The Impact of ESG Score on Financial Performance: A Study on Banks Listed on the NASDAQ
DOI:
https://doi.org/10.5281/zenodo.18190057Parole chiave:
ESG, NASDAQ, Banks’ Financial PerformanceAbstract
This study investigates the impact of Environmental, Social, and Governance (ESG) scores on the financial performance of NASDAQ-listed banks. It examines whether ESG scores are associated with better financial performance, as measured by Return on Assets (ROA) and Return on Equity (ROE), between 2010 and 2021. In addition, the study aims to provide practical guidance for bank managers, investors, and policymakers on the strategic importance of ESG integration in the banking sector. In this study, a panel regression analysis was conducted using data on 74 banks with ESG scores. ROA and ROE are examined as dependent variables, and ESG scores are treated as the primary independent variable. ROA and ROE are significantly affected by ESG scores, implying that better financial results for banks are associated with higher levels of corporate social responsibility. Despite the low average ESG ratings in our sample, improving these ratings moderately improves profitability even for the low-rated banks included in our sample. In order to increase profits and gain a competitive advantage, banks may be wise to include environmental, social, and governance issues in their strategic plans. Investors should benefit from such ESG ratings when deciding on their investments. This study contributes to the growing literature on the financial effects of ESG performance by providing empirical evidence from a unique dataset of NASDAQ-listed banks. Despite the traditionally low emphasis on ESG in the banking sector, it provides new insights into the positive role that ESG integration can play in improving bank profitability.
Riferimenti bibliografici
Abdul Rahman R. & Alsayegh M.F. (2021). Determinants of Corporate Environment, Social and Governance (ESG) Reporting among Asian Firms. Journal of Risk and Financial Management, 14, 167. https://doi.org/10.3390/ jrfm14040167
Aebi, V., Sabato, G., & Schmid, M. (2012). Risk management, corporate governance, and bank performance in the financial crisis. Journal of Banking & Finance, 36(12), 3213–3226.
Anggari, N. L. S., & Dana, I. M. (2020). The effect of capital adequacy ratio, third party funds, loan to deposit ratio, bank size on profitability in banking companies on IDX. American Journal of Humanities and Social Sciences Research (AJHSSR), 4(12), 334-338.
Azmi, W., Hassan, M. K., Houston, R., & Karim, M. S. (2021). ESG activities and banking performance: International evidence from emerging economies. Journal of International Financial Markets, Institutions and Money, 70, 101277.
Baldini, M., Dal Maso, L., Liberatore, G., Mazzi, F. & Terzani, S. (2018). Role of Country and Firm-Level Determinants in Environmental, Social, and Governance Disclosure. Journal of Business Ethics, 150 (1), 79-98
Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of banking & finance, 21(6), 849-870.
Birindelli, G., Dell’Atti, S., Iannuzzi, A. P., & Savioli, M. (2018). Composition and activity of the board of directors: Impact on ESG performance in the banking system. Sustainability, 10(12), 4699.
Chen, L., Yuan, T., Cebula, R.J., Shuangjin, W. & Foley, M. (2021). Fulfillment of ESG Responsibilities and Firm Performance: A Zero-Sum Game or Mutually Beneficial. Sustainability, 13, 10954. https:// doi.org/10.3390/ su131910954
Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance. Journal of Environmental Management, 345, 118829.
Chen, Z., & Xie, G. (2022). ESG disclosure and financial performance: Moderating role of ESG investors. International Review of Financial Analysis, 83, 102291.
Chiaramonte, L., Dreassi, A., Girardone, C., & Piserà, S. (2022). Do ESG strategies enhance bank stability during financial turmoil? Evidence from Europe. The European Journal of Finance, 28(12), 1173-1211.
Çetenak, E. H., Ersoy, E., & Özcan, I. Ş. I. K. (2022). ESG (ÇEVRESEL, SOSYAL VE KURUMSAL YÖNETİM) SKORUNUN FİRMA PERFORMANSINA ETKİSİ: TÜRK BANKACILIK SEKTÖRÜ ÖRNEĞİ. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, (63), 75-82.
Dalal, K. K., & Thaker, N. (2019). ESG and corporate financial performance: A panel study of Indian companies. IUP Journal of Corporate Governance, 18(1), 44-59.
DasGupta, R. (2022). Financial performance shortfall, ESG controversies, and ESG performance: Evidence from firms around the world. Finance Research Letters, 46, 102487.
