1 Introduction
2 Literature and hypotheses
2.1 Bank related literature
2.2 Theoretical framework and hypotheses
H1: Overall CSR reduces bank risk.
H2: Each single CSR-pillar (environmental–social–governance) has a reducing effect on bank risk.
3 Empirical approach
3.1 Sample and data
3.2 Dependent variable and risk measures
3.3 ESG scores and control variables
Variables | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) |
---|---|---|---|---|---|---|---|---|
N | Min | 25% | 50% | Mean | 75% | Max | sd | |
Panel A | ||||||||
z-score | 4143 | − 0.39 | 16.34 | 31.10 | 46.31 | 57.92 | 959.86 | 50.42 |
RD | 2980 | 0.06 | 48.43 | 63.96 | 62.59 | 76.83 | 579.31 | 25.56 |
Panel B | ||||||||
ESG score | 4143 | 12.30 | 35.20 | 48.09 | 50.86 | 66.46 | 93.53 | 18.94 |
EnvPillar | 4143 | 7.67 | 29.29 | 45.91 | 51.00 | 73.75 | 98.10 | 24.83 |
SocPillar | 4143 | 2.65 | 34.32 | 49.40 | 50.72 | 66.81 | 98.01 | 21.54 |
GovPillar | 4143 | 1.72 | 32.94 | 51.27 | 50.85 | 69.13 | 99.52 | 21.81 |
Panel C | ||||||||
logFTE | 3787 | 1.39 | 7.80 | 9.20 | 9.10 | 10.36 | 12.15 | 1.66 |
LR | 4143 | − 16,986,120.31 | 718.68 | 1025.58 | − 11,862.49 | 1569.98 | 21,030.75 | 392,593.30 |
LoanRatio | 3654 | 0.02 | 51.15 | 62.52 | 60.29 | 70.19 | 93.51 | 14.25 |
DepRatio | 3661 | 0.23 | 60.38 | 72.17 | 68.71 | 80.36 | 98.76 | 15.53 |
ROE | 4143 | − 10,271.65 | 9.46 | 14.20 | 71.42 | 19.83 | 49,600.56 | 1556.94 |
3.4 Methodology
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | RD | RD | RD | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
L.ESG score | 0.8061*** | 0.7749*** | 0.6176*** | − 0.1598*** | − 0.1368* | − 0.1572** |
(0.09) | (0.09) | (0.10) | (0.05) | (0.07) | (0.07) | |
L.logFTE | 0.1783 | 2.2885 | − 3.9859 | − 3.2291 | ||
(4.19) | (4.12) | (5.57) | (5.74) | |||
L.LR | − 0.0000*** | − 0.0000*** | 0.0000 | 0.0000** | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.LoanRatio | 0.1448 | 0.1201 | 0.2757** | 0.2782** | ||
(0.16) | (0.16) | (0.12) | (0.12) | |||
L.DepRatio | 0.3383*** | 0.2507** | − 0.0977 | − 0.1013 | ||
(0.11) | (0.11) | (0.13) | (0.14) | |||
L.ROE | − 0.0010*** | − 0.0006** | − 0.0001 | 0.0000 | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.Inflation | − 0.0277 | 0.0333 | ||||
(0.35) | (0.10) | |||||
L.\(\text {GDP}^{\text {Growth}}_\text {Cap}\) | 1.2607*** | 0.3616* | ||||
(0.36) | (0.19) | |||||
L.\(\text {GDP}_\text {Cap}\) | 0.0016 | 0.0000 | ||||
(0.00) | (0.00) | |||||
Constant | 6.3560 | − 24.7530 | − 91.1087* | 70.3927*** | 96.1081 | 87.9577 |
(4.75) | (39.97) | (47.32) | (2.78) | (60.31) | (61.69) | |
N | 3949 | 3200 | 3117 | 2904 | 2674 | 2635 |
\(\text {R}^{2}_{adj}\)
