Neutral Agree Strongly Agree
1 2 3 4 5
3.11 Ethical Issues & Considerations

The researcher maintains the ethical standards in entire research process which are essential
requirement. For this purpose, the research study followed all the prerequisite requirements
for conducting and presented research document. Likewise, proposal was duly approved by
concerned supervisor, approved and forwarded by director of concerned department on the
recommendations of the students’ supervisory committee and finally approved by board of
advanced studies and research of Gomal University. Moreover, confidentiality and privacy
of the respondents have been strictly followed to keep the views/opinions of the respondents
as confidential which ensures/guarantees the autonomy of the respondents of study under
consideration.
3.12 Reliability of Instrument

The reliability is most important element used in research process which is used to examine
the internal consistency among measures used in the questionnaire. The reliability denotes
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to the internal consistency among research variables, their attributes and the questions used
for measuring these variables (Wilson, 2010). For validating instrument, researcher suggest
three methods comprises construct, content and external validity. Thus, researcher ensured
the validity of the instruments through field study while the reliability was endured through
the Cronbach Alpha. To study reliability, Cronbach’s alpha tools has been used to calculate
value against six (6) research variables over 54 items with Alpha value (0.937) which shows
that research variables used in instrument for the data collection from respondents have good
reliability.
Table 3.3 The Reliability Statistics

Variables Items Cronbach’s Alpha
Economic Responsibility 08 0.842
Social Responsibility 08 0.864
Environmental Responsibility 08 0.712
Corporate Reputation 10 0.789
Customers Trust 10 0.825
Customers Loyalty 10 0.888
Overall Value 54 0.937
3.13 Validity of Instrument

The validity is the critical aspects of research process which guide researcher in conducting
research in systematic manner. The validity helps in explaining extent through which the
requirements for scientific methods is shadowed during the research process by producing
research findings (Cohen et al., 2007). The validity apprehensions help in deciding that to
what extent the measurement in research is correct, thus that measurement changes replicate
the accurate differences that are being measured in order to get the suitable information for
research.
The researcher recommends diverse techniques to examine validity like the predictive
(behavioral features), content (face validity), discriminant (measuring the same concept)
and content (captures the essence) validities (Churchill, Brown, and Suter, 2010). For this
purpose, the researcher used the KMO and Bartlett's test for validity of measures (variables)
over items used in questionnaire by providing significant information in deciding validity
of the instrument concerning the sample adequacy, the correlation matrix and the factor
loadings.
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Table 3.4 Validity Statistics (Economic Responsibility)
KMO and Bartlett's Test Matrix
Sampling Adequacy (Kaiser-Meyer-Olkin Measure) .773 Items Score
Bartlett's Test of Approx. Chi-Square 532.948 ER1 .639
Sphericity Difference 22 ER2 .502
Significance .000 ER3 .569
ER4 .585
Required Computed ER5 .754
KMO test = or > .7 .737 ER6 .457
Bartlett’s test = or < .05 .000 ER7 .372
Factor Loadings = or > .4 ER8 .421
Table 3.5 Validity Statistics (Social Responsibility)

Bartlett's Test of Approx. Chi-Square 411.574 SR1 .512
Sphericity Difference 24 SR2 .639
Significance .000 SR3 .596
SR4 .458
Required Computed SR5 .354
KMO test = or > .7 .812 SR6 .575
Bartlett’s test = or < .05 .000 SR7 .419
Factor Loadings = or > .4 SR8 .389
Table 3.6 Validity Statistics (Environmental Responsibility)

Bartlett's Test of Approx. Chi-Square 544.128 ER1 .421
Sphericity Difference 21 ER2 .318
Significance .000 ER3 .469
ER4 .679
Required Computed ER5 .534
KMO test = or > .7 .731 ER6 .434
Bartlett’s test = or < .05 .000 ER7 .287
Factor Loadings = or > .4 ER8 .403
Table 3.7 Validity Statistics (Corporate Reputation)

Bartlett's Test of Approx. Chi-Square 387.682 CR1 .612
Sphericity Difference 19 CR2 .467
Significance .000 CR3 .524
CR4 .297
CR5 .419
CR6 .343
Required Computed CR7 .561
KMO test = or > .7 .698 CR8 .419
Bartlett’s test = or < .05 .000 CR9 .564
Factor Loadings = or > .4 CR10 .423
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Table 3.8 Validity Statistics (Customers Trust)
Bartlett's Test of Approx. Chi-Square 421.834 CT1 .731
Sphericity Difference & 20 CT2 .578
Significance .000 CT3 .396
CT4 .497
CT5 .621
CT6 .311
Required Computed CT7 .482
KMO test = or > .7 .818 CT8 .436
Bartlett’s test = or < .05 .000 CT9 .510
Factor Loadings = or > .4 CT10 .368
Table 3.9 Validity Statistics (Customers Loyalty)

Bartlett's Test of Approx. Chi-Square 518.742 CL1 .529
Sphericity Difference & Significance 25 (.000) CL2 .419
CL3 .376
CL4 .498
CL5 .402
CL6 .533
Required CL7 .647
KMO test = or > .7 Computed CL8 .311
Bartlett’s test = or < .05 .802 CL9 .651
Factor Loadings = or > .4 .000 CL10 .632
To examine the validity of the items in the instrument, the KMO and Bartlett tests were used
thereby offering the significant information in deciding the validity of the instrument. The
results show that the KMO values for all the research variables in instrument are above the
required and suitable values (.7) like for economic responsibility (.773), social responsivity
(.812), environmental responsibility (.731), corporate reputation (.708), the customers trust
(.818) and customers’ loyalty (.802). Therefore, the variables in the instrument have suitable
validity regarding the sample adequacy. For structure detection concerning the correlation
matrix shows the significance value (.000) for all the variables from the results of the Bartlett
tests.
Similarly, the required value for factor loading of items in instrument is (.4) and in present
case, for all the research variables, the item factor loadings are above (.4) which means that
the items have acceptable association between each other. However, the items having lower
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factor loading have been excluded from instrument. Therefore, the results provide enough
evidence about the validity of the instrument. Therefore, the results of the reliability and
validity provide sufficient information about the internal consistency, sample adequacy, the
structure detection of correlation matrix and the factor loading in deciding the validity and
reliability.
3.14 Mediation Analysis

The corporate reputation and customer trust have been used as mediators in the relationships
between the corporate social responsibility measures (social, economic and environmental)
and customer loyalty. The mediation is used to examine intermediary influence of any third
variable in connecting predicting and criterion variables. The mediation is used to examine
direct relationship between independent and dependent variables and indirect relationship
between the independent variable and dependent variable through mediating variables. For
this drive, Hayes Process Model (2008) mediation procedure is used which is recommended
tool for mediation and which has already been used by different researchers in their research
studies. Therefore, six mediation models have been extracted from theoretical framework
to examine the role of mediators in the relationships between the predicting and criterion
variables. Similarly, three multiple mediation models have been extracted from theoretical
framework to examine that which mediator is more effective in offering active facilitating
role.
Table 3.10 The Mediation Models

Predictors Mediators Criterions
Mediation Model No. 1
Economic Responsibility Corporate Reputation Customers Loyalty
Social Responsibility Corporate Reputation Customers Loyalty
Environmental Responsibility Corporate Reputation Customers Loyalty
Economic Responsibility Customers Trust Customers Loyalty
Social Responsibility Customers Trust Customers Loyalty
Environmental Responsibility Customers Trust Customers Loyalty
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Table 3.11 The Multiple-Mediation Models
Multiple Mediation Model No. 1
Economic Responsibility Corporate Reputation Customers Loyalty
Customers Trust
Social Responsibility Corporate Reputation Customers Loyalty
Customers Trust
Environmental Responsibility Corporate Reputation Customers Loyalty
Customers Trust
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CHAPTER No. 4 RESULTS & DISCUSSIONS
The results of the study obtained through statistical procedures thereby finding the answers
of the research questions have been presented in this section. In this connection, the results
presentation is the most important part of research studies as it helps in providing the main
outcomes concerning the assumptions extracted from the theoretical framework. Therefore,
the researcher presented the main results systematically to reach the conclusion of present
study.
4.1 Descriptive Results

The descriptive results help in providing the information about description of demographic
and research variables under considerations. The descriptive results provide the prerequisite
information with regard to frequencies concerning the mean, standard deviation, minimum
and maximum responses of respondents in order to describe the variables in understanding
their representation about the nature of demographic as well as the research variables more
comprehensively.
Table 4.1 Cross-tabulation about Profession, Experience & Education

Education Experience Total
1-10 Years 11-20 Years 21-30
Bachelor Profession Businessmen 39 48 22 109
Servicemen 13 15 18 46
Total 52 63 40 155
Master Profession Businessmen 16 14 11 41
Total 48 53 26 127
M. Phil Profession Businessmen 10 12 11 33
Total 19 22 17 58
Total Profession Businessmen 65 74 44 183
Total 119 138 83 340
The demographics were used as the personal characteristics of the respondents those who
were under exploration by analyzing their view about under investigation phenomena along
with inter relationships. The table above show the frequencies about profession, experience
and education of respondents (customers) in Islamic banks where about the 340 respondents
participated in this study. The table above is self-explanatory and all personal characteristics
150
of respondents are described over their frequencies concerning profession, experience and
education.
Table 4.2 Cross-tabulation about Residence, Gender & Age

Residence Age Total
20-35 Years 36-50 Years 51 & Above
Local Gender Male 73 66 23 162
Residence Female 10 14 25 49
Total 83 80 48 211
Non-Local Gender Male 23 52 15 90
Residence Female 11 13 15 39
Total 34 65 30 129
Total Gender Male 96 118 38 252
Female 21 27 40 88
Total 117 145 78 340
The personal characteristics of the respondents were used as demographics variables about
the sample of the study those views have been analyzed about the main variables and their
relationships. Total 340 respondents participated in current study and above table show the
frequencies concerning residence, gender and age. The above table is also self-explanatory
and above-mentioned demographic variables can be best described through the mentioned
frequencies.
Table 4.3 Descriptive Statistics

