IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v142y2022icp412-422.html
   My bibliography  Save this article

The impact of climate change management on banks profitability

Author

Listed:
  • Caby, Jérôme
  • Ziane, Ydriss
  • Lamarque, Eric

Abstract

This study empirically examines the influence of climate change management on banks’ profitability using panel data of a sample of 137 banks from 36 emerging and developed countries during the period 2011–2019, using the Generalized Method of Moments. Our empirical evidence shows that, although banks seem to be aware of the consequences of climate change on their business, to the point of making it a strategic topic worthy of the board of directors, they remain very timid in terms of operational implementation. It leads to a positive impact on profitability limited to the overall quality of climate change management and disclosure and an ex-post justification of the topic’s relevance to the board. The foreseeable introduction of new banking regulations and the current weak relationship between climate change managerial practices and financial performance should encourage banks to pay greater attention to these practices to preserve their future returns.

Suggested Citation

  • Caby, Jérôme & Ziane, Ydriss & Lamarque, Eric, 2022. "The impact of climate change management on banks profitability," Journal of Business Research, Elsevier, vol. 142(C), pages 412-422.
    • Handle: RePEc:eee:jbrese:v:142:y:2022:i:c:p:412-422
    DOI: 10.1016/j.jbusres.2021.12.078
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296321009929
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2021.12.078?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wu, Meng-Wen & Shen, Chung-Hua, 2013. "Corporate social responsibility in the banking industry: Motives and financial performance," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3529-3547.
    2. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    3. Danquah Jeff Boakye & Ishmael TIngbani & Gabriel Ahinful & Isaac Damoah & Venancio Tauringana, 2020. "Sustainable environmental practices and financial performance: Evidence from listed small and medium‐sized enterprise in the United Kingdom," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2583-2602, September.
    4. Mingfeng Tang & Grace Walsh & Daniel Lerner & Markus A. Fitza & Qiaohua Li, 2018. "Green Innovation, Managerial Concern and Firm Performance: An Empirical Study," Business Strategy and the Environment, Wiley Blackwell, vol. 27(1), pages 39-51, January.
    5. Molyneux, Philip & Thornton, John, 1992. "Determinants of European bank profitability: A note," Journal of Banking & Finance, Elsevier, vol. 16(6), pages 1173-1178, December.
    6. Caprio, Gerard & Laeven, Luc & Levine, Ross, 2007. "Governance and bank valuation," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 584-617, October.
    7. Noordewier, Thomas G. & Lucas, Marilyn T., 2020. "On being green and profitable: Does industry context matter?," International Journal of Production Economics, Elsevier, vol. 223(C).
    8. Bolt, Wilko & de Haan, Leo & Hoeberichts, Marco & van Oordt, Maarten R.C. & Swank, Job, 2012. "Bank profitability during recessions," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2552-2564.
    9. Caby, Jérôme & Ziane, Ydriss & Lamarque, Eric, 2020. "The determinants of voluntary climate change disclosure commitment and quality in the banking industry," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    10. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
    11. Jérôme Caby & Ydriss Ziane & Eric Lamarque, 2020. "The determinants of voluntary climate change disclosure commitment and quality in the banking industry," Post-Print hal-02927623, HAL.
    12. Paul Shrivastava & Stuart Hart, 1995. "Creating sustainable corporations," Business Strategy and the Environment, Wiley Blackwell, vol. 4(3), pages 154-165, July.