| 0.0413 | 0.0450 | 0.0611 | 0.0059 | 0.0107 | 0.0119 |
4 Results
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | RD | RD | RD | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
L.EnvPillar | 0.5589*** | 0.5415*** | 0.4393*** | − 0.1359*** | − 0.1296*** | − 0.1436*** |
(0.07) | (0.07) | (0.08) | (0.04) | (0.04) | (0.04) | |
L.logFTE | 0.8016 | 2.5585 | − 3.5049 | − 2.7782 | ||
(4.23) | (4.13) | (5.29) | (5.43) | |||
L.LR | − 0.0000*** | − 0.0000*** | 0.0000 | 0.0000** | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.LoanRatio | 0.1412 | 0.1150 | 0.2854** | 0.2880** | ||
(0.16) | (0.16) | (0.12) | (0.12) | |||
L.DepRatio | 0.3986*** | 0.2990*** | − 0.1142 | − 0.1204 | ||
(0.11) | (0.11) | (0.13) | (0.13) | |||
L.ROE | − 0.0010*** | − 0.0006** | − 0.0000 | 0.0000 | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.Inflation | − 0.0440 | 0.0220 | ||||
(0.35) | (0.10) | |||||
L.\(\text {GDP}^{\text {Growth}}_\text {Cap}\) | 1.2126*** | 0.3633* | ||||
(0.36) | (0.19) | |||||
L.\(\text {GDP}_\text {Cap}\) | 0.0016 | 0.0001 | ||||
(0.00) | (0.00) | |||||
Constant | 18.7935*** | − 22.5995 | − 88.3094* | 69.2300*** | 91.9350 | 83.2806 |
(3.52) | (41.21) | (47.69) | (1.94) | (58.49) | (59.38) | |
N | 3949 | 3200 | 3117 | 2904 | 2674 | 2635 |
\(\text {R}^{2}_{adj}\) | 0.0402 | 0.0451 | 0.0622 | 0.0088 | 0.0138 | 0.0153 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | RD | RD | RD | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
L.SocPillar | 0.5181*** | 0.4579*** | 0.2958*** | − 0.0549 | − 0.0342 | − 0.0441 |
(0.08) | (0.08) | (0.09) | (0.04) | (0.05) | (0.05) | |
L.logFTE | 4.1909 | 6.2426 | − 5.3885 | − 4.7190 | ||
(4.48) | (4.43) | (5.37) | (5.53) | |||
L.LR | − 0.0000*** | − 0.0000*** | 0.0000 | 0.0000** | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.LoanRatio | 0.1876 | 0.1566 | 0.2643** | 0.2680** | ||
(0.16) | (0.17) | (0.12) | (0.12) | |||
L.DepRatio | 0.3390*** | 0.2475** | − 0.1040 | − 0.1070 | ||
(0.11) | (0.12) | (0.13) | (0.13) | |||
L.ROE | − 0.0009*** | − 0.0005** | − 0.0001 | 0.0000 | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.Inflation | − 0.2096 | 0.0802 | ||||
(0.35) | (0.11) | |||||
L.\(\text {GDP}^{\text {Growth}}_\text {Cap}\) | 1.1619*** | 0.3823** | ||||
(0.36) | (0.19) | |||||
L.\(\text {GDP}_\text {Cap}\) | 0.0018* | − 0.0000 | ||||
(0.00) | (0.00) | |||||
Constant | 21.2068*** | − 48.0482 | − 119.3424** | 64.8943*** | 104.8033* | 99.2207* |
(3.81) | (43.38) | (50.89) | (1.87) | (58.73) | (59.85) | |
N | 3949 | 3200 | 3117 | 2904 | 2674 | 2635 |
\(\text {R}^{2}_{adj}\) | 0.0236 | 0.0278 | 0.0480 | 0.0006 | 0.0073 | 0.0079 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | RD | RD | RD | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