DuqueGrisales, E. & AguileraCaracuel, J. (2021). Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Efects of Geographic International Diversifcation and Financial Slack. Journal of Business Ethics, 168, 315-334. https://doi.org/10.1007/s10551-019-04177-w
Dyduch, J. & Krasodomska, J. (2017). Determinants of Corporate Social Responsibility Disclosure: An Empirical Study of Polish Listed Companies. Sustainability, 9 (11), 1934. https://doi.org/10.3390/su9111934
El Khoury, R., Nasrallah, N. & Alareeni, B. (2023). The Determinants of ESG in the Banking Sector of MENA Region: A Trend or Necessity?. Competitiveness Review ,33 (1), 7-29. https://doi.org/10.1108/CR-09-2021-0118
Eriki, P. O., & OSifo, O. (2015). Determinants of performance efficiency in Nigerian banking industry: A DEA approach. International Journal of Economics, Commerce and Management, 3(2), 1-13.
Fries, S., & Taci, A. (2005). Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries. Journal of Banking & Finance, 29(1), 55-81.
Gafoor, C. A., Mariappan, V., & Thiyagarajan, S. (2018). Board characteristics and bank performance in India. IIMB management review, 30(2), 160-167.
García-Meca, E., García-Sánchez, I. M., & Martínez-Ferrero, J. (2015). Board diversity and its effects on bank performance: An international analysis. Journal of banking & Finance, 53, 202-214.
Giannopoulos, G., Kihle Fagernes, R. V., Elmarzouky, M., & Afzal Hossain, K. A. B. M. (2022). The ESG disclosure and the financial performance of Norwegian listed firms. Journal of Risk and Financial Management, 15(6), 237.
Hays, F. H., De Lurgio, S. A., & Gilbert, A. H. (2009). Efficiency ratios and community bank performance. Journal of Finance and Accountancy, 1(1), 1-15.
Indrianingsih, I. & Agustina, L. (2020). The Effect of Company Size, Financial Performance, and Corporate Governance on the Disclosure of Sustainability Report. Accounting Analysis Journal, 9(2), 116-122. https://doi. org/10.15294/aaj.v9i2.31177
John, T. A. (2018). Effect of non-performing loans on bank performance of some selected commercial bank in the Nigerian banking sector. International Journal of New Technology and Research, 4(4), 263089.
Karim, M. Z. A., Chan, S. G., & Hassan, S. (2010). Bank efficiency and non-performing loans: Evidence from Malaysia and Singapore. Prague Economic Papers Issue 2, 2010, Pages 118-132.
Kean, F. R., & Baumann, H. D. (2003). Firm Size, Employees and Profitability in US Manufacutring Industries. University of New Hampshire, Durham.
Khursheed, A., Asif, M., Hussain, S., & Liaquat, M. (2021). Factors Affecting Total Risk in Banking Sector of Pakistan: Empirical Evidence from Panel Data Analysis. Review of Applied Management and Social Sciences, 4(2), 431-445.
Kumar, K., Rajan, R., & Zingales, L. (1999). What determines firm size?.
Kusmana, A., & Sumilir, S. (2019). Banking performance analysis. International Journal of Multicultural and Multireligious Understanding, 6(9), 34-48.
Liyana, L., & Indrayani, E. (2020). The Effect of Non-Performing Loan (NPL), Loan to Deposit Ratio (LDR) and Net Interest Margin (NIM) on Financial Performance (ROA) With Car as Intervening Variables on Go Public Commercial Banks in Indonesia and Listed on BEI Period 2014-2018. Asian Journal of Social Science and Management Technology, 2(2), 61-75.
Marozva, G. (2015). Liquidity and bank performance. International Business & Economics Research Journal (IBER), 14(3), 453-562.
Naeem, N., Cankaya, S., & Bildik, R. (2022). Does ESG performance affect the financial performance of environmentally sensitive industries? A comparison between emerging and developed markets. Borsa Istanbul Review, 22, S128-S140.
Nirino, N., Santoro, G., Miglietta, N., & Quaglia, R. (2021). Corporate controversies and company's financial performance: Exploring the moderating role of ESG practices. Technological Forecasting and Social Change, 162, 120341.
Ozili, P. K. (2019). Non-performing loans and financial development: new evidence. The Journal of Risk Finance, 20(1), 59-81. Ozili, P. K. (2019). Non-performing loans and financial development: new evidence. The Journal of Risk Finance, 20(1), 59-81.
Özçelik, F., Avcı Öztürk, B. & Gürsakal, S. (2014), Investigating the Relationship between Corporate Social Responsibility and Financial Performance in Turkey. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 28 (3), 189-203
Partovi, E., & Matousek, R. (2019). Bank efficiency and non-performing loans: Evidence from Turkey. Research in international Business and Finance, 48, 287-309.
