Sustainable banking initiatives, environmental disclosure and financial performance: The moderating impact of corporate governance mechanisms

Abstract

This paper contributes to the sustainable development in business literature by examining the impact of a broad corporate governance disclosure index on sustainable banking initiatives and, subsequently, determines the extent to which the sustainability-for-performance sensitivity metric is moderated by corporate governance mechanisms. Based on data collected from 220 banks in 16 Sub-Saharan Africa countries over the 2007-2018 period (i.e., making over 2027 bank-year observations), the findings of the study are as follows: Firstly, the study finds that corporate governance mechanisms have positive impact on sustainable decisions, as captured by environmental disclosures and sustainable banking initiatives. Secondly, the study finds that sustainable banking initiatives improve the financial performance of banks in the Sub-Saharan African countries. Finally, the study detects that the relationship between sustainable banking initiatives and financial performance is significantly moderated by corporate governance mechanisms, revealing that the sustainabilityfor-performance sensitivity metric is mainly positive, and improves in banks with quality corporate governance mechanisms. This indicates that the sustainability-forperformance sensitivity is contingent on the quality of the bank's corporate governance structures. The findings have key implications for banking practitioners, environmental activists, regulators and policymakers.

Carbon performance, financial performance and market value: The moderating effect of pay incentives

“…Environmental performance efforts are essential investments that can impact the flow of critical resources to firms, according to the NIT paradigm (Adu, 2022a). The implication is that companies that engage in GHG emission reductions may be able to attract and retain climate‐conscious investors.…”

Sustainability reporting in Africa: A systematic review and agenda for future research

“…First, scholars may be unable to conduct a single‐country study in some African countries as a result of the difficulty in obtaining data and accessing companies in the region (Tilt et al, 2021). Second, researchers may have focused on cross‐country samples from Anglophone countries to avoid language barriers in their data collection (Adu, 2022). Nonetheless, this is problematic because the available empirical evidence does not give a complete picture of sustainability reporting in the continent.…”

“…Fewer studies looked beyond the individual corporate governance mechanisms by using firms' overall corporate governance index and reported that firms' corporate governance strength drives sustainability reporting practices in Africa (Adedeji et al, 2020; Adu, 2022; Kilincarslan et al, 2020; Mathuva et al, 2017; Mathuva & Kiweu, 2016; Ntim & Soobaroyen, 2013; Olayinka, 2022). However, Osemene et al (2021) explored cross‐country samples and argued that this relationship varies according to country.…”

How does anticipatory trauma reaction and climate‐friendly behaviour make an affect at the individual level? The role of social norms and self‐efficacy

“…This indicates that firms will embrace industry 4.0 technologies in response to corresponding pressure when they stay committed to environment protection and understand environment management practices. Adu (2022) suggested that those banks with sound corporate governance accomplish improved financial performance through sustainable initiatives. Household goods and services consumption account for 60% of global greenhouse emissions (Ivanova et al, 2016).…”