ESG performance, bank lending, and the COVID-19 pandemic: international evidence

Non-technical summary The research paper studies business sophistication, tax revenue policies, and ESG (Environmental, Social, and Governance) performance across 105 Belt and Road Initiative (BRI) countries spanning from 2013 to 2021. Key insights from the study underscore a positive association between business sophistication and ESG performance. This suggests that organizations leveraging advanced knowledge and innovation are better positioned to implement effective ESG strategies. Moreover, higher tax revenue is linked to better ESG, underlining a commitment to sustainability within the business landscape. Notably, Information, Communication, and Technology (ICT) emerges as a pivotal catalyst in augmenting ESG performance, particularly when integrated with business sophistication and tax revenue mechanisms. Technical summary This study examines the relationship between business sophistication, tax revenue policies, and ESG (Environmental, Social, and Governance) performance in 105 Belt and Road Initiative (BRI) countries from 2013 to 2021, focusing on the moderating role of Information, Communication, and Technology (ICT). Using advanced econometric methods like Two-Stage Least Squares (2SLS), two-step Generalized Method of Moments (GMM), and fixed-effect regression, the research also considers factors such as microfinance institutions, commercial bank financing, and the COVID-19 pandemic. The findings reveal a significant positive link between business sophistication and ESG performance, indicating that companies with advanced knowledge and innovation are more likely to implement successful ESG policies. Higher tax revenue is also positively correlated with ESG improvements, reflecting support for sustainability. ICT is crucial in enhancing ESG performance, especially when combined with business sophistication and tax revenue. Microfinance and commercial banking are vital in promoting ESG practices in BRI countries. Despite a temporary decline in ESG performance due to COVID-19, the study predicts a post-pandemic resurgence, emphasizing the need to foster an innovation culture for sustainable development. Social media summary There is a positive association between business sophistication, tax revenues, microfinance, ICT, and commercial banking, which are key drivers of better ESG performance in BRI countries.

Over the past decades, the frequency and economic losses from natural disasters have continued to escalate globally. Disasters pose significant challenges to global sustainable economic and social development. As a critical part of the economy, a firm’s ESG performance is a key indicator of sustainability. Whereas the determinants of firms’ ESG (environmental, social, and governance) performance have gained growing attention, limited research focuses on the impact of natural disasters on ESG performance. This paper provides the first empirical study on the short-, medium-, and long-term impacts of natural disasters on firms’ ESG performance through the lensof earthquakes. By exploiting a difference-in-differences approach based on panel data of Chinese listed firms and a dataset of seismic events, this paper shows that earthquakes have a significant positive impact on affected firms’ ESG performance, with short-term positive effects on environmental and social performance and long-term positive effects on social and governance performance. Heterogeneity analysis reveals that the positive effects are more pronounced for state-owned firms, relatively smaller firms, and firms located in cities with frequent earthquake occurrences. This study highlights the distinct temporal effects on different ESG dimensions and provides new insights for policymakers to employ ESG practices to alleviate the negative effects of disasters.

Manuscript type: Research paper Research aims: The study aims to investigate the extent and level of environmental, social and governance (ESG) performance of listed companies in Thailand, and test for the relationship between ESG committees and performance. Design/methodology/approach: Using the top 100 Thai listed companies (364 firm-year observations) from the Stock Exchange of Thailand (SET), the corporate annual reports during 2018 to 2021 are used to collect ESG board committee characteristics, while ESG performance is collected and measured by ESG scores from S&P Capital IQ and Capital IQ Pro databases. Descriptive analysis, correlation matrix, and multiple regression are used to analyse the data. Research findings: The average performance score of ESG in Thailand is 29.52. In addition, there was an increase of ESG performance by the top 100 firms in Thailand during the period under study. There is a significantly positive relationship between independent ESG committees and ESG performance, while dual positions between top management and ESG committees is negatively correlated with ESG performance. Theoretical contribution/originality: The findings of the relationship between ESG committees and performance demonstrates that agency theory can be used to explain the factors influencing ESG performance by Thai listed companies.