Pesaran, M. H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica, 74(4), 967-1012.
Prabowo, F. P. S. R., Sarita, B., Syaifuddin, D. T., Saleh, S., Hamid, W., & Budi, N. (2018). Effect of equity to assets ratio (EAR), size, and loan to assets ratio (LAR) on bank performance. IOSR Journal of Economics and Finance, 9(4), 1-6.
Pradhan, P., Shyam, R., & Shrestha, D. (2016). Impact of liquidity on bank profitability in Nepalese commercial banks. Radhe Shyam and Pradhan, Prof. Dr. Radhe Shyam and Shrestha, Deepanjal, Impact of Liquidity on Bank Profitability in Nepalese Commercial Banks (June 9, 2016).
Pranowo, T., Haris, A., Budianto, E., & Mardiyani, M. (2020, March). Effect of CAR, LDR, NPL, and NIM on ROA in Devisa National Public Private Banks Registered on the IDX 2013–2017 Period. In 1st International Conference on Accounting, Management and Entrepreneurship (ICAMER 2019) (pp. 165-168). Atlantis Press.
Psillaki, M., & Mamatzakis, E. (2017). What drives bank performance in transitions economies? The impact of reforms and regulations. Research in International Business and Finance, 39, 578-594.
Sharma, P., Panday, P. & Dangwal, R.C. (2020). Determinants of Environmental, Social and Corporate Governance (ESG) Disclosure: A Study of Indian Companies. International Journal of Disclosure and Governance, 17, 208–217. https://doi.org/10.1057/s41310-020-00085-y
ŞAHİN, A., & Elif, A. C. A. R. (2023). ESG SKORUNUN FİRMAYA ÖZGÜ BELİRLEYİCİLERİ, BORSA İSTANBUL ÖRNEĞİ. Muhasebe ve Denetime Bakış, 23(70), 111-128.
Tamunosiki, K., Giami, I. B., & Obari, O. B. (2017). Liquidity and performance of Nigerian banks. Journal of Accounting and Financial Management, 3(1), 34-46.
Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of global responsibility, 8(2), 169-178.
Gartenberg, C., Prat, A., & Serafeim, G. (2019). Corporate purpose and financial performance. Organization Science, 30(1), 1-18.
Hayes, A. (2024, March 20). What Nasdaq is, history, and financial performance. Investopedia. https://www.investopedia.com/terms/n/nasdaq.asp
Matthews, K., Thompson, J., & Zhang, T. (2023). Economics Of Banking, The. World Scientific.
Sgb, T. (2023, November 12). Environmental Social and Governance (ESG) – the ultimate guide. Traction School of Governance and Business. https://sgb.ac.ke/esg/
##submission.downloads##
Pubblicato
Come citare
Fascicolo
Sezione
Licenza
Copyright (c) 2025 International Journal of Contemporary Economics and Administrative Sciences
TQuesto lavoro è fornito con la licenza Creative Commons Attribuzione 4.0 Internazionale.
The Author(s) must make formal transfer of copyright for each article prior to publication in the International Journal of Contemporary Economics and Administrative Sciences. Such transfer enables the Journal to defend itself against plagiarism and other forms of copyright infringement. Your cooperation is appreciated. You agree that copyright of your article to be published in the International Journal of Contemporary Economics and Administrative Sciences is hereby transferred, throughout the World and for the full term and all extensions and renewals thereof, to International Journal of Contemporary Economics and Administrative Sciences.
The Author(s) reserve(s): (a) the trademark rights and patent rights, if any, and (b) the right to use all or part of the information contained in this article in future, non-commercial works of the Author's own, or, if the article is a "work-for-hire" and made within the scope of the Author's employment, the employer may use all or part of the information contained in this article for intra-company use, provided the usual acknowledgements are given regarding copyright notice and reference to the original publication.
The Author(s) warrant(s) that the article is Author's original work, and has not been published before. If excerpts from copyrighted works are included, the Author will obtain written permission from the copyright owners and shall credit the sources in the article. The author also warrants that the article contains no libelous or unlawful statements, and does not infringe on the rights of others. If the article was prepared jointly with other Author(s), the Author agrees to inform the co-Author(s) of the terms of the copyright transfer and to sign on their behalf; or in the case of a "work-for-hire" the employer or an authorized representative of the employer.
The journal is registered with the ISSN : 1925-4423.
IJCEAS is licensed under a Creative Commons Attribution 4.0 International License.
This license lets others distribute, remix, tweak, and build upon your work, even commercially, as long as they credit you for the original creation. This is the most accommodating of licenses offered. Recommended for maximum dissemination and use of licensed materials.
