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Balancing ESG disclosures and cost efficiency: Implications for bank liquidity

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  • Verma, Geetanjali
  • Kashiramka, Smita

Abstract

We investigate whether the relationship between liquidity creation (LC) and banks' cost efficiency depends on their disclosure of environmental, social, and governance (ESG) practices. The sample spans 2013–2022 and includes 103 commercial banks from ten emerging economies. The cost efficiency scores are calculated using an input-oriented data envelopment analysis (DEA) approach. Using a two-step system generalized method of moments (GMM), we show that ESG disclosure positively impacts LC. The results also highlight that cost efficiency has a positive impact on LC; however, this relationship is negatively moderated by ESG disclosure, implying that a higher ESG disclosure attenuates the beneficial impact of cost efficiency on LC.

Suggested Citation

  • Verma, Geetanjali & Kashiramka, Smita, 2025. "Balancing ESG disclosures and cost efficiency: Implications for bank liquidity," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325013960
    DOI: 10.1016/j.frl.2025.108141
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