    13. Sudipta Bose & Habib Zaman Khan & Reza M. Monem, 2021. "Does green banking performance pay off? Evidence from a unique regulatory setting in Bangladesh," Corporate Governance: An International Review, Wiley Blackwell, vol. 29(2), pages 162-187, March.
    14. Walid Ben‐Amar & Mohamed Chelli, 2018. "What drives voluntary corporate water disclosures? The effect of country‐level institutions," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1609-1622, December.
    15. Beltratti, Andrea & Stulz, René M., 2012. "The credit crisis around the globe: Why did some banks perform better?," Journal of Financial Economics, Elsevier, vol. 105(1), pages 1-17.
    16. Elizabeth Stanny, 2013. "Voluntary Disclosures of Emissions by US Firms," Business Strategy and the Environment, Wiley Blackwell, vol. 22(3), pages 145-158, March.
    17. Dietrich, Andreas & Wanzenried, Gabrielle, 2011. "Determinants of bank profitability before and during the crisis: Evidence from Switzerland," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 307-327, July.
    18. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    19. Douglas W. Diamond & Raghuram G. Rajan, 2001. "Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 287-327, April.
    20. Antonio Trujillo-Ponce, 2013. "What determines the profitability of banks? Evidence from Spain," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(2), pages 561-586, June.
    21. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    22. Dayuan Li & Min Huang & Shenggang Ren & Xiaohong Chen & Lutao Ning, 2018. "Environmental Legitimacy, Green Innovation, and Corporate Carbon Disclosure: Evidence from CDP China 100," Journal of Business Ethics, Springer, vol. 150(4), pages 1089-1104, July.
    23. Kai Hockerts, 2015. "A Cognitive Perspective on the Business Case for Corporate Sustainability," Business Strategy and the Environment, Wiley Blackwell, vol. 24(2), pages 102-122, February.
    24. Saona, Paolo, 2016. "Intra- and extra-bank determinants of Latin American Banks' profitability," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 197-214.
    25. Walid Ben-Amar & Millicent Chang & Philip McIlkenny, 2017. "Board Gender Diversity and Corporate Response to Sustainability Initiatives: Evidence from the Carbon Disclosure Project," Journal of Business Ethics, Springer, vol. 142(2), pages 369-383, May.
    26. Christopher Hartwell, 2015. "Après le déluge: Institutions, the Global Financial Crisis, and Bank Profitability in Transition," Open Economies Review, Springer, vol. 26(3), pages 497-524, July.
    27. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    28. Heather Dixon-Fowler & Daniel Slater & Jonathan Johnson & Alan Ellstrand & Andrea Romi, 2013. "Beyond “Does it Pay to be Green?” A Meta-Analysis of Moderators of the CEP–CFP Relationship," Journal of Business Ethics, Springer, vol. 112(2), pages 353-366, January.
    29. Walid Ben‐Amar & Philip McIlkenny, 2015. "Board Effectiveness and the Voluntary Disclosure of Climate Change Information," Business Strategy and the Environment, Wiley Blackwell, vol. 24(8), pages 704-719, December.
    30. Dietrich, Andreas & Wanzenried, Gabrielle, 2014. "The determinants of commercial banking profitability in low-, middle-, and high-income countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(3), pages 337-354.
    31. Elisabeth Albertini, 2013. "Does Environmental Management Improve Financial Performance? A Meta-Analytical Review," Post-Print halshs-01887802, HAL.
    32. Short, Brock K., 1979. "The relation between commercial bank profit rates and banking concentration in Canada, Western Europe, and Japan," Journal of Banking & Finance, Elsevier, vol. 3(3), pages 209-219, September.
    33. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber, 2019. "It is merely a matter of time: A meta‐analysis of the causality between environmental performance and financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 28(2), pages 257-273, February.
