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The Contribution of ESG Information to the Financial Stability of European Banks

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  • Tóth, Balázs
  • Lippai-Makra, Edit
  • Szládek, Dániel
  • Kis, Gábor Dávid

Abstract

Nowadays more and more economic actors publish information regarding sustainability, through economic (E), social (S), and governance (G) performance. In the case of banks, ESG performance is important as they affect most of the industries through their investments and loans. In this research our aim is to investigate the relationship between financial stability and ESG performance. We applied panel regressive methods during the analysis. The sample consisted of stock exchange listed lending institutions (243 banks) from the European Union (EU) and the European Free Trade Association (EFTA). Our results show that ESG performance reduced the ratio of non-performing loans significantly. Furthermore, the positive effect of regulatory capital has been confirmed. Consequently, we can assert that the economic, social, and governance performance have beneficial impacts on financial stability. Therefore, the consideration of these pieces of information should be important for the investors and the regulators as well.

Suggested Citation

  • Tóth, Balázs & Lippai-Makra, Edit & Szládek, Dániel & Kis, Gábor Dávid, 2021. "The Contribution of ESG Information to the Financial Stability of European Banks," Public Finance Quarterly, Corvinus University of Budapest, vol. 66(3), pages 429-450.
    • Handle: RePEc:pfq:journl:v:66:y:2021:i:3:p:429-450
    DOI: https://doi.org/10.35551/PFQ_2021_3_7
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    Citations

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    Cited by:

    1. Liu, Suyi & Jin, Justin & Nainar, Khalid, 2023. "Does ESG performance reduce banks’ nonperforming loans?," Finance Research Letters, Elsevier, vol. 55(PA).
    2. Arnone, Massimo & Laureti, Lucio & Costantiello, Alberto & Anobile, Fabio & Leogrande, Angelo, 2024. "Banking Stability in the Context of the ESG Model at World Level," MPRA Paper 121617, University Library of Munich, Germany.
    3. Aghilasse Kashi & Mohamed Eskandar Shah, 2023. "Bibliometric Review on Sustainable Finance," Sustainability, MDPI, vol. 15(9), pages 1-30, April.
    4. Arnone, Massimo & Leogrande, Angelo, 2024. "The Sustainability of the Factoring Chain in Europe in the Light of the Integration of ESG Factors," MPRA Paper 121342, University Library of Munich, Germany.
    5. Arnone, Massimo & Leogrande, Angelo, 2024. "Modelli Creditizi nel Contesto ESG: La Domanda dei Mutui delle Famiglie Consumatrici nelle Regioni Italiane [Credit Models in an ESG Context: Mortgage Demand from Consumer Families in Italian Regio," MPRA Paper 122773, University Library of Munich, Germany.
    6. Yu Zhang & Chiping Chen & Xizheng Zhang, 2024. "The Impact of Environmental, Social, and Governance Performance on the Total Factor Productivity of Textile Firms: A Meditating-Moderating Model," Sustainability, MDPI, vol. 16(16), pages 1-19, August.
    7. Afef Bouattour & Maha Kalai & Kamel Helali, 2024. "The non-linear relationship between ESG performance and bank stability in the digital era: new evidence from a regime-switching approach," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    8. Iulia Lupu & Gheorghe Hurduzeu & Radu Lupu, 2022. "How Is the ESG Reflected in European Financial Stability?," Sustainability, MDPI, vol. 14(16), pages 1-14, August.
    9. Inova Fitri Siregar & Tubagus Ismail & Muhammad Taqi & Nurhayati Soleha, 2024. "Influence of ESG on Sustainability Reporting: Mediation Rule of Green Innovation and Investor Sentiment," International Journal of Energy Economics and Policy, Econjournals, vol. 14(1), pages 452-463, January.

    More about this item

    Keywords

    ESG information; financial stability; banking system; Europe; green finance; panel VAR;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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