Banks' business strategy and environmental effectiveness: The monitoring role of the board of directors and the managerial incentives

Galletta, Simona; Mazzù, Sebastiano; Naciti, Valeria

doi:10.1002/bse.2769

Cited by 20 publications

(18 citation statements)

References 126 publications

(183 reference statements)

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“…Our research brings several contributions to the existing literature. First, our findings contribute to the current policy debate on the implications of climate change risk for the banking sector (Faiella & Malvolti, 2020; Galletta, Mazzù, & Naciti, 2021). Financial authorities recognise that climate change is not only a serious threat to economic well‐being but also an emerging financial risk that banks are called on to manage and minimise as soon as possible (Bolton et al, 2020; ESRB, 2020).…”

Section: Introductionsupporting

confidence: 52%

Climate change commitment, credit risk and the country's environmental performance: Empirical evidence from a sample of international banks

et al. 2022

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This paper analyses whether banks with a greater commitment to climate change issues, proxied by the climate change score from the Carbon Disclosure Project (CDP), experience an impact on their credit risk and whether this relationship is moderated by the environmental performance of the country where the bank is located. For these purposes, a panel data analysis is carried out on a large sample of international listed banks over the period 2011–2019. Our findings suggest that the commitment to climate issues lowers the risk level of bank loans when banks have a medium‐high level of attention to these issues. The country location of the bank does play a key role: In countries with better environmental performance, credit risk reduction takes place at lower levels of climate change commitment. This study provides important implications for the actions that bank managers, regulators and practitioners can enact.

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Section: Introductionsupporting

confidence: 52%

Climate change commitment, credit risk and the country's environmental performance: Empirical evidence from a sample of international banks

et al. 2022

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“…The choice of the dependent variables came from the willingness to investigate the financial, social, and environmental dimensions of corporate performance in banks. Improving financial performance is not the only objective of banks; indeed, to attract more investors, financial institutions must enhance the other performance dimensions that can affect investors' decisions and stakeholders' needs, developing a competitive advantage to be socially beneficial (Galletta, Mazzù, & Naciti, 2021; García‐Sánchez et al, 2020).…”

Section: Methodsmentioning

confidence: 99%

“…Along with other polluting industries, financial institutions are involved in environmental responsibility (Gallego‐Álvarez & Pucheta‐Martínez, 2019; Galletta, Mazzù, & Naciti, 2021). Therefore, with the purpose of testing our third set of hypotheses, we employ policy emission reduction as a proxy for the dependent variable, which indicates environmental performance (ENV_PERF).…”

Section: Methodsmentioning

confidence: 99%

Gender diversity and sustainability performance in the banking industry

Galletta

Mazzù

Naciti

et al. 2021

Corp Soc Responsibility Env

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This study analyses the impact of female directors and managers on sustainability performance in the banking industry. Drawing on prior studies, we attempt to frame gender diversity, its determinants, and its consequences with respect to financial, social, and environmental performance. Our sample includes 880 bank‐year observations from 48 countries over the period 2011–2019. We conduct OLS and probit regressions on the panel data sample. The results show that increasing the proportion of female directors also improves the financial and environmental performance; female managers are keener on the social dimension and in engaging with stakeholders, than female directors. This study extends the current literature in the context of the banking industry, suggesting that banks should focus their efforts on establishing the right combination of female directors and managers. Furthermore, practical implications that encourage gender diversity among policy makers and regulators arise from this research.

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“…Meanwhile, it has been suggested that one way by which the SDGs can be attained is to encourage senior managers of firms to implement sustainable banking initiatives (Galletta et al, 2021; Haque, 2017). More importantly, a valuable link of enhancing the accountability of senior managers to sustainable banking is to tie improvements to their compensation (Cordeiro & Sarkis, 2008; Haque & Ntim, 2018; Haque & Ntim, 2020).…”

Section: Introductionmentioning

confidence: 99%

Executive compensation, environmental performance, and sustainable banking: The moderating effect of governance mechanisms

2022

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This paper contributes to the extant business strategy and sustainable development literature by investigating the effect of a broad corporate governance disclosure index on executive compensation and, subsequently, determines the extent to which the pay‐for‐sustainability sensitivity is moderated by corporate governance mechanisms. Employing data collected from 16 Sub‐Saharan Africa countries over the period from 2007 to 2018, the findings are as follows: First, we report that better‐governed banks pay lower compensation packages to their executives. Second, we find that executive compensation increases sustainable banking disclosures in the countries. Third, the findings show that executive compensation is negatively associated with environmental performance. Finally, we detect that the association between executive pay and sustainable banking performance is significantly moderated by corporate governance mechanisms, revealing that the pay‐for‐sustainability sensitivity is mainly positive and improves in banks with high corporate governance quality. This implies that the pay‐for‐sustainability sensitivity is contingent on the quality of the bank's internal governance mechanisms. Our findings have key implications for banking practitioners, regulators, environmental activists, and policy‐makers.

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Banks' business strategy and environmental effectiveness: The monitoring role of the board of directors and the managerial incentives

Cited by 20 publications

References 126 publications

Climate change commitment, credit risk and the country's environmental performance: Empirical evidence from a sample of international banks

Climate change commitment, credit risk and the country's environmental performance: Empirical evidence from a sample of international banks

Gender diversity and sustainability performance in the banking industry

Executive compensation, environmental performance, and sustainable banking: The moderating effect of governance mechanisms

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