N Minimum Maximum Mean SD
Economic Responsibility 340 1.33 5.00 3.2227 .80430
Social Responsibility 340 1.17 4.67 3.0363 .77415
Environmental Responsibility 340 1.83 5.00 3.3642 .74510
Corporate Reputation 340 1.90 4.60 3.2288 .50191
Customers Trust 340 1.50 4.60 3.2347 .58836
Customers Loyalty 340 1.70 4.80 3.5600 .67735
Valid N (List-wise) 340
The above table provide the descriptive statistics about the research variables under study
concerning the total sample, minimum and maximum response rate of the respondents about
each question through which the variables are measured, the mean and standards deviation.
The descriptive statistics helps in providing the leading information about determining the
variables research variables in understanding their mean, standard deviation and rate of the
responses.
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Table 4.4 Normality Distribution
Skewness Kurtosis
Statistic Std. Error Statistic Std. Error
Economic Responsibility -.282 .132 -.659 .264
Social Responsibility -.354 .132 -.558 .264
Environmental Responsibility .038 .132 -.488 .264
Corporate Reputation -.099 .132 -.244 .264
Customers Trust -.210 .132 -.349 .264
Customers Loyalty -.552 .132 -.296 .264
The normality is used to examine the outlier detection which helps in making data normal
which is considered as general thumb rule. The distribution is very skewed, when skewness
is greater than 1 or less than -1. When skewness is between 0.5 and 1 or between -1 and -
0.5, then it is measured as moderately distribution skewed. The distribution is approximately
symmetric, when the skewness is between -0.5 and 0.5. however, the Kurtosis tells upon the
sharpness and height of central peak, virtual to the standard bell curve. In present case, both
the Skewness and Kurtosis values are within the required range, which shows that data is
normal.
Table 4.5 Collinearity Statistics

Model Collinearity Durbin-Watson
(Constant) Tolerance VIF 1.125
Economic Responsibility .534 1.771
Social Responsibility .605 1.654
Environmental Responsibility .888 1.727
Corporate Reputation .724 1.881
Customers Trust .588 1.599
The collinearity is condition wherein some research variables are correlated higher which
thus creates problems in analyzing the data and attaining the desired outcomes. According
to researchers (Hill & Adkins, 2001; Maddala & Lahiri, 2009), if VIF values exceeding 4.0,
or by tolerance less than 0.2 then there is a problem with collinearity and multi-collinearity.
In present case, as per the collinearity statistics, concerning the variables, the tolerance and
VIF values are in required range thus there are limited chances of collinearity and multi-
collinearity.
4.2 Inferential Results

The inferential analysis helps in providing the information about the relationships among
the research variables with regard to association, cause-&-effect in between independent,
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mediating and dependent research variables along with group mean differences in responses
concerning the research variables. These results are consequently help the researchers in
understanding the nature and direction of relationships among the research variables under
considerations.
4.2.1 Correlation Analysis

The correlation analysis helps in understanding the strength and direction of relationship
among the research variables. The correlation helps in determining the association among
the research variables which further help in examining cause-&-effect relationship among
variables.
H1: There is significant association between CSR (economic, social and environmental),
customer loyalty, corporate reputation & customers trust.
Table 4.6 Correlation Analysis

ERS SRS ENR CRR CST
ERS Pearson Correlation 1 .458** .311** .456** .554**
Sig. (2-tailed) .000 .000 .000 .000
N 340 340 340 340 340
SRS Pearson Correlation .558** 1 .267** .416** .521**
Sig. (2-tailed) .000 .000 .000 .000
N 340 340 340 340 340
ENR Pearson Correlation .311** .267** 1 .126* .224**
Sig. (2-tailed) .000 .000 .020 .000
N 340 340 340 340 340
CRR Pearson Correlation .456** .416** .126* 1 .439**
Sig. (2-tailed) .000 .000 .020 .000
N 340 340 340 340 340
CST Pearson Correlation .564** .521** .224** .439** 1
Sig. (2-tailed) .000 .000 .000 .000
N 340 340 340 340 340
CSL Pearson Correlation .574** .686** .509** .493** .480**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 340 340 340 340 340
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
ERS: Economic Responsibility, SRS: Social Responsibility, ENR: Environmental Responsibility
CRR: Corporate Reputation, CST: Customers Trust, CSL: Customers Loyalty
The first hypothesis was about the association between the predictors and criterion variables
in order to examine the strength and direction of association among the research variables.
The results provide enough information in deciding the association among the variables in
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this study. The predictors are positively and significantly associated with criterion variable
as customers’ loyalty is positively and significantly associated with economic responsibility
(.574 & .000), the social responsibility (.686 & 000), environmental responsibility (.509 &
.000), corporate reputation (.493 & .000) and the customers trust (.480 & .000). The results
show that the association among the predicting variables and criterion variables is higher as
compared to independent variables themselves, therefore, there exists nominal chances of
the collinearity and multi-collinearity issues. Thus, from the results, the hypothesis No. 1 as
about the association among the research variables is hence accepted and substantiated as
true.
4.2.2 Regression Analysis

The regression analysis helps in examining the influence of the predicting variables over the
criterion and mediating variables under study. The cause-&-effect relationship is helpful in
understanding the effect of one variable over another variable through the procedure of the
regression.
H2: There is significant impact of corporate social responsibility (economic, social and
environmental) on customers’ loyalty.
Table 4.7 Model Summary

Model R R Square Adjusted Std. Error F Sig.
R Square Estimate
1 .780a .609 .606 .42544 174.442 .000b
Table 4.7a Coefficients of Regression

Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B SE Beta
1 (Constant) .757 .130 5.834 .000
Economic Responsibility .157 .035 .187 4.445 .000
Social Responsibility .435 .036 .497 12.00 .000
Environmental Responsibility .290 .033 .319 8.820 .000
a. Predictors: Environmental, Social, Economic b. Dependent Variable: Customers Loyalty
The second hypothesis was about the influence of predictors on the criterion variables by
examining the cause-&-effect relationship. The results from regression provide substantial
information in deciding the effect of predictors on criterion variables. Likewise, the R2 show
the 61% variation in criterion variable (customers loyalty) is due to predictors (economic,
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social and environmental responsibilities). Similarly, ANOVA and coefficient of regression
tables also provide significant information likewise predictors show the significant impact
on the criterion variables as economic responsibility (Beta value = .157 & P-value = .000),
social responsibility (Beta value = .435 & P-value = .000) and environmental responsibility
(Beta value = .290 & P-value = .000). The results thus verified the results from correlation
wherein the highest correlation was between the social responsibility and customers’ loyalty
and Beta value in regression is higher than other variables, and thus hypothesis No. 2 is also
accepted.
4.3 Mediation Analysis

The mediation analysis is supportive in examining the role of the third variable in connecting
the independent and dependent variables of the study. This helps in determining facilitating
role of third variable which are expected to influence the relationships wherever this variable
arrives.
4.3.1 First Mediation Model
H3: The relationship between economic responsibility and customer loyalty is mediated
by corporate reputation.
X = Economic Responsibility, M = Corporate Reputation & Y = Customer Loyalty
A. First Mediation Step (a)

R R-square MSE F df1 df2 p
.4564 .2083 .2000 88.8595 1.0000 338.0000 .0000
Table 4.8a Coefficient of Regression

Model Coefficient se t p LLCI ULCI
Constant 2.3110 .1019 22.6787 .0000 2.1106 2.5115
Economic .2848 .0302 9.4265 .0000 .2254 .3442
Responsibility
Independent Variable: Economic Responsibility
Dependent Variable: Corporate Reputation
The mediation offers four steps wherein the first step in mediation analysis provide path (a)
is to examine the impact of the predictor (economic responsibility) on corporate reputation
(mediator). Results show that economic responsibility brings 21% variation in the corporate
155
reputation. The coefficient table also shows significant impact of economic responsibility
on the corporate reputation by providing the substantial outcomes (β = 0.28 & p = .000).
Though, the effect is somehow pathetic however, it is still significant by fulfilling the first
condition for mediation that the path (a) should be significant in the mediation four step
procedure.
B. Second & Third Mediation Steps (b & ć)

.6227 .3877 .2826 125.1059 2.0000 337.0000 .0000

constant 1.1027 .1765 6.2481 .0000 .7555 1.4499
Corporate .4014 .0627 6.4044 .0000 .2781 .5247
Reputation
Economic .3604 .0438 8.2349 .0000 .2743 .4464
Responsibility
Independent Variable: Economic Responsibility and Corporate Reputation
Dependent Variable: Customer Loyalty
The second and third step of mediation (b & ć) provide statistics about impact of predictors
(corporate reputation & economic responsibility) on criterion variable (customers loyalty).
The results show that there is 39% (R2) change in dependent variable (customers’ loyalty)
is due to the predictors (corporate reputation & economic responsibility). The results further
reveals that the both the predictors have significant impact on criterion variable (β = 0.40 &
.36 while & p = .000 & respectively). Thus, results confirmed the second and third steps of
mediation.
C. Fourth Mediation Step (c)

.5636 .3177 .3140 158.1829 1.0000 338.0000 .0000

Constant 2.0303 .1313 15.4658 .0000 1.7721 2.2885
Economic .4747 .0377 12.5771 .0000 .4004 .5489
Responsibility
Independent Variable: Economic Responsibility Dependent Variable: Customer Loyalty
156
The fourth step of mediation provide information about path (c) to examine the direct effect
of predictor (economic responsibility) on customer loyalty). The results show that there is
32% variation in the customers’ loyalty is due to economic responsibility by further offering
the significant statistics (β = 0.47 & p = .000). The mediation procedure offered valuable
information in deciding the mediation. Therefore, all the paths in mediation four steps are
significant wherein the increase in β from .36 in the indirect relationship (paths = b & ć) to
.47 in direct relationships (path = c) after the arrival of mediator confirmed partial mediating
role of corporate reputation in relationship between economic responsibility and customers’
loyalty. Consequently, from the mediations results, hypothesis No. 3 is thus accepted and
substantiated.
Table 4.11 Normal Theory Tests OR Sobel Test

Effect se Z p
.1143 .0217 5.2772 .0000
The normal theory test or Sobel test is commonly used for estimates about the existence of
mediation in connecting the predictor and criterion variables. The indirect effect (mediation
effect) may also be computed as variation between c' and c. Therefore, level of confidence
(.05) greater than Zero (.1143) and the p-value = .000 confirmed the existence of mediation
in connecting the independent and dependent variables under considerations in this research
study.
4.3.2 Second Mediation Model
H4: The association between social “responsibility and customer” loyalty is mediated by
corporate reputation.
X = Social Responsibility, M = Corporate Reputation & Y = Customer Loyalty

.4163 .1733 .2089 62.6607 1.0000 338.0000 .0000
Independent Variable: Social Responsibility
157
Constant 2.4094 .1085 22.2025 .0000 2.1960 2.6229
Social .2699 .0341 7.9159 .0000 .2028 .3369
Responsibility
The second mediation model wherein social responsibility was used as predictor; corporate
reputation was used as mediator while customers’ loyalty was used as criterion variables.
The first path (a) provide the information about the prediction of corporate reputation over
the social responsibility. The results show that 17% variance in corporate reputation is due
to social responsibility wherein the Beta and p-value (.27 & .000) showed the significance
of corporate reputation through social responsibility. Therefore, the first path conforms the
mediation.

