Abstract
This chapter goes beyond the relationship between a bank ESG performance (ESGP) and traditional financial measures, known in the literature as Corporate Financial Performance (CFP). Here, the link between ESG factors and financial benchmarks is analysed to verify whether banks may find sufficient stimuli (higher CFP) in the market reaction to adopt ESG conduct spontaneously. Starting from the results achieved in our previous pilot study (Torre et al., Corporate Social Responsibility and Environmental Management 28:1620–1634, 2021) on a limited number of European listed banks, we decided to deepen the relationship between ESGP and CFP to all available listed European banks between 2008 and 2020. Using panel estimation methods, we are going to further explore the relationship between ESGP and CFP, considering different dimensions of financial performance at once, both accounted-based (ROA and ROE) and market-based (Capitalisation to Book Value, Tobin's Q). Furthermore, we employ VBM, namely EVA Spread, less explored in literature. Unlike our previous pilot study, we use the single Pillar Scores (Environmental, Social and Governance) as ESGP instead of the ESG Score.
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Notes
- 1.
As of May 2021.
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Appendices
Appendix A. Data Panel Descriptive Statistic
Variable | Mean | Std. Dev | Min | Max | Observations | |
|---|---|---|---|---|---|---|
E_PS | overall | 4.969.317 | 3.283.496 | 0 | 9.743.303 | N = 920 |
between | 2.978.189 | 0 | 9.054.602 | n = 98 | ||
within | 1.437.594 | –8.610.095 | 1.084.005 | T-bar = 9.38776 | ||
S_PS | overall | 5.663.108 | 2.302.494 | 0.6306375 | 9.724.301 | N = 920 |
between | 1.979.921 | 12.558 | 9.032.054 | n = 98 | ||
within | 1.161.393 | –7.808.608 | 9.897.261 | T-bar = 9.38776 | ||
G_PS | overall | 5.601.424 | 2.369.941 | 1.857.506 | 9.718.805 | N = 920 |
between | 2.085.504 | 2.660.524 | 8.813.325 | n = 98 | ||
within | 1.240.258 | 1.199.819 | 9.908.402 | T-bar = 9.38776 | ||
LTD | overall | 1.234.031 | 5.031.875 | 51.571 | 5.198.318 | N = 898 |
between | 4.436.409 | 1.041.035 | 2.876.958 | n = 96 | ||
within | 2.687.189 | 3.607.411 | 3.555.391 | T-bar = 9.35417 | ||
NET_REV_GRW | overall | 5.832.171 | 5.816.445 | –873.258 | 1.653.792 | N = 914 |
between | 8.838.402 | –1.626.925 | 872.014 | n = 97 | ||
within | 4.120.052 | –7.759.463 | 7.876.106 | T-bar = 9.42268 | ||
TRBC | overall | 1.651.651 | 3.966.185 | –5 | 39.73 | N = 882 |
between | 301.322 | 1.146.667 | 287.975 | n = 93 | ||
within | 2.813.961 | 0.0006746 | 2.744.901 | T-bar = 9.48387 | ||
C_I | overall | 6.384.396 | 3.062.973 | –970.615 | 3.516.778 | N = 917 |
between | 2.041.729 | 1.983.521 | 1.389.773 | n = 97 | ||
within | 2.343.858 | –7.493.388 | 2.993.643 | T-bar = 9.45361 | ||
NIRR_IM | overall | 0.5874469 | 0.1659129 | –0.5423775 | 1.962.766 | N = 917 |
between | 0.1567717 | 0.075804 | 1.003.892 | n = 97 | ||
within | 0.0953016 | –0.6080081 | 1.760.501 | T-bar = 9.45361 | ||
GRW_TOT_LOAN | overall | 6.076.422 | 1.901.198 | –290.845 | 1.991.306 | N = 892 |
between | 1.596.115 | –1.279.673 | 1.057.353 | n = 96 | ||
within | 1.579.907 | –5.844.448 | 1.888.024 | T-bar = 9.29167 | ||
ROA_TO_ROE | overall | 0.0735408 | 0.0436986 | –0.4755 | 0.4926 | N = 917 |
between | 0.0394987 | –0.0131417 | 0.2583 | n = 98 | ||
within | 0.0281309 | –0.3888175 | 0.4544408 | T-bar = 9.35714 | ||
GDP_GRW | overall | 0.0200851 | 0.0685152 | –0.3378723 | 0.34815 | N = 919 |
between | 0.0248443 | –0.0334347 | 0.093743 | n = 98 | ||
within | 0.0647122 | –0.361214 | 0.3392399 | T-bar = 9.37755 | ||
log_TA | overall | 5.339.151 | 0.7794824 | 3.087.841 | 7.556.495 | N = 920 |
between | 0.8179462 | 321.341 | 7.253.287 | n = 98 | ||
within | 0.0948874 | 4.914.298 | 5.694.205 | T-bar = 9.38776 | ||