    34. Hoje Jo & Hakkon Kim & Kwangwoo Park, 2015. "Corporate Environmental Responsibility and Firm Performance in the Financial Services Sector," Journal of Business Ethics, Springer, vol. 131(2), pages 257-284, October.
    35. Bourke, Philip, 1989. "Concentration and other determinants of bank profitability in Europe, North America and Australia," Journal of Banking & Finance, Elsevier, vol. 13(1), pages 65-79, March.
    36. Lily Hsueh, 2019. "Opening up the firm: What explains participation and effort in voluntary carbon disclosure by global businesses? An analysis of internal firm factors and dynamics," Business Strategy and the Environment, Wiley Blackwell, vol. 28(7), pages 1302-1322, November.
    37. Francesco Gangi & Antonio Meles & Eugenio D'Angelo & Lucia Michela Daniele, 2019. "Sustainable development and corporate governance in the financial system: Are environmentally friendly banks less risky?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(3), pages 529-547, May.
    38. Le Luo & Qingliang Tang & Yi‐Chen Lan, 2013. "Comparison of propensity for carbon disclosure between developing and developed countries," Accounting Research Journal, Emerald Group Publishing Limited, vol. 26(1), pages 6-34, July.
    39. Elekdag, Selim & Malik, Sheheryar & Mitra, Srobona, 2020. "Breaking the Bank? A Probabilistic Assessment of Euro Area Bank Profitability," Journal of Banking & Finance, Elsevier, vol. 120(C).
    40. Liao, Lin & Luo, Le & Tang, Qingliang, 2015. "Gender diversity, board independence, environmental committee and greenhouse gas disclosure," The British Accounting Review, Elsevier, vol. 47(4), pages 409-424.
    41. Timo Busch & Stefan Lewandowski, 2018. "Corporate Carbon and Financial Performance: A Meta‐analysis," Journal of Industrial Ecology, Yale University, vol. 22(4), pages 745-759, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dumrose, Maurice & Höck, André, 2023. "Corporate Carbon-Risk and Credit-Risk: The Impact of Carbon-Risk Exposure and Management on Credit Spreads in Different Regulatory Environments," Finance Research Letters, Elsevier, vol. 51(C).
    2. Mohammed M. Al-Humaiqani & Sami G. Al-Ghamdi, 2023. "Assessing the Built Environment’s Reflectivity, Flexibility, Resourcefulness, and Rapidity Resilience Qualities against Climate Change Impacts from the Perspective of Different Stakeholders," Sustainability, MDPI, vol. 15(6), pages 1-30, March.
    3. Vera Mirovic & Branimir Kalas & Ines Djokic & Nikola Milicevic & Nenad Djokic & Milos Djakovic, 2023. "Green Loans in Bank Portfolio: Financial and Marketing Implications," Sustainability, MDPI, vol. 15(7), pages 1-14, March.
    4. Zbigniew Korzeb & Paweł Niedziółka & Monika Zegadło, 2022. "Assessment of the Impact of Commercial Banks’ Operating Activities on the Natural Environment by Use of Cluster Analysis," Risks, MDPI, vol. 10(6), pages 1-19, June.
    5. Xiaohui Chen & Wen Chen & Tao Hu & Bo Yang & Jianguang Zeng, 2023. "Regional carbon efficiency and corporate cash holdings: evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    6. Galletta, Simona & Mazzù, Sebastiano & Naciti, Valeria, 2022. "A bibliometric analysis of ESG performance in the banking industry: From the current status to future directions," Research in International Business and Finance, Elsevier, vol. 62(C).
    7. Adel Benhamed & Yousif Osman & Ousama Ben-Salha & Zied Jaidi, 2023. "Unveiling the Spatial Effects of Climate Change on Economic Growth: International Evidence," Sustainability, MDPI, vol. 15(10), pages 1-20, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caby, Jérôme & Ziane, Ydriss & Lamarque, Eric, 2020. "The determinants of voluntary climate change disclosure commitment and quality in the banking industry," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    2. Jérôme Caby & Ydriss Ziane & Eric Lamarque, 2020. "The determinants of voluntary climate change disclosure commitment and quality in the banking industry," Post-Print hal-02927623, HAL.