L.GovPillar | 0.2886*** | 0.2710*** | 0.2264*** | − 0.0727* | − 0.0474 | − 0.0502 |
(0.06) | (0.06) | (0.06) | (0.04) | (0.05) | (0.05) | |
L.logFTE | 8.9838* | 8.8121** | − 5.4582 | − 4.9101 | ||
(4.57) | (4.40) | (5.15) | (5.30) | |||
L.LR | − 0.0000*** | − 0.0000** | 0.0000 | 0.0000** | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.LoanRatio | 0.2188 | 0.1741 | 0.2614** | 0.2638** | ||
(0.16) | (0.17) | (0.12) | (0.12) | |||
L.DepRatio | 0.3234*** | 0.2268* | − 0.0936 | − 0.0959 | ||
(0.11) | (0.12) | (0.14) | (0.14) | |||
L.ROE | − 0.0007*** | − 0.0004** | − 0.0001 | − 0.0000 | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.Inflation | − 0.2330 | 0.0768 | ||||
(0.36) | (0.11) | |||||
L.\(\text {GDP}^{\text {Growth}}_\text {Cap}\) | 1.2033*** | 0.3689** | ||||
(0.36) | (0.19) | |||||
L.\(\text {GDP}_\text {Cap}\) | 0.0019* | − 0.0000 | ||||
(0.00) | (0.00) | |||||
Constant | 32.8002*** | − 83.2546* | − 141.8616*** | 65.7275*** | 105.5128* | 100.7562* |
(3.14) | (45.56) | (48.49) | (2.00) | (57.35) | (58.12) | |
N | 3949 | 3200 | 3117 | 2904 | 2674 | 2635 |
\(\text {R}^{2}_{adj}\) | 0.0098 | 0.0203 | 0.0476 | 0.0021 | 0.0079 | 0.0084 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | RD | RD | RD | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
L.Env. Innovation | 0.3282*** | 0.3296*** | 0.2310*** | − 0.1302*** | − 0.1315*** | − 0.1465*** |
(0.06) | (0.06) | (0.06) | (0.04) | (0.05) | (0.05) | |
L.Emissions | 0.4007*** | 0.3618*** | 0.2880*** | − 0.0839*** | − 0.0733** | − 0.0800** |
(0.05) | (0.05) | (0.06) | (0.03) | (0.03) | (0.03) | |
L.Resource Use | 0.4639*** | 0.4279*** | 0.3644*** | − 0.0816*** | − 0.0688** | − 0.0726*** |
(0.06) | (0.06) | (0.07) | (0.02) | (0.03) | (0.03) | |
L.Community | 0.0808 | 0.0322 | − 0.0391 | − 0.0202 | − 0.0131 | − 0.0157 |
(0.05) | (0.06) | (0.05) | (0.03) | (0.03) | (0.03) | |
L.Human Rights | 0.3037*** | 0.2674*** | 0.1602*** | − 0.1269*** | − 0.1165*** | − 0.1227*** |
(0.05) | (0.06) | (0.06) | (0.02) | (0.03) | (0.03) | |
L.Product Respon. | 0.1749*** | 0.1294** | 0.0385 | 0.0360 | 0.0509** | 0.0510* |
(0.06) | (0.06) | (0.06) | (0.02) | (0.03) | (0.03) | |
L.Workforce | 0.3435*** | 0.3182*** | 0.2486*** | − 0.0396 | − 0.0310 | − 0.0374 |
(0.05) | (0.05) | (0.06) | (0.03) | (0.04) | (0.04) | |
L.CSR-strategy | 0.2440*** | 0.1742*** | 0.0890* | − 0.0624** | − 0.0482* | − 0.0557** |
(0.05) | (0.05) | (0.05) | (0.02) | (0.03) | (0.03) | |
L.Management | 0.1859*** | 0.1853*** | 0.1615*** | − 0.0307 | − 0.0164 | − 0.0178 |