.7232 .5230 .2201 178.6523 2.0000 337.0000 .0000

Constant .9224 .1609 5.7333 .0000 .6059 1.2388
Corporate .3378 .0541 6.2433 .0000 .2314 .4443
Reputation
Social .5095 .0418 12.2011 .0000 .4273 .5916
Responsibility
Independent Variable: Social Responsibility and Corporate Reputation
The mediation second and third steps provide the information about paths (b & ć) wherein
R2 shows the 52% variation in customer loyalty is due to social responsibility and corporate
reputation. The coefficient of regression shows the significant impact of both the predictors
in determining the criterion variables likewise the corporate reputation (β = 0.34 & p = .000)
while social responsibility (β = 0.51 & p = .000). Therefore, the second and third steps also
confirmed the mediation through indirect relationship between predictor and criterion
through the mediator thereby providing the significant information through the statistical
procedures in confirming the required paths of mediation in deciding the mediating role of
mediator.
158

.6865 .4712 .2433 251.1324 1.0000 338.0000 .0000

Constant 1.7363 .1249 13.8971 .0000 1.4906 1.9821
Social .6006 .0379 15.8472 .0000 .5261 .6752
Responsibility
The third step on mediation (c) provide the information about the direct relationship between
predicting and criterion variable. The model summary show 47% variance in the customers’
loyalty is due to the social responsibility. The coefficient table also show the significance of
social responsibility (β = 0.60 & p = .000) towards the customers’ loyalty. Thus, from the
results of second mediation model, as all the paths are significant while the Beta value for
the direct relationship (.60) has been reduced to (0.51) which confirms that the corporate
reputation partially mediates the relationship between social responsibility and customers’
loyalty. Consequently, from the results, it is decided that hypothesis No. is accepted and
substantiated.

Effect se Z p
.0912 .0187 4.8781 .0000
The Sobel is recommended to confirm the existence of mediation in connecting the predictor
and the criterion variables. Therefore, through Sobel test which is commonly known as
normal theory test shows the total effect (.0912) and the confidence level (.000) which are
in required limits confirmed the mediation existence in linking the predicting and dependent
variables.
4.3.3 Third Mediation Model
H5: The association between environmental “responsibility and customer” loyalty is

mediated by corporate reputation.
X = Environmental Responsibility, M = Corporate Reputation & Y = Customer Loyalty
159

1258 .0158 .2487 4.9510 1.0000 338.0000 .0267

Constant 2.9438 .1344 21.9083 .0000 2.6795 3.2081
Environmental .0847 .0381 2.2251 .0267 .0098 .1596
Responsibility
Independent Variable: Environmental Responsibility
In third mediation model, the corporate reputation was used as mediator in connecting the
environmental responsibility and customers’ loyalty. The first mediation step provides the
information about predicting role of environmental responsibility in determining corporate
reputation wherein there is very nominal variation in the corporate reputation through the
environmental responsibility. The coefficient shows the significant impact of environmental
responsibility on corporate reputation (β = 0.08 & p = .026) thus fulfilling the first step in
mediation.

6680 .4462 .2556 140.6686 2.0000 337.0000 .0000

Constant .2717 .2069 1.3129 .1901 .1354 .6788
Corporate .5877 .0521 11.2752 .0000 .4852 .6903
Reputation
Environmental .4134 .0446 9.2776 .0000 .3257 .5010
Responsibility
Independent Variable: Environmental Responsibility and Corporate Reputation
The b and ć are the second and third steps in mediation wherein 45% variance in customers’
loyalty is due to the corporate reputation and environmental responsibility. The results show
that both the predicting variables have significant influence over the criterion variable with
160
(β = 0.59 & p = .000) for the corporate reputation towards customers’ loyalty and (β = 0.41
& p = .000) for environmental responsibility towards the customers’ loyalty. Thus, the 2nd
and 3rd steps of mediation also fulfilled the conditions for mediation by providing significant
information.

.5095 .2596 .3407 85.5079 1.0000 338.0000 .0000

Constant 2.0018 .1926 10.3955 .0000 1.6230 2.3806
Environmental .4632 .0501 9.2470 .0000 .3646 .5617
Responsibility
The fourth step of mediation provide the information about the direct relationship between
environmental responsibility and customers loyalty. The summary show that there is 26%
change in the customers’ loyalty is due to the environmental responsibility. The coefficient
table provide the significant information in deciding the prediction of customers’ loyalty
over environmental responsibility (β = 0.46 & p = .0000). Thus, Beta for direct relationship
is (.46) which has been reduced to (.41) over the arrival of mediator in connecting predictor
and criterion by providing significant p-values for both variables. Thus, corporate reputation
partially mediates the relationship between the environmental responsibility and customers’
loyalty.

Effect se Z p
.0498 .0229 2.1748 .0296
To confirm the mediation existence, the Sobel test is suggested in verifying the intermediary
role of mediator in connection between predictor and criterion variables. Thus, over normal
theory test, usually known as Sobel shows (.0489) total effect and (.000) confidence level
in confirming the existence of the mediation in connecting the independent and dependent
variables.
161
4.3.4 Forth Mediation Model
H6: The association between economic “responsibility and customer” loyalty is mediated
by customers’ trust.
X = Economic Responsibility, M = Customers’ Trust & Y = Customer Loyalty

.5742 .3297 .2327 161.5293 1.0000 338.0000 .0000

Constant 1.8810 .1077 17.4685 .0000 1.6692 2.0928
Economic .4200 .0330 12.7094 .0000 .3550 .4851
Responsibility
Dependent Variable: Customers’ Trust
The customers trust was used as second mediator in connecting the economic responsibility
and customers’ loyalty. The first mediation step (a) provide the information about predicting
role of economic responsibility in determining the customers trust. The results revealed that
33% variance in the customers’ trust is due to the economic responsibility. The coefficient
of regression shows the significant impact of economic responsibility on customers’ trust (β
= 0.42 & p = .0000). consequently, the first step satisfied the first condition of the mediation
process.

5953 .3543 .2980 100.0942 2.0000 337.0000 .0000

Constant 1.5238 .1697 8.9776 .0000 1.1900 1.8577
Customers’ .2692 .0668 4.0298 .0001 .1378 .4007
Trust
Economic .3616 .0490 7.3845 .0000 .2653 .4579
Responsibility
Independent Variable: Economic Responsibility and Customers’ Trust, Dependent: Customers Loyalty
162
The second and third steps in mediation provide the details about (b & ć) paths. The results
show that there is 35% variance in the customer loyalty is due to the customers trust and the
economic responsibility. Similarly, the coefficient of regression shows significant impact of
the economic responsibility and customers trust on the customers’ loyalty (β = 0.36 & p =
.0000) and (β = 0.27 & p = .0000) respectively. Thus, the second and third steps of mediation
also fulfilled the conditions for the mediation thereby offering the critical role of mediation
procedure.

.5636 .3177 .3140 158.1829 1.0000 338.0000 .0000

Constant 2.0303 .1313 15.4658 .0000 1.7721 2.2885
Economic .4747 .0377 12.5771 .0000 .4004 .5489
Responsibility
The fourth step of mediation provide the details about the direct relationship (c) between the
independent and dependent variables. The results showed that 32% change in customers’
loyalty is due to the economic responsibility. Further, the results revealed that the economic
responsibility has significant impact on the customers’ loyalty (β = 0.47 & p = .0000). Here,
in direct relationship, the Beta value is (0.47) while in the indirect relationship, Beta value
is (0.36). Thus, the Beta value has been reduced from (0.47) to (0.36) when customers trust
arrives as mediator. Thus, customers trust partially mediates the relationship between the
variables.

Effect se Z p
.1131 .0295 3.8306 .0001
The Sobel test confirmed the existence of mediation in connecting the predictor and criterion
variables. In this connection, the total effect model and the level of confidence confirmed
the mediation by providing the significant values (.1131) and (.0001) respectively to confirm
163
mediation. Consequently, the information above confirmed the mediating role of customers’
trust.
4.3.5 Fifth Mediation Model
H7: The association between social “responsibility and customer” loyalty is mediated by
customers’ trust.
X = Social Responsibility, M = Customers’ Trust & Y = Customer Loyalty

.5215 .2720 .2528 121.9513 1.0000 338.0000 .0000

Constant 2.0313 .1115 18.2154 .0000 1.8120 2.2507
Social .3963 .0359 11.0432 .0000 .3257 .4669
Responsibility
In the fifth mediation model, the customers trust was used as mediator in connecting social
responsibility and customers’ loyalty. The first mediation step (a) provide substantial details
by showing 27% variation in customers trust due to the social responsibility while the Beta
(.40) and the p-value provide the significance of the social responsibility towards customers’
trust. This information fulfills first condition of mediation wherein regression is pragmatic
to examine effect of independent variable on mediating variable by applying first step in
mediation.

.7013 .4918 .2345 147.7403 2.0000 337.0000 .0000
Independent Variable: Social Responsibility and Customers’ Trust
164
Constant 1.3431 .1534 8.7552 .0000 1.0414 1.6449
Customers’ .1936 .0543 3.5650 .0004 .0868 .3004
Trust
Social .5239 .0451 11.6279 .0000 .4353 .6125
Responsibility
The third and second steps of mediation offers the details about the paths (b & ć) which are
the requirements of the mediation procedure. The results show that both customers trust and
social responsibility are responsible in bringing 49% variation in the customers’ loyalty and
the coefficient of regression further confirmed this relationship by providing the significant
information (β = 0.19 & p = .000) and (β = 0.52 & p = .000) respectively. Therefore, second
and third steps also fulfilled the other conditions for the mediation in confirming the role of
mediator.

