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Does competition affect ESG controversies? Evidence from the banking industry

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  • Cicchiello, Antonella Francesca
  • Cotugno, Matteo
  • Foroni, Cristian

Abstract

This study empirically investigates the link between competition (measured by the Lerner index) and banks’ Environmental, Social, and Governance Controversies (ESGC). Using a logit regression analysis on a sample of European banks over the period 2010–2020, we find that banks respond to increased competitive pressure from consumers and competitors by avoiding their engagement in ESG controversies that can undermine their reputation. Overall, these results highlight that competition is an important factor that stimulates banks’ sustainability practices in order to preserve their competitive advantage. These findings are robust and hold for alternative measures of market competition and ESG controversies.

Suggested Citation

  • Cicchiello, Antonella Francesca & Cotugno, Matteo & Foroni, Cristian, 2023. "Does competition affect ESG controversies? Evidence from the banking industry," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003446
    DOI: 10.1016/j.frl.2023.103972
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    References listed on IDEAS

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    Cited by:

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    3. Agnese, Paolo & Cerciello, Massimiliano & Oriani, Raffaele & Taddeo, Simone, 2024. "ESG controversies and profitability in the European banking sector," Finance Research Letters, Elsevier, vol. 61(C).
    4. Arnone, Massimo & Leogrande, Angelo, 2024. "The Sustainability Of The Factoring Chain In Europe In The Light Of The Integration Of Esg Factors," OSF Preprints 753gf_v1, Center for Open Science.
    5. Arnone, Massimo & Leogrande, Angelo, 2024. "The Sustainability Of The Factoring Chain In Europe In The Light Of The Integration Of Esg Factors," OSF Preprints 753gf, Center for Open Science.
    6. Gaia Soana, Maria, 2024. "Does ESG contracting align or compete with stakeholder interests?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 96(C).
    7. Li, Bingjie & Duan, Zhao & Cai, Qibin, 2024. "Exploring the nexus between past financial performance and voluntary GRI adoption: The role of environmental certification," Finance Research Letters, Elsevier, vol. 66(C).

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    More about this item

    Keywords

    ESG; Market competition; European countries; Banking sector; Corporate social responsibility;
    All these keywords.

    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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