Environmental, social, and governance (ESG) and market efficiency of China’s commercial banks under market competition

Abstract

As the leading financial institutions in China, it is crucial for commercial banks to pay attention to environmental protection (E), social responsibility (S), and corporate governance (G) in order to enhance operational efficiency and to advance the high-quality development of the country’s social economy. This research explores the market share of banks as exogenous variables in the profit stage and the market and sustainability stage to investigate the efficiency of 20 listed banks in China over 2016–2020 and innovatively incorporates indicators such as green credit, social giving, executive compensation, and ESG score into the meta-dynamic two-stage SBM under the exogenous variable DEA model. The results demonstrate the following. (1) By integrating market share as an exogenous variable in the model, the efficiency estimate is more precise. (2) In overall, UCBs are the most efficient type of banks, JSCBs are the second, SOCBs are the least efficient. All three types of banks are more efficient in profit stage versus the market and sustainability stage, JSCBs perform best in the profit stage, where SOCBs perform best in the market and sustainability stage. The three different bank types’ TGR performance is comparable to their efficiency value performance. (3) SOCBs lead in ESG investment and have the best ESG performance due to their distinct state-owned background. With their ongoing dedication to profit maximization and disregard for social responsibility and sustainable development, JSCBs have the worst ESG performance. (4) Policy recommendations are made based on the study’s findings for commercial banks, stakeholders, and regulators to support ESG investment and to bring about long-term sustainable development. Finally, as ESG develops in China, future research can consider longer time scales and larger perspectives to investigate the sustainability efficiency of commercial banks themselves, as well as their role in the local economy and industrial transformation.

How can organizations measure the integration of environmental, social, and governance (ESG) criteria? Validation of an instrument using item response theory to capture workers' perception

“…Companies that consider environmental factors in their strategic decisions are better positioned to mitigate risks associated with climate change (Kouloukoui et al, 2023), resource depletion (Yang et al, 2023), and regulatory changes (Agnese et al, 2023). By adopting sustainable practices, they can enhance operational efficiency (Ji et al, 2022), reduce waste (Ahmad et al, 2023), and often achieve cost savings in the long run (Chen & Wang, 2023).…”

How Does the Digital Transformation of Banks Improve Efficiency and Environmental, Social, and Governance Performance?

“…Executives of commercial banks with technical backgrounds rely on their accumulated social capital to gain information and resource advantages in innovation, which are conducive to integrating resources and ensuring their optimal allocation, thereby improving bank efficiency. In addition, executives with a technical background pay more attention to the long-term development of commercial banks and tend to increase the proportion of investment in human capital and R&D expenditures to promote innovation [32], thereby improving the ESG performance of commercial banks. Compared with executives without a technical background, executives with a technical background have a more vital risk-taking ability for innovation, a higher tolerance for innovation failure, and encourage employees to try new ideas [33].…”

Contribución de las inversiones en recursos humanos según el tipo de eficiencia técnica de la banca múltiple peruana

“…Actualmente se dispone de diferentes investigaciones relacionadas con el análisis de eficiencia en instituciones financieras, las cuales aplicaron la herramienta DEA para evaluar esta industria en distintos países o regiones durante periodos de tiempo concretos. Así, se han llevado a cabo investigaciones en Brasil (Comelli et al, 2017), Canadá (Ghahraman & Prior, 2016), Bangladesh (Uddin et al, 2022), Pakistán (Shah et al, 2022), China (Ji et al, 2023), Indonesia (Sari et al, 2022), países del BRICS (Jreisat et al, 2022), Líbano (Naimy & Chukry, 2016) y República Checa (Havranek et al, 2016), entre otros. En el Perú, el tema de la eficiencia de la banca ha sido poco explorado.…”