.6865 .4712 .2433 251.1324 1.0000 338.0000 .0000

Constant 1.7363 .1249 13.8971 .0000 1.4906 1.9821
Social .6006 .0379 15.8472 .0000 .5261 .6752
Responsibility
The third step (c) of mediation is helpful and required condition for mediation by examining
the direct relationship between the predictor and criterion variables. The results show that
the social responsibility is responsible in bringing 47% change in the customers’ loyalty by
showing the significance through statistical values (β = 0.60 & p = .000). As the Beta in the
indirect relationship has been reduced to (.52) with the arrival of customers trust as mediator
as appeared in the direct relationship (.60) while all the paths in mediation procedure still
remained the significant which confirmed the partial mediating role of customers trust in
the connection between social responsibility (predictor) and customers’ loyalty (criterion)
variables.
165
Effect se Z p
.0767 .0227 3.3800 .0007
The Sobel test further confirmed the mediation by providing the total effect and the level of
confidence values within the required range. Therefore, the above information from normal
theory test confirmed the existence of mediation in connecting independent and dependent
variables. This test is usually used for confirming the mediation in relationships among the
variables.
4.3.6 Sixth Mediation Model
H8: The association between environmental “responsibility and customer” loyalty

is mediated by customers’ trust.
X = Environmental Responsibility, M = Customers’ Trust & Y = Customer Loyalty

.2240 .1502 .3298 17.0091 1.0000 338.0000 .0000

Constant 2.6397 .1503 17.5573 .0000 2.3440 2.9354
Environmental .1769 .0429 4.1242 .0000 .0925 .2612
Responsibility
The six-mediation model concerned with the mediating role of customers trust in connecting
the environmental responsibility and customers’ loyalty. The R2 shows very nominal change
in the customers trust due to the environmental responsibility however, the coefficient of
regression table confirmed the significance of environmental responsibility in predicting the
customers trust (β = 0.18 & p = .000). Therefore, the first step of mediation fulfills the first
condition of the mediation procedure by examining the mediator (customers trust) through
the predicting variable (environmental responsibility) to confirm first condition required in
mediation.
166

.6331 .4008 .2765 97.5840 2.0000 337.0000 .0000

Constant .8299 .2131 3.8945 .0001 .4107 1.2490
Customers’ .4440 .0510 8.6994 .0000 .3436 .5443
Trust
Environmental .3847 .0478 8.0521 .0000 .2907 .4786
Responsibility
Independent Variable: Environmental Responsibility and Customers’ Trust
The second step and third step in mediation confirmed the (b & ć) paths by confirming the
indirect relationship between predicting variable and criterion variable through mediator.
The results show that 40% change in customers’ loyalty is possible through the customers
trust and environmental responsibility while the coefficient of regression shows significant
impact of environmental responsibility and customers trust on customers’ loyalty (β = 0.38
& p = .000) and (β = 0.44 & p = .000) respectively. Therefore, the second and third steps in
mediation also confirmed the other conditions of the mediation in deciding the role of the
mediator.

.5095 .2596 .3407 85.5079 1.0000 338.0000 .0000

Constant 2.0018 .1926 10.3955 .0000 1.6230 2.3806
Environmental .4632 .0501 9.2470 .0000 .3646 .5617
Responsibility
The fourth mediation step confirmed the fourth condition of mediation thereby examining
the direct relationship of the independent variable on dependent variable. The results show
167
that environmental responsibility is responsible to bring 26% variation in customers’ loyalty
(β = 0.46 & p = .000). The beta value in direct relationship (.46) has been reduced to (.38)
in the indirect relationship after arriving the mediator while all paths remained significant
thus it confirmed the partial role of mediator in connecting the dependent and independent
variables.

Effect se Z p
.0785 .0212 3.7067 .0002
The Sobel test further confirmed the mediation thereby proving the total effect and p-value
in the required range which validated the meditation in deciding that the customers trust
significantly mediated the relationship between the customers’ loyalty and environmental
responsibility which is an active tool in confirming the mediation existence among research
variables.
4.4 Multiple Mediation

The multiple mediation models have been suggested by Hayes (2008) aimed at examining
the role of multiple mediators in connecting the independent and dependent variables. The
main purpose behind is to examine the differences between single mediation and multiple
mediation.
4.4.1 First Multi-Mediation Model
H9: Both mediators (corporate reputation & customers trust) significantly mediate
the relationship amid Economic responsibility and customers’ loyalty.
X = Economic Responsibility, M1 = Corporate Reputation, M2 = Customers’ Trust

& Y = Customer Loyalty
A. First Mediation Steps (a)

.4564 .2083 .2000 88.8595 1.0000 338.0000 .0000
168
Constant 2.3110 .1019 22.6787 .0000 2.1106 2.5115
Economic .2848 .0302 9.4265 .0000 .2254 .3442
Responsibility

.5742 .3297 .2327 161.5293 1.0000 338.0000 .0000

Constant 1.8810 .1077 17.4685 .0000 1.6692 2.0928
Economic .4200 .0330 12.7094 .0000 .3550 .4851
Responsibility
Independent Variable: Economic Responsibility Dependent Variable: Customers Trust
The corporate reputation and customers trust were measured as the mediators in connecting
economic responsibility and customers’ loyalty. In first step in mediation while examining
the predictor with mediator, it confirmed that predictor (economic responsibility) is bringing
variation in corporate reputation (21%) and customers trust (33%). The coefficient shows
that economic responsibility has significant impact on both the mediators likewise corporate
reputation (β = 0.28 & p = .000) and (β = 0.42 & p = .000). Therefore, the first mediation
step provides significant information about the first condition of mediation in examining the
mediation.

.6363 .4049 .2755 94.5502 3.0000 336.0000 .0000

Constant .8608 .1881 4.5771 .0000 .4908 1.2307
Corporate .3515 .0626 5.6162 .0000 .2284 .4746
Reputation
Customers’ .1899 .0671 2.8319 .0049 .0580 .3218
Trust
Economic .2948 .0519 5.6846 .0000 .1928 .3968
Responsibility
Independent Variable: Economic Responsibility, Corporate reputation and Customers’ Trust
169
The multiple mediation is used to examine the combined effect of mediators in deciding the
which mediator is more effective in mediation procedure. The R2 shows that there is 40%
change in customers’ loyalty is due to corporate reputation, customers trust and economic
responsibility. The coefficient shows that there is significant impact of the predictors and
the mediators in determining the customers’ loyalty likewise corporate reputation (β = 0.35
& p = .000), customers trust (β = 0.19 & p = .0049) and economic responsibility (β = 0.29
& p = .000). Therefore, the second and third step in mediation confirmed the mediating role
of mediators in connecting the economic responsibility and customers’ loyalty in mediation
procedure.

.5636 .3177 .3140 158.1829 1.0000 338.0000 .0000

Constant 2.0303 .1313 15.4658 .0000 1.7721 2.2885
Economic .4747 .0377 12.5771 .0000 .4004 .5489
Responsibility
The fourth step of mediation confirmed direct relationship (c) between predicting variable
and criterion variable. The results show that economic responsibility is liable to bring 32%
variance in the customers’ loyalty however, the economic responsibility shows significant
impact on the customers’ loyalty (β = 0.48 & p = .0000). As, the coefficient for the economic
responsibility in direct relationship (.47) has been reduced to (.29) in indirect relationship
after the inclusion of mediator while all the paths remained significant which means that the
mediators partially mediate the connection between economic responsibility and customers’
loyalty.

Variables Effect se Z p
Corporate .1001 .0208 4.8049 .0000
Reputation
Customers trust .0798 .0289 2.7560 .0059
170
The Sobel test confirmed existence of mediation in dependent and independent variables.
As. coefficient and p-value (.35 & .0000) for corporate reputation is higher than customers
trust (.18 & .0079) confirms that corporate reputation is most effect mediator than customers
trust. Likewise, total effect (.10 & .0000) for corporate reputation is higher than customers
trust (.08 & .0059) also confirmed the significance of corporate reputation as compared to
customers trust in mediating the connection between economic responsibility and customer
loyalty.
4.4.2 Second Multi-Mediation Model
the relationship amid social responsibility and customers’ loyalty.
X = Social Responsibility, M1 = Reputation, M2 = Trust & Y = Customer Loyalty

.4163 .1733 .2089 62.6607 1.0000 338.0000 .0000

Constant 2.4094 .1085 22.2025 .0000 2.1960 2.6229
Social .2699 .0341 7.9159 .0000 .2028 .3369
Responsibility
Independent Variable: Social Responsibility Dependent Variable: Corporate Reputation

.5215 .2720 .2528 121.9513 1.0000 338.0000 .0000

Constant 2.0313 .1115 18.2154 .0000 1.8120 2.2507
Social .3963 .0359 11.0432 .0000 .3257 .4669
Responsibility
Dependent Variable: Customers Trust
The second multiple-mediation model was concerned with the mediating role of corporate
reputation and customers trust in connecting social responsibility and customers’ loyalty. In
171
first step of mediation, wherein the indirect relationship has been examined in between the
predictor and mediating variables. The social responsibility is responsible in bringing 17%
variance while customers corporate is bringing 27% variance in customers’ trust. Likewise,
the social responsibility shows the significant impact on both the mediators (β = 0.27 & p =
.0000) and (β = 0.40 & p = .0000). Thus, the customers trust has higher values that corporate
reputation.

7278 .5297 .2177 127.5190 3.0000 336.0000 .0000

Constant .7761 .1677 4.6286 .0000 .4463 1.1059
Corporate .3016 .0567 5.3219 .0000 .1901 .4130
Reputation
Customers’ .1150 .0566 2.0312 .0430 .0036 .2264
Trust
Social .4737 .0463 10.2275 .0000 .3826 .5648
Responsibility
Independent Variable: Social Responsibility, Corporate reputation and Customers’ Trust
The second and third mediation steps are concerning with the second and third conditions
for mediations. The results show that both the predictor and mediators are responsible to
bring 53% variance in the customers’ loyalty. The coefficient of regression shows that the
predictor and mediators have significant impact of loyalty likewise the corporate reputation
(β = 0.30 & p = .0000), customers trust (β = 0.12 & p = .0430) and social responsibility (β
= 0.47 & p = .0000). thus, again the corporate reputation emerged as significant mediator in
connection between the social responsibility and customers’ loyalty in the procedures of the
mediation.

.6865 .4712 .2433 251.1324 1.0000 338.0000 .0000
172
Constant 1.7363 .1249 13.8971 .0000 1.4906 1.9821
Social .6006 .0379 15.8472 .0000 .5261 .6752
Responsibility
The fourth step of mediation confirmed the fourth condition for mediation by examining the
direct relationship between social responsibility and customers’ loyalty. The results show
that 47% variance in customers’ loyalty is due to social responsibility. Moreover, coefficient
show the significant impact of social responsibility on customers’ loyalty (β = 0.60 & p =
.0000). Thus, mediation procedure fulfilled all the required paths wherein the coefficient
values for social responsibility (.60) in direct relationship has been reduced to (.47) with the
inclusion of mediators. Both mediators partially mediate the connection between research
variables.