(0.04) | (0.04) | (0.04) | (0.02) | (0.03) | (0.03) | |
L.Shareholders | 0.0150 | 0.0096 | 0.0116 | − 0.0423* | − 0.0326 | − 0.0031 |
(0.04) | (0.05) | (0.05) | (0.02) | (0.03) | (0.03) | |
Bank controls | No | Yes | Yes | No | Yes | Yes |
Country controls | No | No | Yes | No | No | Yes |
N | 3949 | 3200 | 3117 | 2904 | 2674 | 2635 |
5 Robustness
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | RD | RD | RD | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
Without lag | ||||||
ESG score | 0.7169*** | 0.6900*** | 0.5526*** | − 0.1211*** | − 0.0838 | − 0.1020* |
(0.09) | (0.10) | (0.11) | (0.04) | (0.06) | (0.06) | |
EnvPillar | 0.5274*** | 0.5015*** | 0.4175*** | − 0.1100*** | − 0.1224*** | − 0.1341*** |
(0.07) | (0.07) | (0.08) | (0.03) | (0.03) | (0.03) | |
SocPillar | 0.4465*** | 0.3495*** | 0.2013** | − 0.0685* | − 0.0695 | − 0.0813* |
(0.07) | (0.08) | (0.09) | (0.04) | (0.05) | (0.05) | |
GovPillar | 0.2366*** | 0.2235*** | 0.1798*** | − 0.0242 | − 0.0089 | − 0.0092 |
(0.06) | (0.06) | (0.06) | (0.03) | (0.04) | (0.04) | |
2 years lagged | ||||||
L2.ESG score | 0.7421*** | 0.6945*** | 0.5589*** | − 0.1700*** | − 0.1359** | − 0.1544*** |
(0.09) | (0.09) | (0.10) | (0.05) | (0.06) | (0.06) | |
L2.EnvPillar | 0.5214*** | 0.4962*** | 0.4041*** | − 0.1292*** | − 0.1082*** | − 0.1180*** |
(0.07) | (0.07) | (0.07) | (0.04) | (0.04) | (0.04) | |
L2.SocPillar | 0.4971*** | 0.4472*** | 0.3208*** | − 0.0817* | − 0.0576 | − 0.0661 |
(0.08) | (0.08) | (0.09) | (0.05) | (0.04) | (0.04) | |
L2.GovPillar | 0.2217*** | 0.2067*** | 0.1588** | − 0.0705*** | − 0.0402 | − 0.0388 |
(0.07) | (0.07) | (0.07) | (0.03) | (0.03) | (0.03) | |
Bank controls | No | Yes | Yes | No | Yes | Yes |
Country controls | No | No | Yes | No | No | Yes |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | z-score | z-score | z-score | |
(ROA) | (ROA) | (ROA) | (CAR) | (CAR) | (CAR) | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
L.ESG score | 0.0866*** | 0.0888*** | 0.0744*** | 0.7193*** | 0.6860*** | 0.5431*** |
(0.01) | (0.01) | (0.02) | (0.08) | (0.08) | (0.09) | |
L.logFTE | − 0.0743 | 0.1626 | 0.2593 | 2.1525 | ||
(0.77) | (0.78) | (3.53) | (3.46) | |||
L.LR | − 0.0000*** | − 0.0000* | − 0.0000*** | − 0.0000*** | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.LoanRatio | 0.0207 | 0.0176 | 0.1224 | 0.1013 | ||
(0.02) | (0.02) | (0.13) | (0.14) | |||
L.DepRatio | 0.0397** | 0.0283 | 0.3004*** | 0.2234** | ||
(0.02) | (0.02) | (0.09) | (0.09) | |||
L.ROE | − 0.0001*** | − 0.0000 | − 0.0009*** | − 0.0006** | ||
(0.00) | (0.00) | (0.00) | (0.00) | |||
L.Inflation | − 0.0217 | − 0.0056 | ||||
(0.05) | (0.31) | |||||
