The determinants of ESG in the banking sector of MENA region: a trend or necessity?


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

COMPETITIVENESS REVIEW, 2021 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Publication Date: 2021
  • Doi Number: 10.1108/cr-09-2021-0118
  • Journal Name: COMPETITIVENESS REVIEW
  • Journal Indexes: Emerging Sources Citation Index, Scopus, Academic Search Premier, ABI/INFORM, Aerospace Database, Business Source Elite, Business Source Premier, Communication Abstracts, EconLit, Educational research abstracts (ERA), INSPEC, Metadex, Public Affairs Index, Civil Engineering Abstracts
  • Keywords: Corruption, MENA, ROA, ESG, Banks, CORPORATE SOCIAL-RESPONSIBILITY, REPORTING EMPIRICAL-EVIDENCE, FINANCIAL PERFORMANCE, CSR, DISCLOSURE, FIRM, INDUSTRY, GOVERNANCE, MANAGEMENT, IMPACT

Abstract

Purpose As reporting environmental, social and governance (ESG) information is not yet mandatory in all countries, it is intriguing to understand ESG's underlying driving mechanisms. This study aims to investigate ESG determinants in the banking sector of the Middle East and North Africa countries. Design/methodology/approach The authors gather data for 38 listed banks for the period 2011-2019. The data used is threefold as follows: data related to ESG; firm-level; and country-level data. While ESG and firm's level data are taken from Refinitiv, country-level data are extracted from the World Bank. Using panel regression, the authors test the effect of firm- and country-specific variables on the overall ESG score and its pillars. Findings Results indicate that banks' ESG scores are negatively affected by performance and positively affected by size. The level of economic development exerts a negative impact on the environmental pillar while the social development exerts a positive impact on ESG and governance pillar. Corruption is the only country-level that gathers a homogenous effect on ESG scores. Finally, the three pillars follow heterogeneous patterns. Originality/value This study extends the scope of previous studies by introducing new country-level independent variables to contribute to the understanding of ESG antecedents.