Corporate Reputation .0814 .0185 4.3925 .0000
Customers trust .0456 .0229 1.9898 .0466
The Sobel test confirmed the mediation existence thereby confirming the effective role of
the mediators in connecting the research variables. As, the coefficient value and p-value for
corporate reputation (β = 0.30 & p = .0000) are higher as compared to customers’ trust (β =
0.12 & p = .0430) which confirmed that corporate reputation is more effective mediator than
customers trust as supported by total effect (.08) and p-value (.0000) for corporate reputation
as compared to (.05) and p-value (.0466) for the customers trust throughout the mediation
procedure.
4.4.3 Third Multi-Mediation Model
the relationship amid environmental responsibility and customers’ loyalty.
X = Environmental Responsibility, M1 = Corporate Reputation, M2 = Customers’

Trust & Y = Customer Loyalty
173
.1258 .0158 .2487 4.9510 1.0000 338.0000 .0267

Constant 2.9438 .1344 21.9083 .0000 2.6795 3.2081
Environmental .0847 .0381 2.2251 .0267 .0098 .1596
Responsibility

2240 .0502 .3298 17.0091 1.0000 338.0000 .0000

Constant 2.6397 .1503 17.5573 .0000 2.3440 2.9354
Environmental .1769 .0429 4.1242 .0000 .0925 .2612
Responsibility
Dependent Variable: Customers Trust
The third multiple-mediation comprises the environmental responsibility as predictor, the

corporate reputation and customers trust as mediators while customers’ loyalty as criterion
variables. The results show that environmental responsibility is used as predictor while the
corporate reputation and customers trust as criterion variables. There is very nominal change
evidenced in predicting the corporate reputation through environmental responsibility while
the similar nominal change is evident from environmental responsibility towards customers’
trust. While both environmental responsibilities have shown significance for both mediators
used as the criterion variables likewise (β = 0.08 & p = .0267) and (β = 0.18 & p = .0000)
respectively.

.7009 .4913 .2355 122.5292 3.0000 336.0000 .0000
Independent Variable: Environmental Responsibility, Corporate reputation and Customers’ Trust
174
Constant -.0601 .1979 -.3036 .7616 -.4493 .3292
Corporate .4520 .0582 7.7627 .0000 .3375 .5666
Reputation
Customers’ .2770 .0549 5.0467 .0000 .1690 .3850
Trust
Environmental .3759 .0445 8.4532 .0000 .2884 .4633
Responsibility
The second and third mediation steps (b & ć) were used to examine the indirect relationships
among the research variables. The results show that 49% variance in the customers’ loyalty
is due to predictors (customers trust, corporate reputation & environmental responsibility).
The coefficient of regression shows the significant impact of all the predictors on criterion
variable likewise, the corporate reputation (β = 0.45 & p = .0000), customers trust (β = 0.28
& p = .0000) and (β = 0.36 & p = .0000). therefore, the second and third steps also confirmed
mediation.

.5095 .2596 .3407 85.5079 1.0000 338.0000 .0000

Constant 2.0018 .1926 10.3955 .0000 1.6230 2.3806
Environmental .4632 .0501 9.2470 .0000 .3646 .5617
Responsibility
The fourth step in the mediation (c) confirmed the direct relation between the environmental
responsibility and customers’ loyalty. The R2 show significant variation (26%) in criterion
variable due to environmental responsibility. However, the coefficient and p-values (.46 &
.0000) also showed the significance of predictor towards criterion variable. Thus, reduction
in Beta in direct relationship (.46) to (.38) in indirect relationship with the inclusion of the
mediator confirmed the partial mediating role of mediators in entire procedure of multiple
mediation.
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Corporate Reputation 0383 .0180 2.1227 .0338
Customers trust .0490 .0155 3.1565 .0016
The normal theory test confirmed the mediation thereby verifying the mediating role of the
mediators in connecting environmental responsibility and customers’ loyalty. The Sobel test
also confirmed that the total effect (0383) and p-values (.0338) are somehow pathetic than
the customers trust total effect (0493) and p-values (.0016) which shows that customers trust
is more effective in connecting/bridging the environmental responsibility and customers’
loyalty.
4.5 Test of Significance

The test of significance helps in determining the group mean differences in responses of the
respondents about the research variables under study. It further helps in examining that to
what extent there exists the variation in responses of different groups of respondents under
study.
H12: The respondents about education have significant group mean differences
concerning research variable under study.
Table 4.47 Group Mean Differences about Education (ANOVA)

Sum2 df Mean2 F Sig.
Economic Between Groups 2.284 2 1.142 1.774 .048
Responsibility Within Groups 217.015 337 .644
Total 219.300 339
Social Between Groups 1.070 2 .535 .892 .411
Total 203.164 339
Environmental Between Groups 1.142 2 .571 1.029 .359
Total 188.204 339
Corporate Between Groups .186 2 .093 .367 .693
Reputation Within Groups 85.212 337 .253
Total 85.398 339
Customers Between Groups .192 2 .096 .276 .759
Trust Within Groups 117.159 337 .348
Total 117.350 339
Loyalty Within Groups 155.110 337 .460
Total 155.536 339
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The test of significant was used to measure the group mean differences in responses of the
respondents. The education as demographic attribute was measures against the research
variables wherein the education shows the group mean differences against one variable, the
economic responsibility (.048). The other variables like (social, environmental, corporate
reputation, trust & loyalty) showed insignificant group mean differences concerning the
education.
H13: The respondents towards profession have significant group mean differences
concerning the research variable.
Table 4.48 Group Mean Differences about Profession (T-test)

Profession N Mean SD F Sig.
Economic Businessman 183 3.2554 .83663 1.922 .037
Responsibility Serviceman 157 3.1847 .76581
Social Businessman 183 2.9936 .76703 .095 .758
Responsibility Serviceman 157 3.0860 .78187 1.624 .203
Environmental Businessman 183 3.3506 .77003
Responsibility Serviceman 157 3.3800 .71707 1.446 .230
Corporate Businessman 183 3.2153 .52455
Reputation Serviceman 157 3.2446 .47534 .053 .819
Customers Businessman 183 3.2355 .58844
Trust Serviceman 157 3.2338 .59015 .685 .409
Customers Businessman 183 3.5574 .69007
Loyalty Serviceman 157 3.5631 .66441 1.922 .247
The profession was used as personal characteristic of respondents which the aim to examine
variation in responses of the respondents. The results of t-test showed that the respondents
concerning the profession have significant group mean differences regarding the economic
responsibility and customers’ loyalty while the other did not show any significance in t-test
application.
H14: The respondents about experience have significant group mean differences
concerning research variable.
Table 4.49 Group Mean Differences about Experience (ANOVA)

Total 219.300 339
Social Between Groups 2.325 2 1.162 1.951 .144
Total 203.164 339
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Environmental Between Groups .178 2 .089 .160 .852
Total 188.204 339
Total 85.398 339
Total 117.350 339
Customers Between Groups 1.272 2 .636 1.089 .051
Total 155.536 339
The experience was used as respondent personal attribute to examine respondent responses
with regard to their variation in views. The t-test results revealed that respondents about the
experience have group mean significant variances about customers’ loyalty and economic
responsibility, conversely, the other variables did not show any significances in the t-test
application.
H15: The respondents about residence have significant group mean differences
concerning research variable.
Table 4.50 Group Mean Differences about Residence (ANOVA)

Residence N Mean SD F Sig.
Economic Local Residence 211 3.2100 .82906
Responsibility Non-Local Residence 129 3.2437 .76478 2.807 .045
Social Local Residence 211 3.0411 .76749
Responsibility Non-Local Residence 129 3.0284 .78785 .208 .649
Environmental Local Residence 211 3.3610 .76922
Responsibility Non-Local Residence 129 3.3695 .70679 2.017 .157
Corporate Local Residence 211 3.2469 .50674
Reputation Non-Local Residence 129 3.1992 .49442 .036 .851
Customers Local Residence 211 3.2190 .60547
Trust Non-Local Residence 129 3.2605 .56061 1.655 .199
Customers Local Residence 211 3.5531 .69716
Loyalty Non-Local Residence 129 3.5713 .64617 1.750 .187
The hypothesis was related with residence which was used as respondents’ personal attribute
to examine the differences in opinion concerning research variables under study. The results
show that residence has shown the significant group mean differences on the economic
responsibility while the other research variables remained insignificant while applying t-test
application.
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H16: The respondents about gender have significant group mean differences about
research variable.
Table 4.51 Group Mean Differences about Gender (ANOVA)

Gender N Mean SD F Sig.
Economic Male 252 3.2020 .80776
Responsibility Female 88 3.2822 .79589 .657 .418
Social Male 252 3.0179 .75569
Responsibility Female 88 3.0890 .82697 1.212 .272
Environmental Male 252 3.3671 .73795
Responsibility Female 88 3.3561 .76946 1.108 .293
Corporate Male 252 3.2103 .50501
Reputation Female 88 3.2818 .49190 .115 .734
Customers Male 252 3.2159 .58527
Trust Female 88 3.2886 .59720 .003 .958
Customers Male 252 3.5480 .66221
Loyalty Female 88 3.5943 .72180 .315 .575
The gender was used as the demographic variable to explore its effect concerning the group
mean differences in responses towards the research variables. The gender is widely research
variables concerning the different research variables however, in the present case, the gender
did not show any significance in group mean differences concerning the research variables
under considerations.
H17: Respondents about age have significant group mean differences concerning
research variable.
Table 4.52 Age-Based Group Mean Differences (ANOVA)

Total 219.300 339
Social Between Groups .481 2 .241 .400 .671
Total 203.164 339
Environmental Between Groups .159 2 .080 .143 .867
Total 188.204 339
Total 85.398 339
Customers Between Groups .942 2 .471 1.364 .257
Total 117.350 339
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Total 155.536 339
The age was also used as the demographic variable with the purpose to examine the group
mean differences in responses about economic, social, environmental, corporate reputation,
trust and customers’ loyalty and the results revealed that the age show the significant group
mean differences regarding the economic responsibility however, other did not show any
significance.
4.6 Summary of Results

The entire statistical procedure has been summarized in this section in order to understand
clearly the acceptance and rejection of the hypotheses. The summary results are thus helpful
for researcher and readers to understand nature of statistical relationships among research
variables.
Table 4.53 Summary Results (Correlation & Regression)

Hypotheses Tools Code Decision
The association among research variables Correlation H1 Accepted
The cause-&-effect relationship among variables Regression H2 Accepted
Table 4.54 Summary Results (Mediation)

Models Variables Results Procedure Code Decision
Model 1 X = Economic Responsibility Partial Hayes H3 Accepted
M = Corporate Reputation Mediation Process
Y = Customers Loyalty
Model 2 X = Social Responsibility Partial Hayes H4 Accepted
Model 3 X = Environmental Responsibility Partial Hayes H5 Accepted
M = Customers Trust Mediation Process
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Table 4.55 Summary Results (Multiple-Mediation)
Models Variables Results Procedure Code Decision
M = Customers Trust
M = Customers Trust
M = Customers Trust
Table 4.56 Summary Results (Test of Significance)

