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Herding behavior and the dynamics of ESG performance in the European banking industry

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  • Wang, Qishu

Abstract

We investigate the dynamics of ESG performance and explore the potential driving force, including the role of herd behavior among banks. Utilizing Phillips and Sul (2007)'s panel data convergence model and data from the EURO STOXX Banks index, we identify a significant divergence in ESG performance followed by convergence towards separate clusters or clubs after 2018. Notably, banks with lower Return on Equity (ROE) and leverage demonstrate herding tendencies towards improved ESG performance, emphasizing sustainability objectives and community ties. The study contributes to understanding the potential driving forces behind ESG convergence among EU banks.

Suggested Citation

  • Wang, Qishu, 2023. "Herding behavior and the dynamics of ESG performance in the European banking industry," Finance Research Letters, Elsevier, vol. 58(PD).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323010127
    DOI: 10.1016/j.frl.2023.104640
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    More about this item

    Keywords

    ESG; European banking; Panel convergence; Phillip and Sul convergence method;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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