A Cross-Market Analysis of ESG impact on Bank...

A Cross-Market Analysis of ESG impact on Bank Performance

Author Name : Brian Mandisodza, Serkan Çankaya

ABSTRACT The nature of the relationship between bank performance and ESG activities remains an area of growing interest among investors, academics, regulators, and scholars as indicated in literature by an increasing number of related studies, however the research results show significant and notable variations across industries. Moreso, literature indicates a limited number of studies for the banking industry. Therefore, this study aims to comparatively examine the impact of ESG factors on financial performance of banks in developed and emerging markets. To achieve this, we employ a panel multiple regression analysis on yearly data which covers a period from 2010 through 2021 from a total of 220 banks where 114 banks are from developed markets and 106 from emerging markets. The findings of the study show that ESG combined has a significant positive impact on the financial performance of banks in developed markets while no impact is found in emerging markets. This study contributes to literature by providing more evidence on the nexus between bank performance and ESG performance, especially with a comparative analysis between developed and emerging markets and consideration of the lagging effect. Furthermore, the findings are resourceful for some decision-makers such as ESG conscious investors, management of banks, policy makers and other interested stakeholders.