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ESG and Systemic Risk

George-Marian Aevoae, Alin Marius Andries, Steven Ongena and Nicu Sprincean
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George-Marian Aevoae: Alexandru Ioan Cuza University - Faculty of Economics and Business Administration
Alin Marius Andries: Alexandru Ioan Cuza University of Iasi; Romanian Academy - Institute for Economic Forecasting

Authors registered in the RePEc Author Service: Alin Marius Andrieș

No 22-25, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: How do changes in Environmental, Social and Governance (ESG) scores influence banks’ systemic risk contribution? We document a beneficial impact of the ESG Combined Score and Governance pillar on banks’ contribution to system-wide distress analysing a panel of 367 publicly listed banks from 47 countries over the period 2007-2020. Stakeholder theory and theory relating social performance to expected returns in which enhanced investments in corporate social responsibility mitigate bank specific risks explain our findings. However, only better corporate governance represents a tool in reducing bank interconnectedness and maintaining financial stability. A similar relationship for banks’ exposure to systemic risk is also found. Our findings stress the importance of integrating banks’ ESG disclosure into regulatory authorities’ supervisory mechanisms as qualitative information.

Keywords: Systemic Risk; Financial Stability, Corporate Social Responsibility (CSR), Environmental, Social and Governance (ESG) Scores (search for similar items in EconPapers)
JEL-codes: G01 G21 M14 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2022-03
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-env, nep-fdg, nep-fmk, nep-isf and nep-rmg
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Citations: View citations in EconPapers (9)

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