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The impact of social and environmental sustainability on financial performance: A global analysis of the banking sector

Esma Nizam, Adam Ng, Ginanjar Dewandaru, Ruslan Nagayev and Malik Abdulrahman Nkoba

Journal of Multinational Financial Management, 2019, vol. 49, issue C, 35-53

Abstract: While there is ample evidence that non-financial firms’ financial performance and social and environmental performance are related, evidence for the banking sector remains limited and inconclusive. This paper examines the impact of access to finance and environmental financing on the financial performance of the banking sector globally. Based on cross-sectional linear regressions and non-linear threshold regressions of 713 banks from 75 countries over the period 2013–2015, we find that access to finance has significantly positive effects on banks’ financial performance in most estimation models controlling for both bank-specific and macroeconomic variables. The positive impact on financial performance is channeled through loan growth and management quality. We find that for banks with total assets less than USD 2 billion, access to finance has a significantly positive impact on return to equity. The paper concludes by discussing policy implications.

Keywords: Sustainability; Bank performance; ESG; Access to finance; Environmental financing; Threshold (search for similar items in EconPapers)
JEL-codes: C31 C52 G21 G30 G32 M14 (search for similar items in EconPapers)
Date: 2019
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