Variables EDU PRO EXP RSD GDR AGE Code Tool Results
Economic .048 .037 .026 .045 .418 .040 H12 ANOVA 5/6
Responsibility
Social .411 .758 .144 .649 .272 .671 H12 T-test 0/6
Responsibility
Environmental .359 .203 .852 .157 .293 .867 H14 ANOVA 0/6
Responsibility
Corporate .693 .230 .437 .851 .734 .726 H15 T-test 0/6
Reputation
Customers .759 .819 .588 .199 .958 .257 H16 T-test 0/6
Trust
Customers .630 .247 051 .187 .575 .632 H17 ANOVA 1/6
Loyalty
4.7 Discussions of Study

The discussion section helps in positioning of the current study by matching the results of
current study with the results of the previous research studies. The current study identified
most leading issues like corporate social responsibility (economic, social & environmental),
the corporate reputation, customers trust and customers’ loyalty. These variables have been
explored in the context of Islamic banks due to their critical role in the social and economic
development of the developing countries including Pakistan. The data was collected from
the customers hailing from the Islamic banks and were analyzed by using different statistical
tools (correlation, regression, mediation, multiple-mediation and test of significance) to find
answers of research questions (hypotheses) about relationships as emerged from theoretical
framework.
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The correlation provides significant information about the association among the research
variables likewise, significant correlation was found between economic responsibility and
customers’ loyalty which has been evident in the previous studies (Crespo & Bosque, 2005;
Berg & Lidfors, 2012; González & Vilela, 2016; Aramburu & Pescador, 2019). Similarly,
the current study shows the significant association between the social responsibility and the
customers loyalty which were also found in the previous studies by showing the significant
and positive association between corporate social responsibility dimensions and customers
loyalty (Iwasaki & Havitz, 2004; Mandhachitara & Poolthong, 2011; Afridi Gul & Haider,
2018). Thus, the findings of current study have been validated over the findings of existing
studies.
The current study shows the positive and significant association between the environmental
responsibility and customers loyalty in context of Islamic banks which has been confirmed
through the findings of existing research studies wherein positive and significant association
was witnessed (Vlachos, Tsamakos, Vrechop & Avramidis, 2009; Ailawadi, Neslin, Luan
& Taylor, 2014; Aramburu & Pescador, 2019). The current study also showed the positive
and significant association between the corporate reputation and customers loyalty which
has been validated over the existing research studies by confirming the similar association
between the customers’ loyalty and corporate reputation in different contexts (Maharsi. Sri
& Fenny. 2006; Keh & Xie, 2009; Fiordelisi, Soana, Schwizer, 2014 and Kircova & Esen,
2018).
This study examined the associated between the customers trust and customers’ loyalty by
confirming the positive and significant association between variables under considerations.
This association between the customers trust and customers’ loyalty has also been validated
through existing research studies by confirming the results of this study (Harris & Goode,
2004; Hoq, Sultana & Amin, 2010; Jan & Abdullah, 2014; Haroon & Qureshi, 2019). The
present study also shows positive and significant association between corporate reputation
and the customers trust which has been validated through the results of the existing research
studies by confirming similar significant association in similar as well as in diverse context
(Harris & Goode, 2004; Kolk & Tulder, 2010; Bögel & Hall, 2016; Aramburu & Pescador,
2019).
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The cause-&-effect relationships was hypothesized by examining the impact of corporate
social responsibility measures (economic, social and environmental) on customers’ loyalty.
The results of this study show the significant impact of the corporate social responsibility
on the customers’ loyalty. Likewise, the economic responsibility has significant impact on
the customers’ loyalty which has been validated through existing research studies (Iwasaki
& Havitz, 2004; Choi & La, 2013; González & Vilela, 2016; Aramburu & Pescador, 2019).
Similarly, the social responsibility has significant impact on customers’ loyalty which has
been validated over results of existing research studies in different contexts (Schlegelmilch
& Pollach, 2005; Naeem & Welford, 2009; González & Vilela, 2016; Arambur & Pescador,
2019).
The results of the present study show the significant impact of environmental responsibility
on the customers’ loyalty in the context of Islamic banking system which has been validated
through the results of the existing research studies on similar as well as the diverse contexts
(Sirdeshmukh, Singh & Sabol, 2002; Crespo & Bosque, 2005; Choi & La, 2013; González
& Vilela, 2016; Aramburu & Pescador, 2019). The present study also show the significant
impact of corporate reputation and customers trust on the customers’ loyalty in similar and
diverse context which have been verified through the results of the previous research studies
(Harris & Goode, 2004; Balmer & Greyser, 2006; Matzler et al., 2008; Choi & La, 2013;
Kircova & Esen, 2018). Thus, this study provides significant evidence about cause-&-effect
relationships.
The mediating role of corporate reputation and customers trust have also been hypothesized
by providing significant information about the mediation. The results of this study show that
corporate reputation significantly mediated relationships between economic responsibility
and customers’ loyalty, social responsibility and customers’ loyalty and environmental and
customers’ loyalty in Islamic banking system context. The previous researches also provide
the same results in different contexts by offering the significant role of corporate reputation
as mediator in connecting corporate social responsibility measures and customers’ loyalty.
Thus, the results of this study validated the results of the existing research studies (Kolk &
Tulder, 2010; Hillenbrand & Money, 2007; Bögel & Hall, 2016; Aramburu & Pescador,
2019).
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The mediating role of customers trust in connecting corporate social responsibility measures
and customers’ loyalty were also hypothesized to examine the mediation. The results of the
study show that with regards to the mediating role of the customers’ trust, three mediation
models have been extracted from theoretical framework which conformed that the customer
trust significantly mediate the relationship between CSR measures and customers’ loyalty
through partial mediation. These results have also been validated through the results of the
existing research studies by providing the significant statistical relationships among the
research variables under study (Flavian, Guinaliu & Torres, 2005; Swaen & Chumpitaz,
2008; Ercis, Unal, Candan & Yildirim, 2012; Saleem & Gopinath, 2015; Haroon & Qureshi,
2019).
The multi-mediation models have been used in this study which is the novelty of the current
study to examine the combined meditating role of corporate reputation and customers trust
in the relationships between corporate social responsibility measures and customer loyalty.
The previous studies examined the mediating role of these mediators individually however,
the current study examined the combined role of these mediators in connecting predictors
and criterion variables. The results provide significant information in deciding that which
mediator is more significant. The results of multiple-mediation by relating Hayes procedure
show that corporate reputation emerged as significant mediator in connecting the corporate
social responsibility and customers’ loyalty as compared to the mediating role of customers’
trust.
The group mean differences in responses of respondents concerning the research variables
under considerations have also been hypothesized thereby providing significant information
in Islamic banking context. The respondents’ demographics show the variation in responses
about the corporate social responsibility measures, customers trust, corporate reputation and
customers loyalty by showing the significant group mean differences. The results show that
most of the demographic attributes are insignificant while applying the t-test and ANOVA
to examine group mean differences. There are studies who examined same variables through
different personal characteristics of respondents thereby providing the diverse results (Basil
& Weber, 2006; Bear, Rahman & Post, 2010; Bartikowski et al., 2011); Wajdi & Humayon.,
2014).
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Consequently, present study provides significant information in deciding the relationships
between predictors, mediators and criterion variables. The current study shows significant
association between predictors and criterion variables, between the predictors and mediators
and between the mediators and criterion variables. The results of this study also provide the
significant information about the significant impact of the predictors and criterion variables
through direct and indirect relationships thereby applying regression procedure. The results
of this study have been validated through the results of the existing research studies on the
similar issues to make clear the position of current study that where the present study stands
in existing literature. Thus, the study significantly confirmed the position of current research
study.
Similarly, this study also revealed the significant role of mediators (corporate reputation and
customers trust) in connecting the economic, social and environmental responsibilities and
the customers’ loyalty. The results revealed that all the mediation models (six) confirming
the partial mediation that both the mediators like corporate reputation and customers trust
partially mediate the relationship between corporate social responsibility measures and the
customers’ loyalty. Likewise, the multiple-mediation models confirmed that which mediator
is more effective in determining the facilitating role in connecting predictors and criterion
variables of study. The group mean differences provide significant information about the
respondents’ opinions about variables in context of Islamic banks in Khyber Pakhtunkhwa,
Pakistan.
Last but not the least, this study statistically examined the research hypotheses as emerged
from the theoretical framework about the potential relationships among research variables
under considerations. Thus, by applying the statistical tools relating with the nature of the
desired relationships, the current study significantly explored these relationships by chasing
the research questions (hypotheses) thereby finding the answers of the research questions.
These are thus helpful in deciding about existence of relationship and reaching to the desired
conclusion more comprehensively. The results of this study, from every possible dimension,
is thus helpful to reach the conclusion of study in producing some decision point in order to
conclude the study and to extract certain recommendations for the policy makers and future
researchers.
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CHAPTER No. 5 CONCLUSION & RECOMMENDATIONS
The conclusion is main part of the research studies wherein researchers concluded studies
about combination of different important points that what researchers have achieved in their
research studies. Thus, conclusion is planned that helps readers to understand that researcher
aimed to achieve. The present study is concluded by offering concluding points to recognize
the outcomes of research study systematically about relationships of variables in particular
context.
5.1 Summary
The study was aimed to examine the relationships between corporate social responsibility
measures (economic, social & environmental) and customers’ loyalty. This study was aimed
to examine the mediating role of corporate reputation and customers trust in connecting the
corporate social responsibility measures and customers’ loyalty. Moreover, present study
also aimed at examining the group mean differences concerning the research variables under
considerations in the context of Islamic banks in Khyber Pakhtunkhwa, Pakistan. Therefore,
by applying different statistical tools (correlation. regression, mediation, multiple-mediation
& test of significance) as per the nature of the relationship, the present study systematically
explored the significant statistical relationships among the different research variables under
consideration.
The summary of results is related with the key findings about the relationships of research
variables with one another likewise about the association, the correlation tool was applied
which provide the positive and significant association among the research variables. For the
cause-&-effect relationship, the regression was applied thereby providing significant results
about the influences of predictors over criterion variable. The mediation analysis provides
the outcomes about the facilitating role of mediators while the multiple-mediation provide
the details about which mediators is more effective in determination of mediation. Likewise,
the t-test and ANOVA were applied to examine the group mean differences thereby offering
the significant information about the variation in responses of respondents about research
variables.
5.2 Conclusion
The conclusion is all about the judgments that the researcher has achieved from the research
study. The researcher provides the concluding points systematically in order to understand
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the different nature of the relationships among the research variables. The relationships were
mainly concerned with the association, cause-&-effect, mediation, multiple-mediation and
group mean differences in responses of the respondents about the research variables. Thus,
the researcher presented the key findings in this section to conclude the research study and
to reach the conclusion systematically by presenting the key findings about the relationships
of the research variables through the data collected in particular context thereby generalizing
the results. Thus, researcher presented the key points systematically to understand nature of
relationships.
1. The first hypothesis was about association among economic, social, environmental
responsibilities, customers trust, corporate reputation and customers’ loyalty. From
the hints of existing literature, it was expected that the corporate social responsibility
measures have significant association with the customer loyalty, customer trust and
corporate reputation. Consequently, from results, these expectations were sustained
thereby obtaining the significant information about the association customer loyalty
with corporate responsibilities likewise the economic (.574 & .000), social (.686 &
000), environmental (.509 & .000), the reputation (.493 & .000) and trust (.480 &
.000).
2. The second hypothesis was about the influence of economic, social, environmental
responsibilities on the customers’ loyalty which was also expected as per hints from
the existing literature. The expectations were sustained and significant relationships
were evident from regression results likewise the customer loyalty was significantly
predicted through independent variables like 61% variance along with significance
of economic responsibility (coefficient=.157 & P-value= .000), social responsibility
((Beta=.435 & P-value=.000), environmental responsibility (Beta=.290 & P-value =
.000).
3. The hypothesis three to eight were related about mediating role corporate reputation
and customers trust by extracting six mediating models from theoretical framework
about the possible relationships of the mediators with the dependent and independent
variables. In this connection, all the mediation models were tested thereby providing
the significant information in deciding the mediating role of mediators in connecting
the predictors and criterion variables which thus helps in deciding the mediation in
research.
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a. The first mediation model (H3) was about mediating role of corporate reputation
in the relationship between economic responsibility and customers’ loyalty. The
results show the partial mediating role of corporate reputation thereby reducing
Beta from (.47) to (.36) while showing all the paths as significant in mediation
procedure.
b. The second model of mediation (H4) was related with mediating role of corporate
reputation in connecting social responsibility and customers’ loyalty. The results
show that corporate reputation partially mediated the relation between predictor
and criterion by reducing the Beta from (.60) to (.51) with all paths remained as
significant.
c. The third mediation (H5) was related with corporate reputation as the mediator
in connecting economic responsibility and customers’ loyalty. The results show
that the corporate reputation partially mediated the connection by reducing Beta
from (.46) to (.41) while all the other paths in the mediation procedure remained
significant.
d. The fourth mediation (H6) was related with the mediating role of customer trust
in the relationship between economic responsibility and customers’ loyalty. The
results show that customers trust significantly mediated the relationship through
partial mediation be changing the Beta from (.47) to (.36) with the other paths as
significant.
e. The fifth mediation (H7) was about the customers trust as mediator in connecting
social responsibility and customers’ loyalty. The results show partial mediation
by changing the values of Beta from (.60) to (.52) while all the other paths in the
mediation procedure remained the significant which are the basic condition for
mediation.
f. The sixth mediation (H8) was about mediating role of customer trust in linking
the environmental responsibility and customers’ loyalty. The results again show
the partial mediation by changing the Beta from (.46) in direct relationship to
(.38) in the indirect relationship while all the other paths remained significant in
mediation.
4. The hypotheses ninth to eleventh were about the multiple-mediation by examining

