Herding behavior and the dynamics of ESG performance in the European banking industry

Qishu Wang

Finance Research Letters, 2023, vol. 58, issue PD

Abstract: We investigate the dynamics of ESG performance and explore the potential driving force, including the role of herd behavior among banks. Utilizing Phillips and Sul (2007)'s panel data convergence model and data from the EURO STOXX Banks index, we identify a significant divergence in ESG performance followed by convergence towards separate clusters or clubs after 2018. Notably, banks with lower Return on Equity (ROE) and leverage demonstrate herding tendencies towards improved ESG performance, emphasizing sustainability objectives and community ties. The study contributes to understanding the potential driving forces behind ESG convergence among EU banks.

Keywords: ESG; European banking; Panel convergence; Phillip and Sul convergence method (search for similar items in EconPapers)
JEL-codes: C23 C33 C58 G21 Q56 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323010127

DOI: 10.1016/j.frl.2023.104640

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