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Examining the Impact of Environmental, Social, and Corporate Governance Factors on Long-Term Financial Stability of the European Financial Institutions: Dynamic Panel Data Models with Fixed Effects

Author

Listed:
  • Georgia Zournatzidou

    (Department of Business Administration, University of Western Macedonia, GR51 100 Grevena, Greece)

  • Konstantina Ragazou

    (Department of Management Science and Technology, University of Western Macedonia, GR50 100 Kozani, Greece)

  • George Sklavos

    (Department of Business Administration, University of Thessaly, GR41 500 Larissa, Greece)

  • Nikolaos Sariannidis

    (Department of Accounting and Finance, University of Western Macedonia, GR50 100 Kozani, Greece)

Abstract

Modern economies are progressively acknowledging the need to assess environmental, social, and corporate governance (ESG) elements to identify possible risks and possibilities. The financial sector, exerting significant influence over the economy, is essential for sustaining economic stability via the lending mechanism. Our study focuses on examining the influence of ESG factors on the financial stability of European financial institutions. To attain this goal, we utilized fixed-effects and random-effects dynamic panel models, analyzing 352 financial institutions across many European nations from 2019 to 2021. The study’s findings reveal a complex scenario. The findings indicate that ethical and corporate responsibility practices significantly impact the financial performance of European financial institutions. Nonetheless, the execution of policies pertaining to ESG ethics seems markedly inadequate. Our research reveals substantial evidence of a direct correlation between ethical practices and profit stability, diverging from other studies. This newly established group directly influences the financial performance of financial institutions in Europe. These findings enhance the comprehension of the interaction between ESG variables and financial stability, illuminating both the beneficial effects and the current deficiencies in ethical behaviors within the European banking sector.

Suggested Citation

  • Georgia Zournatzidou & Konstantina Ragazou & George Sklavos & Nikolaos Sariannidis, 2025. "Examining the Impact of Environmental, Social, and Corporate Governance Factors on Long-Term Financial Stability of the European Financial Institutions: Dynamic Panel Data Models with Fixed Effects," IJFS, MDPI, vol. 13(1), pages 1-20, January.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:1:p:3-:d:1559272
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    References listed on IDEAS

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    1. Ignatov, Konstantin, 2023. "When ESG talks: ESG tone of 10-K reports and its significance to stock markets," International Review of Financial Analysis, Elsevier, vol. 89(C).
    2. Georgia Zournatzidou & Christos Floros, 2023. "Hurst Exponent Analysis: Evidence from Volatility Indices and the Volatility of Volatility Indices," JRFM, MDPI, vol. 16(5), pages 1-15, May.
    3. Georgia Zournatzidou & George Sklavos & Konstantina Ragazou & Nikolaos Sariannidis, 2024. "Anti-Competition and Anti-Corruption Controversies in the European Financial Sector: Examining the Anti-ESG Factors with Entropy Weight and TOPSIS Methods," JRFM, MDPI, vol. 17(11), pages 1-18, October.
    4. Dinh, Jeannette Mai & Isaak, Andrew Jay & Wehner, Marius Claus, 2024. "Sustainability-oriented crowdfunding: An integrative literature review," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 448, pages 1-38.
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    Cited by:

    1. Xi CHEN & Adnan KHURSHID & Alexandru Răzvan TOPA & Radu Alexandru BUDU, 2025. "Green Finance, Innovation, and Financial Markets: Shaping Industrial Resilience in China and Europe," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 165-179, April.

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