The impact of ESG performance in the banking industry: A comparative study between developed and emerging markets

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Thesis Type: Postgraduate

Institution Of The Thesis: Istanbul Commerce University, Finans Enstitüsü, International Finance, Turkey

Approval Date: 2024

Thesis Language: English

Student: BRIAN MANDISODZA

Supervisor: Serkan Çankaya

Open Archive Collection: AVESIS Open Access Collection

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 notable variations. Therefore, this study aims to comparatively examine the impact of ESG factors on the 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 2012 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. Individually, ESG pillars are shown to have varying results. The study indicates that only Environmental and Social pillars have a strong positive impact on bank performance in developed markets whereas governance has no impact. Interestingly, in emerging markets, only the Governance factor has a significant positive impact on bank performance while environmental and Social factors have no significant impact. Furthermore, the results also show that ESG controversy has a strong positive impact on banks' performance both in emerging and developed markets. Keywords: Environmental, social, governance, sustainability, bank performance, developed and developing markets.