the combined effect of both mediators in connecting corporate social responsibility
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measures and the customers’ loyalty. In this connection, three multiple-mediation
models were extracted from theoretical framework to examine that which mediator
is more effective in connecting the corporate social responsibilities with customers’
loyalty.
a. The first multiple-mediation model (H9) was related with the mediating role of
corporate reputation and customers trust in connecting economic responsibility
and customers’ loyalty. The results show that corporate reputation is effective
mediator with higher p-values (.35) than customers trust (.18) along with higher
effect (.10) for corporate reputation as compared to the customers’ trust (.08) in
mediation.
b. The multiple mediation second model (H10) was again related with the combined
effect of mediating variable like corporate reputation and customers trust in the
relationship between the social responsibility and customers’ loyalty. The results
show that again corporate reputation emerged as effective mediator as the Beta
for the corporate reputation was higher (0.30) as compared to customers’ trust
(.12).
c. The third multiple-mediation model (H11) was related with the mediating role of
customers trust and corporate reputation in linking environmental responsibility
and customers’ loyalty. The findings show that in corporate reputation, the total
effect (0383) and p-value (.0338) are lower as compared to the customers’ trust
where total effect was (0493) and p-value was (.0016) shows that here customers
trust is effective mediator in linking environmental responsibility and customers’
loyalty.
5. The hypotheses twelfth to seventeenth were related with demographic to examine

the group mean differences in responses of the respondents concerning the corporate
social responsibility measures (economic, social & environmental), customers trust,
customers’ loyalty and corporate reputation. The test of significance was used as per
the nature of demographic attributes to examine desired group mean differences in
responses.
a. The first demographic hypothesis (H12) was related with the education of the
respondents to examine their group mean differences about research variables.
The results show education show significance only on economic responsibility
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(.048). the rest of demographic variable did not show any significance in test of
significance.
b. The second hypothesis about demographics (H13) was related with profession of
respondents about their variation in responses. The results show that none of the
research variables has shown their significance concerning the profession of the
respondents.
c. The third hypothesis about demographics (H14) was related with the group mean
differences of respondents concerning their experiences with regard to research
variables. The results show that again none of research variable has shown their
significance.
d. The fourth hypothesis of demographics (H15) about the residence with regard to
the group mean differences regarding research variables. The results show that
again none of the variables has shown their significance while applying test of
significance.
e. The fifth demographic hypothesis (H16) was related with the role of the gender
in effecting their responses towards the research variables. The results showed
that none of research variables has been affected thereby applying the test of the
significance.
f. The sixth demographic hypothesis (H17) was related with role of age in effecting
the respondents’ responses concerning the variation in views about the research
variables and only economic responsibility whoa the significant (.040) in test of
significance.
The current study is finally concluded that all the research hypotheses about relationships
among the research variables have been test successfully and all answers have been found
satisfactorily. Therefore, it is concluded that in the context of Islamic banks in Pakistan, the
significant relationships have been evident in the existing studies as well as in present study
about the significant association and influences of corporate social responsibility measures
(economic, social & environmental) towards the customers’ loyalty. Similarly, the corporate
reputation and customers trust have also shown their facilitating role in connecting corporate
responsibilities with the customers’ loyalty. Therefore, some recommendations have been
190
emerged/extracted from the results of the current study for the policy makers and the future
researchers.
5.3 Recommendations
The current study offered some suggestions from the results and conclusion of the study to
facilitate the policy makers of the Islamic banks in revising their policies towards corporate
social responsibility measures (social, economic & environmental), customers’ loyalty, the
corporate reputation and customers trust to attain customers’ augmented loyalties as well as
reputation.
1. The Islamic banks are required in increase and ensure their participation in corporate
responsibilities to develop customers trust and loyalties to augment their reputations.
The Islamic banks are required to put their emphasis on the economic responsibility
to contribute the society like arrangement of training programs for individuals and
students.
2. The Islamic banks are required to initiate different social projects for the wellbeing
of individuals which thus help banks in developing corporate image in societies. The
Islamic banks are required to plan for the environmental protection of society from
different environmental problems which may help them in reshaping the attitude of
stakeholders.
3. The Islamic banks are required to participate in the local issues like the provision of
educational and healthcare facilities to attract stakeholders towards the values of the
banks. The Islamic banks are required to introduce the projects for environmental
protection to save environment from pollution and related dilemmas to grip viable
markets.
4. The Islamic banks are required to prioritize the customers’ needs which may help
them in increasing the customers trust towards the concerned banks in competitive
environments. The Islamic banks are required to focus upon the ethical values of the
individuals in society by ensuring that bank goals are aligned with development of
societies.
5. The Islamic banks are required to upgrade knowledge and skills of their workforces
in dealing the customers which may be helpful in nurturing the positive behavior of
customers. Some additional efforts are required on part of government in ensuring
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the contributory role of Islamic banks to become the socially responsible towards
community.
6. The Islamic banks are required to focus on those measures which are helpful in
increasing the customers trust as this trust further helps the banks in nurturing the
attitude and behavior of their customers towards the undaunted loyalties towards the
banks.
5.4 Recommendations for Future Research

Some recommendations for future researcher have been extracted from the conclusion of
the current study which might be helpful for them to explore these phenomena from different
dimensions to attain some valuable information from study and apply in their future research
studies.
1. The future researchers are required to work on a large sample size by expanding the
population to attain some better results about the relationships among the research
variables. Future researchers are required to add some independent and dependent
variables to achieve some significant statistical results about relationships among
variables.
2. The future researchers are further required to add some other mediating variables in
connecting the corporate social responsibility quality measures with the customers’
loyalty. Future researchers are direly required to add some moderators in connecting
the corporate social responsibility measures with customer loyalty to achieve better
outcomes.
3. The future researchers are required to implement this model in conventional banks
with similar research variables by adding some moderators and mediators to extract
some valuable results by producing some better theoretical and statistical outcomes
which might be helpful in adding the significant knowledge to existing database of
knowledge.
4. The future researchers are required to examine these research variables with regard
to their interrelationships in different context (other than banks) to attain some better
consequences. The future researchers are required to apply the advanced statistical
procedures like structural equation modeling to revisit relationships among research
variables.
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5.5 Practical Implications
The present study offered some practical and managerial implications as extracted from the
conclusion of this study. This study is helpful for the managers in providing the short-term
and long-term benefits to different organizations including banking sector to confirm their
standing.
1. The effective implementation of corporate social responsibility measures is helpful
in determining the customers trust as well as reputation of organizations including
the banking sector. Therefore, the banks engagement in social activities encourages
the customers’ behavior which in turn helps in increasing their trust overwhelmed at
loyalties.
2. The trust is vital tool in developing and managing the relationships between banks
and customers. The combination of the CSR measures, trust and customers’ loyalty
are significant predictors towards the performance of the concerned banks in viable
environment to achieve their competitive edge over the competitors in competitive
situations.
3. The corporate reputation is the most significant factor which can increase or decrease
the banks image in the competitive markets. Thus, the concerned banks are required
to manage their corporate image and reputation over corporate social responsibility
quality measures and customer loyalties in managing bank operations in successful
manners.
4. Through the successful implementation of corporate social responsibility measures

like economic, social and environmental, the Islamic banks might be able to nurture
the optimistic behavior of the customers leading to higher trust and loyalties which
in turn helps the banks in augmenting their corporate reputation in the competitive
situations.
5.6 Contribution of Study

