ESG and financial performance of banks in the MENAT region: concavity–convexity patterns

El Khoury R., Nasrallah N., Alareeni B.

Journal of Sustainable Finance and Investment, cilt.13, sa.1, ss.406-430, 2023 (ESCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 13 Sayı: 1
  • Basım Tarihi: 2023
  • Doi Numarası: 10.1080/20430795.2021.1929807
  • Dergi Adı: Journal of Sustainable Finance and Investment
  • Derginin Tarandığı İndeksler: Emerging Sources Citation Index (ESCI), Scopus
  • Sayfa Sayıları: ss.406-430
  • Anahtar Kelimeler: MENAT countries, bank accounting and market performance, ESG disclosure, environmental score, social score, governance score, CORPORATE SOCIAL-RESPONSIBILITY, GOVERNANCE PERFORMANCE, COMMERCIAL-BANKS, SUSTAINABILITY, PROFITABILITY, IMPACT, DETERMINANTS, DISCLOSURE, PAY, REQUIREMENTS
  • Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

© 2021 Informa UK Limited, trading as Taylor & Francis Group.This study aims to investigate the impact of Environmental, Social and Governance (ESG) on bank performance (FP) in the Middle East, North Africa and Turkey (MENAT) region. The sample consists of 46 listed banks between 2007–2019. FP is measured through accounting (Return on Assets Return on Equity) and market indicators (Tobin’s Q Stock Return). We test the effect of ESG and its quadratic term on FP by controlling for bank-specific, macroeconomic and financial development variables. Our results support the presence of a non-linear ESG–FP relationship. ESG incremental investments remain beneficial till reaching an inflection point. Interestingly, the financial development variables are significant, while ESG pillars follow different patterns. Governance pillar has a concave relationship with accounting performance while environmental pillar has a convex relationship with the market return. The ESG–FP relationship depends on three vectors: pillars; measure of FP; and level of ESG. Banks should determine ESG turning points to rationalize their investments and contemplate efficient returns.