Corporate Financial Performance and ESG Performance: Which One Leads European Banks?

Mario La Torre (), Sabrina Leo and Ida Panetta ()
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Mario La Torre: Sapienza University of Rome

Chapter Chapter 5 in Contemporary Issues in Sustainable Finance, 2023, pp 105-137 from Palgrave Macmillan

Abstract: Abstract This chapter goes beyond the relationship between a bank ESG performance (ESGP) and traditional financial measures, known in the literature as Corporate Financial Performance (CFP). Here, the link between ESG factors and financial benchmarks is analysed to verify whether banks may find sufficient stimuli (higher CFP) in the market reaction to adopt ESG conduct spontaneously. Starting from the results achieved in our previous pilot study (Torre et al., Corporate Social Responsibility and Environmental Management 28:1620–1634, 2021) on a limited number of European listed banks, we decided to deepen the relationship between ESGP and CFP to all available listed European banks between 2008 and 2020. Using panel estimation methods, we are going to further explore the relationship between ESGP and CFP, considering different dimensions of financial performance at once, both accounted-based (ROA and ROE) and market-based (Capitalisation to Book Value, Tobin's Q). Furthermore, we employ VBM, namely EVA Spread, less explored in literature. Unlike our previous pilot study, we use the single Pillar Scores (Environmental, Social and Governance) as ESGP instead of the ESG Score.

Keywords: ESG; ESG factors; ESG score; ESGP; CFP; VBM; Banks financial performance; Value creation (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psifcp:978-3-031-22539-0_5

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DOI: 10.1007/978-3-031-22539-0_5

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