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Moderating impact of non-performing loans on the relationship between sustainable development goals and the financial performance of banks

Author

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  • Saba Iqbal

    (University of Management and Technology)

  • Safia Nosheen

    (University of Management and Technology)

Abstract

Sustainability is a vital perspective for banks to keep their survival in the long run. While nonperforming loans (NPLs) also impact sustainability, this study aims to examine the moderating impact of NPLs on the adoption of sustainable development goals and the financial performance of the banks. The central hypothesis assumes that even after adopting sustainable development goals, banks cannot get high profits if their NPLs are high. Economic, social, and environmental indicators represent SDG measurement using an ESE index. We are performing panel data analysis through regression and the GMM technique. This study also conducts independent research on economic, social, and environmental indicators. We found that NPL significantly moderates the relationship between the SDGs and the financial performance. This paper has the following vital contribution. Bank that adopts sustainable development goals may have low profits if it has a high nonperforming loan ratio so banks must focus on the customer to whom they offer loans. The novelty of this study is adopting the ESE index for measuring the adoption of SDGs.

Suggested Citation

  • Saba Iqbal & Safia Nosheen, 2023. "Moderating impact of non-performing loans on the relationship between sustainable development goals and the financial performance of banks," Future Business Journal, Springer, vol. 9(1), pages 1-12, December.
    • Handle: RePEc:spr:futbus:v:9:y:2023:i:1:d:10.1186_s43093-023-00224-1
    DOI: 10.1186/s43093-023-00224-1
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    3. Victor Cardenas, 2024. "Assessing the regulatory framework of financial institutions in Canada in the context of international climate risk management practices and Canadian net zero emission targets," Papers 2411.02668, arXiv.org.

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