This study has several contributions concerning the theoretical, methodological, empirical
and practical which are expected to add knowledge to the existing database concerning the
issues under considerations thereby helping in advancement of knowledge by adding new
information.
193
1. The foremost contribution of the study is the careful extraction of research variables
(corporate social responsibility, customers’ loyalty, customers trust and corporate
reputation) and their transformation into theoretical framework wherein hypotheses
were developed and tested in field work to verify current knowledge over systematic
investigations.
2. The applications of two mediators simultaneously through multiple-mediation is the
main contribution of this study as these variables together were never explored by
the researchers in the existing research studies on similar issues. The reverification
of these mediators in connecting the CSR and customers’ loyalty is novelty of this
study.
3. This study empirically verified role of corporate social responsibility in determining
the customers’ loyalty by collecting primary data (first-hand) from respondents and
analyzing the views through different statistical procedures to find out the answers
of the research assumptions as extracted from the theoretical framework of current
study.
4. Current study contributes in confirming the role of corporate social responsibility
measures towards the customers’ loyalty thereby confirming through the facilitating
role of corporate reputation and customers trust which might help the management
of the Islamic banks in finding the efficient and effective ways to build long lasting
relationship.
5.7 Limitations of Study

 The current study is limited only to “Islamic banks” which are functional in Khyber
Pakhtunkhwa, Pakistan thereby exploring the views/opinions of stakeholders.
 The study is limited to specific predictors of corporate social responsibility model

(economic, social & environmental) known as triple‐bottom line theory.
 The study is limited to the customers’ loyalty thereby using it as dependent variables
in the present study in connection to the corporate social responsibility.
 This study is limited to two mediators (corporate reputation and customers trust) to
examine its role in corporate social responsibility and customer loyalty.
194
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Annexure 1 Questionnaire
Topic

Evidence from Islamic Banks in Khyber Pakhtunkhwa, Pakistan
Muhammad Haroon Rehan

PhD (Management Studies)
Registration:
Dear Respondent!
The questionnaire is used purely for Academic purposes thus your collaboration will help
the student to fulfill the requirements for degree of PhD in Management Studies.
Respondent Personal Profile

1. Qualification ______________ 2. Designation _________________
3. Experience _______________ 4. Residence ___________________
5. Gender __________________ 6. Age ________________________
Note. How far do you Agree/Disagree with the following Statements using 5-Point Scale?
Strongly Disagree Disagree Neutral Agree Strongly Agree
1 2 3 4 5
Corporate Social Responsibility

Economic Responsibility
7 Bank is trying to maximize profits so as to guarantee its stability. 1 2 3 4 5
8 Bank aims to build solid relationships to assure economic success. 1 2 3 4 5
9 Bank is showing efforts to expand quality of products & services. 1 2 3 4 5
10 Bank is trying to have competitive assessing/flexible policies. 1 2 3 4 5
11 Bank is trying best to improve more its financial performance. 1 2 3 4 5
12 Bank is trying to do its best to be productive in viable situation. 1 2 3 4 5
13 Bank is offering sufficient economic share to benefit the societies. 1 2 3 4 5
14 Bank is paying in providing economic edge towards societal issues. 1 2 3 4 5
Social Responsibility
15 Bank contributes in reducing the problem of unemployment. 1 2 3 4 5
16 Bank seeks for excellence by sponsoring public health programs. 1 2 3 4 5
17 Bank contributes in providing training series to entrepreneurial. 1 2 3 4 5
18 Bank is trying to be committed to well-defined ethical principles. 1 2 3 4 5
19 Bank is trying to make financial donations to the social activities. 1 2 3 4 5
20 Bank is trying to help in improving quality life of the community. 1 2 3 4 5
21 Bank is more enthusiastic about the social issues of the societies. 1 2 3 4 5
22 Bank is dynamic in offering economic support to the social issues. 1 2 3 4 5
222
Environmental Responsibility
23 Bank tries to sponsor pro-environmental programs in the region. 1 2 3 4 5
24 Bank donates in volunteer campaigns to preserve environment. 1 2 3 4 5
25 Bank Supports investment projects towards green environment. 1 2 3 4 5
26 Bank donates in solving issues related to environmental pollution. 1 2 3 4 5
27 Bank trying to improve appearance of civilization & cleanliness. 1 2 3 4 5
28 Bank is trying to offer products compatible with the environment. 1 2 3 4 5
29 Bank is paying sufficient in social issues through economic shares. 1 2 3 4 5
30 Bank is dynamic over eliminating the environmental constraints. 1 2 3 4 5
Corporate Reputation
41 The Islamic Banks try to ensure the long-term economic success. 1 2 3 4 5
42 The Banks try to do everything possible to be more productive. 1 2 3 4 5
43 The Islamic banks try to make rational use of natural resources. 1 2 3 4 5
44 Based on my experience, I habitually use really the Islamic Banks. 1 2 3 4 5
45 I could say positive things/opinion about this bank/Islamic bank. 1 2 3 4 5
46 Islamic Banks are the institutions that transmits good sensations 1 2 3 4 5
47 The Banks try to have an ethical code of conduct and respect it. 1 2 3 4 5
48 The Islamic Banks try to carry out activities to reduce pollution. 1 2 3 4 5
49 The Banks try to make economic donations to the social causes. 1 2 3 4 5
50 The Banks try to sponsor activities that favor the environment. 1 2 3 4 5
Customers Trust
51 The process of providing banking services in the bank is safe. 1 2 3 4 5
52 Relationship within bank and its clients is based on mutual trust. 1 2 3 4 5
53 Bank uses a clear language in the provision of banking services. 1 2 3 4 5
54 The Bank performs its obligations towards clients satisfactorily. 1 2 3 4 5
55 The banking system of accounts processing is the trustworthy. 1 2 3 4 5
56 Fairness & justice constitute cornerstone in bank transactions. 1 2 3 4 5
57 Employees preserve high degree of credibility in keeping privacy. 1 2 3 4 5
58 Bank has consistency & continuity by providing quality services. 1 2 3 4 5
59 Bank employees have knowledge and skill needed to solve issues. 1 2 3 4 5
60 Bank is ensuring corporate social responsibilities in superior way. 1 2 3 4 5
Customers Loyalty
31 I wish continue with this bank due to its advanced technologies. 1 2 3 4 5
32 I recommend the services of the bank to my friends and family. 1 2 3 4 5
33 I consider myself to be loyal with this bank in future dealings. 1 2 3 4 5
34 Bank due to its performance has become brand on the market. 1 2 3 4 5
35 I would recommend this bank if somebody asked for my advice. 1 2 3 4 5
36 I would discontinue this bank if its rates increased exceedingly. 1 2 3 4 5
37 I would change bank if another brand offers the better services. 1 2 3 4 5
38 I have the emotional desire to continue dealings with this bank. 1 2 3 4 5
39 I will not turn towards another bank whatever competitor offers. 1 2 3 4 5
30 I intend to increase my financial transactions with bank in future. 1 2 3 4 5
223

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PhD

IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON CUSTOMERS

Muhammad Haroon Rehan

Dr. Qamar Afaq Qureshi

Ph.D Dissertation submitted to Department of Public Administration (Faculty of Law

Department of Public Administration, Gomal University,

Keywords: Corporate Social Responsibility, Customer Loyalty, Corporate Reputation,

Certificate of Approval ......................................................... Error! Bookmark not defined.

Student’s Declaration ........................................................... Error! Bookmark not defined.

CHAPTER No. 1 INTRODUCTION ................................................................................. 1

1.1 Background of Study ................................................................................................... 1

1.2 Problem Statement ...................................................................................................... 5

1.3 Objectives of Study ..................................................................................................... 5

1.4 Significance of Study .................................................................................................. 6

1.5 Research Gap ............................................................................................................... 6

1.6 Scope of Study............................................................................................................. 7

CHAPTER No. 2 LITERATURE REVIEW ...................................................................... 8

2.1 Existing Research ........................................................................................................ 8

2.2 The Banking Sector ................................................................................................... 10

2.2.1 The Banking Sector & Economic Change .......................................................... 12

2.2.2 The Banking Sector in Pakistan .......................................................................... 14

2.2.3 The Islamic Banking System .............................................................................. 16

2.2.4 The Islamic Banking System in Pakistan ........................................................... 19

2.2.5 The Islamic Banks in Khyber Pakhtunkhwa....................................................... 21

2.2.6 The Responsibilities of Islamic Banks ............................................................... 23

2.3 The Corporate Social Responsibility ......................................................................... 25

2.3.1 Evolution of Corporate Social Responsibility .................................................... 27

2.3.2 Meaning of Corporate Social Responsibility ...................................................... 29

2.3.3 Ethics of Corporate Social Responsibility .......................................................... 32

2.3.4 Importance of Corporate Social Responsibility .................................................. 34

2.3.5 Benefits of Corporate Social Responsibility ....................................................... 36

2.3.7 Corporate Social Responsibility in Islamic Banks ............................................. 40

2.3.8 Stakeholders of Corporate Social Responsibility ............................................... 42

2.3.8.1 Employees .................................................................................................... 44

2.3.8.2 Government .................................................................................................. 45

2.3.8.3 Societies ....................................................................................................... 46

2.3.9 Theories of Corporate Social Responsibility ...................................................... 48

2.3.9.1 Classical Theory ........................................................................................... 48

2.3.9.2 Social Contract Theory ................................................................................ 49

2.3.9.3 Instrumental Theory ..................................................................................... 49

2.3.9.4 Legitimacy Theory ....................................................................................... 49

2.3.9.5 Stakeholder Theory ...................................................................................... 50

2.3.9.6 Triple‐Bottom Line Theory .......................................................................... 50

2.3.10 Dimensions of Corporate Social Responsibility ............................................... 51

2.3.10.1 Economic Responsibility ........................................................................... 52

2.3.10.2 Social Responsibility.................................................................................. 54

2.3.10.3 Environmental Responsibility .................................................................... 56

2.4 Customer Loyalty ...................................................................................................... 58

2.4.1 Definition of Customers Loyalty ........................................................................ 60

2.4.2 Customer Loyalty Formation .............................................................................. 62

2.4.3 Importance of Customers Loyalty ...................................................................... 65

2.4.4 Benefits of Customers Loyalty ........................................................................... 67

2.4.5 Customers Loyalty in Banking Sector ................................................................ 69

2.4.6 Customers Loyalty in Islamic Banking .............................................................. 71

2.4.7 Theories of Customer Loyalty ............................................................................ 73

2.4.7.1 Exchange Relationship Theory .................................................................... 74

2.4.7.2 Marketing Theory......................................................................................... 74

2.4.7.3 Social Comparison Theory ........................................................................... 74

2.4.7.5 Schwartz's Value Theory ............................................................................. 75

2.4.7.6 Typological Loyalty Theory ........................................................................ 76

2.4.8 Dimensions of Loyalty........................................................................................ 76

2.4.8.1 Attitudinal Loyalty ....................................................................................... 77

2.4.8.2 Behavioral Loyalty ....................................................................................... 79