EconPapers    
Economics at your fingertips  
 

Bank diversification and ESG activities: A global perspective

Abdulazeez Y.H. Saif-Alyousfi, Asish Saha and Turki Rashed Alshammari

Economic Systems, 2023, vol. 47, issue 3

Abstract: The present study uses data from 1385 banks in 89 countries from 2009 to 2020 to analyze whether the banks’ environmental, social, and governance (ESG) activities around the world affect their diversification. We use a two-step system dynamic generalized method of moments technique and find that the relationship between ESG activity and bank diversification is nonlinear. Environmental and social factors negatively impact bank diversification, whereas governance has a positive impact. Bank diversification is affected by ESG overall and individual ESG dimensions more in developed countries. In high-income countries, banks generate more scope for diversification through environmental disclosures. The social activities of the executive management and the board of directors in high-income countries are intended more to satisfy their own needs than those of their banks. Governance disclosure increases income and asset diversification more for banks in high- and upper-middle-income countries. Capitalization, management quality, and liquidity are the channels through which ESG affects bank diversification. We argue that policy makers and regulators need to design and implement tailor-made frameworks and incentivize banks to embrace sustainable finance best practices. The adoption of these practices and the financing of socially responsible projects would drive interest by various stakeholders and thereby attract higher investor interest and bank valuation.

Keywords: Bank diversification; ESG activities; Sustainability (search for similar items in EconPapers)
JEL-codes: G20 G30 G32 M14 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362523000237
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:47:y:2023:i:3:s0939362523000237

DOI: 10.1016/j.ecosys.2023.101094

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).

 
Page updated 2024-12-28
Handle: RePEc:eee:ecosys:v:47:y:2023:i:3:s0939362523000237