ESG ACTIVITIES AND FINANCIAL PERFORMANCE IN BANKING INDUSTRY

Özet

This study aims to provide empirical evidence regarding how ESG practices have impacted financial performance in the banking sector. To investigate this relationship, we use an annual dataset of an unbalanced panel of 58 commercial banks from 6 countries (i.e., Canada, the UK, Australia, Japan, Spain, and Türkiye) for the period 2012-2020. Our empirical findings reveal that there exists an inverted U-shaped non-linear association between ESG scores and financial performance of Canadian, UK and Japanese banks, which supports the idea of the “too-much-of-a-good thing” impact. However, a positive linear association exists for Australian and Spanish banks. Moreover, changes in ESG activities have no influence on profitability of Turkish banks. The findings demonstrate that bank managers should consider the diversity of linkages between ESG activities and financial performance in the banking sector when identifying an appropriate strategy to effectively manage ESG activities.

Abstract

This study aims to provide empirical evidence regarding how ESG practices have impacted financial performance in the banking sector. To investigate this relationship, we use an annual dataset of an unbalanced panel of 58 commercial banks from 6 countries (i.e., Canada, the UK, Australia, Japan, Spain, and Türkiye) for the period 2012-2020. Our empirical findings reveal that there exists an inverted U-shaped non-linear association between ESG scores and financial performance of Canadian, UK and Japanese banks, which supports the idea of the “too-much-of-a-good thing” impact. However, a positive linear association exists for Australian and Spanish banks. Moreover, changes in ESG activities have no influence on profitability of Turkish banks. The findings demonstrate that bank managers should consider the diversity of linkages between ESG activities and financial performance in the banking sector when identifying an appropriate strategy to effectively manage ESG activities.

Yazarlar

Özcan IŞIK

Anahtar Kelimeler

Corporate Social Responsibility, ESG Activities, Financial Performance, Banking Industry

JEL Codes

G20, G30

Yayın Bilgileri

Cilt 3, Sayı 2, 2023 · Sayfa 53-64

DOI: 10.52898/ijif.2023.10

Dosyalar