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The effect of national culture and social capital on banking ESG performance: Evidence from Europe

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  • Ioannidis, Filippos
  • Kosmidou, Kyriaki
  • Zopounidis, Constantin

Abstract

This study explores the role of a country's culture and social capital in the performance of European banks concerning Environmental, Social, and Governance (ESG) factors. We applied a random effects model using ESG data of 112 banks from 25 countries for 7 years (2017–2023). Our empirical findings suggest that the dimensions of national culture have a statistically significant impact on the ESG performance of European banks. Specifically, power distance and uncertainty avoidance have a positive association with banking ESG scores. However, empirical findings indicate that individualism, indulgence and social capital have a statistically significant negative impact on the ESG performance of European banks. Our findings related to masculinity and long-term orientation show that those dimensions do not affect the ESG scores of European banks. Finally, we found no significant impact of cultural dimensions and social capital on the performance of the environmental and governance sub-pillars when solely examined.

Suggested Citation

  • Ioannidis, Filippos & Kosmidou, Kyriaki & Zopounidis, Constantin, 2025. "The effect of national culture and social capital on banking ESG performance: Evidence from Europe," International Review of Financial Analysis, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:finana:v:102:y:2025:i:c:s1057521925001711
    DOI: 10.1016/j.irfa.2025.104084
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • 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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