The Impact of ESG Scores on Bank Market Value? Evidence from the U.S. Banking Industry

Ersoy, Ersan; Świecka, Beata; Grima, Simon; Özen, Ercan; Romānova, Inna

doi:10.3390/su14159527

Cited by 52 publications

(23 citation statements)

References 44 publications

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“…In this sense, a good ESG performance generates favorable publicity, and a company with a good ESG performance realizes higher firm value if it also enjoys favorable media coverage (Cahan et al, 2016). In conclusion, it has been found that there is a positive relationship between certain ESG factors and financial performance (Ersoy et al, 2022). Thus, our second hypothesis is as follows:…”

Section: Effect Of Environmental Social and Governance Score On Banks...mentioning

confidence: 85%

Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

Ben Ali,

Chouaibi

2023

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Purpose This study aims to investigate whether integrating environmental, social and governance (ESG) practices mediates the relationship between executive incentive compensation and the financial performance of Islamic and conventional banks in the Middle East and North Africa (MENA) region. Design/methodology/approach This study used multiple regression models to analyze the effectiveness of ESG practices as a mediating variable in explaining the relationship between executive incentive compensation and banks’ financial performance between 2015 and 2021. The sample consisted of 57 Islamic and conventional banks operating in the MENA region, and the data were collected from the Thomson Reuters database (Data Stream). Findings This research paper showed the positive and significant mediating effect of the ESG practice on Banks’ financial performance. Thus, banks’ financial and stock market profitability is influenced by ESG information disclosure. This finding shows that taking ESG into account improves the relationship between executive incentive compensation and banks’ financial performance. Practical implications The results may interest academic researchers, regulators and policymakers and would support stakeholders and decision-makers who wish to discover how executive incentive compensation affects financial performance in banks. Originality/value This study contributes to previous literature by studying the mediating effect of ESG practices on the relationship between executive incentive compensation and banks’ financial performance. Indeed, the originality of this research paper is justified by the scarcity of studies and, to the best of the authors’ knowledge, constitutes one of the first attempts to examine this relationship via a mediating variable, i.e. ESG.

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Section: Effect Of Environmental Social and Governance Score On Banks...mentioning

confidence: 85%

Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

Ben Ali,

Chouaibi

2023

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“…Studies in the banking sector have shown varied results. While some suggest a positive correlation between EPI and financial performance, others find no significant linear relationship (Valerio Potì, Di Martino, & Miglietta, n.d.;Ersoy et al, 2022). Moreover, theoretical frameworks and empirical evidence suggest that the relationship between EPI performance and bank value may be complex, with nonlinear associations and potential trade-offs between EPI pillars (This is supported by both theoretical frameworks and empirical evidence.…”

Section: Literature Reviewmentioning

confidence: 91%

An Analysis of the Banking Sectors: The effect of Ecosystem Performance on Financial Stability

2024

PJC

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With an emphasis on the effects of regional differences and the COVID19 epidemic, this study examines the link between Environmental Performance Index (EPI) ratings and the financial performance of European banks while considering the role of governance and law. Our study, which uses panel data regressions spanning five years and 71 listed banks in 21 European nations, shows a negative link between EPI scores and bank performance, which is most noticeable in Southern Europe. These results highlight the significance of taking regional variations in bank size and characteristics into account when assessing EPI performance in the banking industry.

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“…Yuen et al (2022) observed that there is a U-shaped relationship between ESG and profitability, reflecting that ESG activities improve bank performance in the long term. Ersoy et al (2022) examined 176 US commercial banks and they show an inverted U-shaped relationship between market value and ESG. Menicucci and Paolucci (2023) examine 105 Italian banks, and they show that ESG policies negatively affect ROA, ROE, stock market return and Tobin's Q, showing that Italian banks have not fully applied robust sustainability procedures.…”

Section: Profitabilitymentioning

confidence: 99%

“…(2022) observed that there is a U-shaped relationship between ESG and profitability, reflecting that ESG activities improve bank performance in the long term. Ersoy et al. (2022) examined 176 US commercial banks and they show an inverted U-shaped relationship between market value and ESG.…”

Section: Literature Background and Hypothesis Developmentmentioning

confidence: 99%

Is ESG disclosure associated with bank performance? Evidence from the Visegrad Four countries

Lamanda,

Tamásné Vőneki

2023

MEQ

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PurposeThe purpose of this paper is to investigate the relationship between ESG disclosure and banks performance and to discuss how banks are committed to the implementation of sustainability issues.Design/methodology/approachThe authors examined the annual, risk and sustainability reports published by 26 banks located in four Central European countries (Czech Republic, Hungary, Poland and Slovakia) in the period of 2017–2021. The authors applied the methodology of content analysis and developed indexes. Panel regression was performed to improve and ensure the robustness of this study.FindingsThe results show that social and governance aspects dominate the ESG preparedness; however, after 2019, there was a significant improvement in the integration of environmental issues. This study confirms a strong association between bank size (total assets) and ESG reporting, and between capital adequacy and ESG reporting. The results demonstrate that there is no connection between banks' operational and financial performance and ESG disclosure. Finally, this study concludes that the integration of ESG risks into the risk management framework is at an early stage.Practical implicationsThis study also adds to the existing research in the field of sustainability reporting. For regulators, this research proves their essential role in the facilitation of sustainable development. For practitioners, the ESG disclosure index could serve as a “detection tool” in the sustainability self-assessment process.Originality/valueThe authors examined – through a self-developed multidimensional ESG disclosure index – the sustainability reporting of the banking sector in four countries from the Central European region.

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The Impact of ESG Scores on Bank Market Value? Evidence from the U.S. Banking Industry

Cited by 52 publications

References 44 publications

Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

Mediating effect of ESG performance on executive incentive compensation-financial performance relationship: evidence from MENA banking sector

An Analysis of the Banking Sectors: The effect of Ecosystem Performance on Financial Stability

Is ESG disclosure associated with bank performance? Evidence from the Visegrad Four countries

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