    3. Mariarosa Borroni & Mariacristina Piva & Simone Rossi, 2016. "Determinants of Bank Profitability in the Euro Area: Has Anything Changed?," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1619, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    4. Nizam, Esma & Ng, Adam & Dewandaru, Ginanjar & Nagayev, Ruslan & Nkoba, Malik Abdulrahman, 2019. "The impact of social and environmental sustainability on financial performance: A global analysis of the banking sector," Journal of Multinational Financial Management, Elsevier, vol. 49(C), pages 35-53.
    5. Hongxing Yao & Muhammad Haris & Gulzara Tariq, 2018. "Profitability Determinants of Financial Institutions: Evidence from Banks in Pakistan," IJFS, MDPI, vol. 6(2), pages 1-28, May.
    6. Maria Elisabete Duarte Neves & Maria Do Castelo Gouveia & Catarina Alexandra Neves Proença, 2020. "European Bank’s Performance and Efficiency," JRFM, MDPI, vol. 13(4), pages 1-17, April.
    7. Muhammad Haris & Yong Tan & Ali Malik & Qurat Ul Ain, 2020. "A Study on the Impact of Capitalization on the Profitability of Banks in Emerging Markets: A Case of Pakistan," JRFM, MDPI, vol. 13(9), pages 1-21, September.
    8. Chavarín, Rubén, 2015. "Determinants of commercial bank profitability in Mexico," MPRA Paper 70106, University Library of Munich, Germany.
    9. J.A. Bikker & Tobias M. Vervliet, 2017. "Bank Profitability and Risk-Taking under Low Interest Rates," Working Papers 17-10, Utrecht School of Economics.
    10. Fakhri J. Hasanov & Nigar Bayramli & Nayef Al-Musehel, 2018. "Bank-Specific and Macroeconomic Determinants of Bank Profitability: Evidence from an Oil-Dependent Economy," IJFS, MDPI, vol. 6(3), pages 1-21, September.
    11. Seyed Alireza Athari & Mahboubeh Bahreini, 2023. "The impact of external governance and regulatory settings on the profitability of Islamic banks: Evidence from Arab markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2124-2147, April.
    12. Ayaydin, Hasan & Karaaslan, İbrahim, 2014. "Stock Market Development, Bank Concentration, Ownership Structure, and Bank Performance: Evidence from Turkey," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(1), pages 49-67.
    13. Dietrich, Andreas & Wanzenried, Gabrielle, 2014. "The determinants of commercial banking profitability in low-, middle-, and high-income countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(3), pages 337-354.
    14. Hasan AYAYDIN & Ýbrahim KARAASLAN, 2014. "Stock Market Development, Bank Concentration, Ownership Structure, and Bank Performance: Evidence from Turkey," Journal of Economics and Political Economy, KSP Journals, vol. 1(1), pages 49-67, September.
    15. Djalilov, Khurshid & Piesse, Jenifer, 2016. "Determinants of bank profitability in transition countries: What matters most?," Research in International Business and Finance, Elsevier, vol. 38(C), pages 69-82.
    16. Vijay Kumar & Sanjeev Acharya & Ly T. H. Ho, 2020. "Does Monetary Policy Influence the Profitability of Banks in New Zealand?," IJFS, MDPI, vol. 8(2), pages 1-17, June.
    17. Mimouni, Karim & Smaoui, Houcem & Temimi, Akram & Al-Azzam, Moh'd, 2019. "The impact of Sukuk on the performance of conventional and Islamic banks," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 42-54.
    18. Raftis, Achilleas & Karpetis, Christos & Papadamou, Stephanos & Spyromitros, Eleftherios, 2024. "Monetary winds of change: Exploring the link between policy shifts and bank profitability in developed and emerging European markets," Global Finance Journal, Elsevier, vol. 59(C).
    19. Phan, Dinh Hoang Bach & Narayan, Paresh Kumar & Rahman, R. Eki & Hutabarat, Akhis R., 2020. "Do financial technology firms influence bank performance?," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    20. Tan, Yong, 2017. "The impacts of competition and shadow banking on profitability: Evidence from the Chinese banking industry," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 89-106.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:142:y:2022:i:c:p:412-422. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.