Do environmental, social and governance performance affect the financial performance of banks? A cross-country study of emerging market banks

By Mohammad Hassan Shakil, Nihal Mahmood, Mashiyat Tasnia, Ziaul Haque Munim. Management of environmental quality, 2019

248 citations recorded by the source corpus.

Purpose Earlier firms were evaluated mostly from their financial performance perspective, but with the increasing attention to sustainability goals, environmental, social and governance (ESG) performance of firms became key concerns to stakeholders. The purpose of this paper is to explore the effects of ESG performance of banks on their financial performance, in the context of emerging markets. Design/methodology/approach This study employs the generalised method of moments technique for estimation purpose due to the dynamic nature of the data and to correct for endogeneity. This study uses the ESG performance data of 93 emerging market banks from 2015 to 2018, available in Asset4 ESG database of Refinitiv, formerly known as Thompson Reuters. The accounting and financial data are collected from Refinitiv Datastream database. Findings The findings indicate a positive association of emerging market banks’ environmental and social performance with their financial performance, but governance performance does not influence financial performance. Originality/value While many studies exist on the association of ESG concerns of an organisation with their financial profitability, the literature on in the context of banking is still limited. To the best of the authors’ knowledge, this is the first study that examines the effect of ESG practices of banks on their financial performance in the context of emerging economies.

Subfields: Accounting, Marketing, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/6e036c8f9b09412888297e1fcc7580e44715fa07

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Ida Claudia Panetta
2. Sabrina Leo
3. Lei Ruan
4. M. La Torre
5. Heng Liu

In Marketing

1. Lei Ruan
2. Heng Liu

In Strategy and Management

1. Ida Claudia Panetta
2. Sabrina Leo
3. Lei Ruan
4. M. La Torre
5. Heng Liu

Citations in the corpus

• Environmental, Social, Governance Activities and Firm Performance: Evidence from China (2021, background): “In addition, some scholars have found that ESG or a certain dimension of ESG has no correlation with corporate financial performance [18,19].”
• Banks and environmental, social and governance drivers: Follow the market or the authorities? (2021, methodology): “On the one hand, ROA proxied the effectiveness of a bank producing profits by Variables Obs Mean SD Min Max F IGURE 1 Boxplot of CFPs [Colour figure can be viewed at wileyonlinelibrary.com] exploiting their internal assets; on the other hand, ROE measured how companies manage their capital to produc”