Article2020

Sustainability reporting and performance of MENA banks: is there a trade-off?

Amina Mohammed Buallay · Sayed M. Fadel · Jasim Al‐Ajmi · Shahrokh M. Saudagaran

207 citations0/0 files storedMeasuring Business Excellence

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Corporate Social Responsibility Reporting Sustainable Finance and Green Bonds Corporate Governance and Financial Management

Abstract

Purpose Sustainability reporting has been widely adopted by firms worldwide given stakeholders’ need for more transparency on environmental, social and governance (ESG) issues. This study aims to investigate the relationship between ESG and bank’s operational (return on assets [ROA]), financial (return on equity [ROE]) and market performance (Tobin’s Q) in a group of emerging countries in the Middle East and North Africa (MENA) region. Design/methodology/approach This study examines 59 banks listed on the stock exchanges of MENA countries over a period of 10 years (2008-2017). Only conventional banks with all data for at least two years are included in the sample. The core independent variable is ESG scores, and the dependent variables are ROA, ROE and Tobin’s Q. This study uses bank- and country-specific control variables to measure the relationship between sustainability reporting and bank’s performance. Findings The findings from the empirical results demonstrate a significant positive impact of ESG on performance and economic benefits to shareholders. However, the relationship between ESG disclosures varies individually; unlike the majority of published research, the authors found that social performance plays a negative role in determining bank’s profitability and value. Furthermore, the authors present evidence in support of the impact of bank- and country-specific factors in determining bank’s performance. Originality/value To the best of the authors’ knowledge, this is the first study to investigate the impact of sustainability reporting on banks’ performance in the MENA region. It provides evidence that questions the positive relationship between sustainability reporting and financial measures of performance.

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References

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2021A worldwide sectorial analysis of sustainability reporting and its impact on firm performance 2021Banks and environmental, social and governance drivers: Follow the market or the authorities?2022The Impact of ESG Scores on Bank Market Value? Evidence from the U.S. Banking Industry 2023From financial reporting to ESG reporting: a bibliometric analysis of the evolution in corporate sustainability disclosures 2024Environmental, social and governance (ESG) disclosure and firm performance: Moderating role of board gender diversity and sustainability committee

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