L.\(\text {GDP}^{\text {Growth}}_\text {Cap}\) | 0.2431*** | 1.0090*** | ||||
(0.05) | (0.31) | |||||
L.\(\text {GDP}_\text {Cap}\) | 0.0002 | 0.0014 | ||||
(0.00) | (0.00) | |||||
Constant | 2.6238*** | − 0.6165 | − 7.884 | 3.7116 | − 24.2422 | − 83.4566** |
(0.70) | (6.95) | (7.57) | (4.13) | (33.98) | (40.96) | |
N | 3949 | 3200 | 3117 | 3953 | 3203 | 3120 |
\(\text {R}^{2}_{adj}\) | 0.0231 | 0.0283 | 0.0427 | 0.0432 | 0.0466 | 0.0626 |
(1) | (2) | (3) | (4) | (5) | (6) | |
---|---|---|---|---|---|---|
z-score | z-score | z-score | z-score | z-score | z-score | |
(ROA) | (ROA) | (ROA) | (CAR) | (CAR) | (CAR) | |
Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | Coef./se | |
L.EnvPillar | 0.0629*** | 0.0649*** | 0.0555*** | 0.4958*** | 0.4766*** | 0.3837*** |
(0.01) | (0.01) | (0.01) | (0.06) | (0.06) | (0.07) | |
L.SocPillar | 0.0530*** | 0.0517*** | 0.0356*** | 0.4654*** | 0.4061*** | 0.2602*** |
(0.01) | (0.01) | (0.01) | (0.07) | (0.07) | (0.08) | |
L.GovPillar | 0.0300*** | 0.0286*** | 0.0247*** | 0.2581*** | 0.2420*** | 0.2016*** |
(0.01) | (0.01) | (0.01) | (0.05) | (0.06) | (0.05) | |
L.Env. Innovation | 0.0379*** | 0.0405*** | 0.0309*** | 0.2900*** | 0.2894*** | 0.2000*** |
(0.01) | (0.01) | (0.01) | (0.05) | (0.06) | (0.06) | |
L.Emissions | 0.0460*** | 0.0441*** | 0.0370*** | 0.3544*** | 0.3177*** | 0.2511*** |
(0.01) | (0.01) | (0.01) | (0.04) | (0.05) | (0.05) | |
L.Resource Use | 0.0500*** | 0.0495*** | 0.0437*** | 0.4138*** | 0.3782*** | 0.3205*** |
(0.01) | (0.01) | (0.01) | (0.05) | (0.05) | (0.06) | |
L.Community | 0.0009 | − 0.0037 | − 0.0114 | 0.0798* | 0.0360 | − 0.0275 |
(0.01) | (0.01) | (0.01) | (0.04) | (0.05) | (0.05) | |
L.Human Rights | 0.0347*** | 0.0343*** | 0.0240*** | 0.2690*** | 0.2332*** | 0.1361*** |
(0.01) | (0.01) | (0.01) | (0.05) | (0.05) | (0.05) | |
L.Product Respon. | 0.0182** | 0.0164** | 0.0064 | 0.1564*** | 0.1129* | 0.0320 |
(0.01) | (0.01) | (0.01) | (0.05) | (0.06) | (0.05) | |
L.Workforce | 0.0371*** | 0.0374*** | 0.0310*** | 0.3069*** | 0.2809*** | 0.2176*** |
(0.01) | (0.01) | (0.01) | (0.04) | (0.05) | (0.05) | |
L.CSR-strategy | 0.0303*** | 0.0248*** | 0.0167** | 0.2127*** | 0.1495*** | 0.0723* |
(0.01) | (0.01) | (0.01) | (0.04) | (0.04) | (0.04) | |
L.Management | 0.0202*** | 0.0205*** | 0.0184*** | 0.1653*** | 0.1644*** | 0.1430*** |
(0.01) | (0.01) | (0.01) | (0.04) | (0.04) | (0.04) | |
L.Shareholders | − 0.0025 | − 0.0037 | − 0.0031 | 0.0176 | 0.0134 | 0.0145 |
(0.01) | (0.01) | (0.01) | (0.04) | (0.05) | (0.04) | |
Bank controls | No | Yes | Yes | No | Yes | Yes |
Country controls | No | No | Yes | No | No | Yes |
N | 3949 | 3200 | 3117 | 3953 | 3203 | 3120 |