EVA_S | overall | –0.9273173 | 4.347.834 | –634.924 | 200.367 | N = 920 |
between | 3.390.739 | –1.015.565 | 1.156.535 | n = 98 | ||
within | 3.482.696 | –5.426.407 | 1.529.317 | T-bar = 9.38776 | ||
A_CAP_BV | overall | 1.096.266 | 0.8012441 | 0.0269 | 85.201 | N = 916 |
between | 0.8537427 | 0.3268615 | 659.345 | n = 98 | ||
within | 0.4569083 | –1.676.501 | 6.562.899 | T-bar = 9.34694 | ||
T’s_Q | overall | 1.008.558 | 0.0609786 | 0.5689 | 14.565 | N = 915 |
between | 0.0589698 | 0.9292 | 127.314 | n = 98 | ||
within | 0.0382508 | 0.6087888 | 1.346.858 | T-bar = 9.33673 | ||
N_ROA | overall | 0.5317132 | 1.009.741 | –124.461 | 38.701 | N = 916 |
between | 0.8138232 | –1.338.533 | 3.523.633 | n = 98 | ||
within | 0.7142329 | –1.057.585 | 2.771.322 | T-bar = 9.34694 | ||
N_ROE | overall | 7.698.787 | 1.412.876 | –1.489.404 | 1.425.936 | N = 916 |
between | 1.065.142 | –196.572 | 8.061.231 | n = 98 | ||
within | 9.584.283 | –1.215.844 | 6.968.008 | T-bar = 9.34694 | ||
Country | overall | 1.192.935 | 5.648.038 | 1 | 21 | N = 920 |
between | 5.701.643 | 1 | 21 | n = 98 | ||
within | 0 | 1.192.935 | 1.192.935 | T-bar = 9.38776 | ||
Banks | overall | 4.856.196 | 2.812.363 | 1 | 98 | N = 920 |
between | 2.843.413 | 1 | 98 | n = 98 | ||
within | 0 | 4.856.196 | 4.856.196 | T-bar = 9.38776 | ||
Year | overall | 2.014.455 | 3.659.943 | 2008 | 2020 | N = 920 |
between | 217.994 | 2013 | 2019.5 | n = 98 | ||
within | 3.338.521 | 2.008.455 | 2.020.872 | T-bar = 9.38776 |
Appendix B. Correlation Matrix
E_PS | S_PS | G_PS | LTD | NET_REV _GRW | TRBC | C_I | NIRR_IM | GRW_TOT _LOAN | ROA_TO _ROE | GDP_GRW | log_TA | EVA_S | A_CAP_BV | Ts_Q | N_ROA | N_ROE | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
E_PS | 1.0000 | ||||||||||||||||
S_PS | 0.7964 | 1.0000 | |||||||||||||||
G_PS | 0.4944 | 0.5431 | 1.0000 | ||||||||||||||
LTD | 0.0380 | –0.0240 | –0.0047 | 1.0000 | |||||||||||||
NET_REV_GRW | –0.0688 | –0.0650 | –0.0777 | –0.0379 | 1.0000 | ||||||||||||
TRBC | 0.1474 | 0.1585 | 0.1173 | –0.0893 | 0.0062 | 1.0000 | |||||||||||
C_I | 0.0203 | 0.0079 | –0.0497 | –0.0982 | –0.0037 | –0.0709 | 1.0000 | ||||||||||
NIRR_IM | –0.1403 | –0.1314 | –0.1051 | 0.2177 | –0.0260 | –0.1446 | –0.0183 | 1.0000 | |||||||||
GRW_TOT_LOAN | –0.1673 | –0.1110 | –0.0449 | –0.0832 | 0.3729 | –0.0058 | –0.0657 | –0.0429 | 1.0000 | ||||||||
ROA_TO_ROE | –0.3090 | –0.1949 | –0.0729 | –0.1126 | 0.1381 | 0.0511 | –0.1211 | 0.1377 | 0.0875 | 1.0000 | |||||||
GDP_GRW | –0.0831 | –0.0503 | –0.0029 | –0.1073 | –0.0073 | 0.0814 | 0.0845 | –0.0173 | 0.0435 | 0.0482 | 1.0000 | ||||||
log_TA | 0.5327 | 0.4738 | 0.3101 | 0.0837 | –0.0888 | 0.1110 | –0.1144 | –0.0344 | –0.1215 | –0.2192 | –0.0132 | 1.0000 | |||||
EVA_S | –0.0197 | 0.0478 | 0.0701 | –0.0639 | –0.0417 | 0.0987 | –0.5586 | 0.0036 | 0.0839 | 0.0642 | –0.0771 | 0.0211 | 1.0000 | ||||
A_CAP_BV | –0.2296 | –0.1659 | –0.0145 | –0.2239 | 0.0588 | 0.2003 | –0.1773 | –0.1157 | 0.3283 | 0.2036 | 0.1882 | –0.1859 | 0.1896 | 1.0000 | |||
Ts_Q | –0.2488 | –0.2073 | –0.0106 | –0.2017 | 0.0888 | 0.1418 | –0.1548 | –0.0668 | 0.2371 | 0.2689 | 0.0974 | –0.1845 | 0.1061 | 0.6832 | 1.0000 | ||
N_ROA | –0.1961 | –0.0870 | 0.0344 | –0.1849 | 0.0189 | 0.2269 | –0.3741 | –0.0150 | 0.2000 | 0.3580 | 0.2068 | –0.0097 | 0.3296 | 0.4096 | 0.3704 | 1.0000 | |
N_ROE | –0.1526 | –0.1344 | –0.0419 | –0.1560 | 0.0203 | 0.1919 | –0.4475 | 0.0232 | 0.1981 | 0.0213 | 0.0749 | 0.0260 | 0.3101 | 0.2823 | 0.2218 | 0.5640 | 1.0000 |
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La Torre, M., Leo, S., Panetta, I.C. (2023). Corporate Financial Performance and ESG Performance: Which One Leads European Banks?. In: La Torre, M., Leo, S. (eds) Contemporary Issues in Sustainable Finance. Palgrave Studies in Impact Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-22539-0_5
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