This paper investigates the impact of funding liquidity on bank lending at 26 Vietnamese commercial banks in the period 2003–2023. Our paper uses panel data regression methods combined with endogeneity tests and robustness tests to produce consistent research results. The econometric methods used in the paper include multiple fixed-effects regression, the generalized method of moments (GMM), Prais-Winsten regression, Newey-West regression, and two-way clustering regression. Accordingly, the empirical results indicate that funding liquidity has a negative impact on Vietnamese commercial banks' loan growth. In particular, the results from the quantile regression model show that the negative impact of funding liquidity on bank lending becomes stronger for banks with higher loan growth. Furthermore, factors such as bank size, capitalization, and the cost-to-income ratio also have a negative impact on bank lending, whereas income diversification enhances banks' capacity to provide loans. Based on empirical research, this article also proposes some solutions to help Vietnamese commercial banks lend more safely and effectively, including: (i) improving funding liquidity management strategies to minimize negative impacts on lending activities; (ii) encouraging banks to diversify their income rather than relying solely on credit activities; (iii) enhancing banks' ability to manage costs and control their size. Investors, managers, and policymakers can all benefit from our conclusions and ramifications.

PurposeThis study aimed to investigate the role of the country's institutional quality on the environmental, social and governance (ESG) performance of its companies.Design/methodology/approachOver a four-year period (2016–2019), the study examined the ESG performance of 412 organizations situated in 19 countries. ESG performance was the dependent variable, and the independent variables were rule of law, economic freedom, education index and international trade freedom. These factors described the institutional quality of countries in the authors’ study.FindingsThe findings reveal that institutional quality has a major impact on ESG performance. Companies engage in more ESG practices when they operate in countries with greater economic freedom and international trade freedom. The authors corroborated the core assumption of institutional theory (IT), which argues that organizational behavior is determined by the country's institutional setting.Research limitations/implicationsThe findings, like all research, should be interpreted with caution. The authors’ research focused solely on large energy corporations. As a result, the conclusions cannot be applied to small companies or other industries. ESG performance can also be measured using different datasets.Practical implicationsIf managers want their companies to perform better in terms of ESG, the authors recommend that they form a CSR committee and sign the Global Compact. This study may be valuable to international policymakers because they can underline that greater economic freedom, better education and greater international trade freedom all promote higher ESG performance.Originality/valueTo the best of the authors' knowledge, nearly all of research explores the relationship between ESG and financial performance. As a result, this study built on past research by investigating how national aspects affect corporate ESG performance.

Environmental, social and governance (ESG) performance has been a hot topic among investors, decision-makers and academics. Factor affecting ESG performance has been largely done but failed to pay attention to the different board governance systems, such as Indonesia’s board governance system. This paper investigates the contribution of the board gender diversity and board network as well as foreign ownership on ESG performance using blue chip stock (LQ-45) listed in the Indonesia Stock exchange. Seventeen companies with five years of data (2013-2017) participated in this study. Multiple regression analysis is employed, and the result shows that gender diversity on the supervisory board negatively impacts environmental and social performance. Second, the board network on the supervisory board has a positive impact on environmental and social performance, and the board network on the management board has a positive impact on social performance. Third, foreign ownership has a positive effect on governance performance. This research has practical implications where if a company plans to improve ESG performance, it must more effectively select a female supervisory board so that its existence positively impacts ESG performance. In addition, ESG performance can also be increased by appointing a supervisory board who have a high social and professional network so that it can have an impact on ESG performance. Finally, ESG performance can also be improved by increasing foreign ownership. This research contributes to social capital, stakeholder, agency, and resources-dependent theory.

Purpose This paper aims to empirically assess the effect of hospitality firms’ digital dynamic capabilities (DDC) on their corporate digital responsibilities (CDR) and the subsequent impact on their environmental, social and governance (ESG) performance. Specifically, it examines how CDR practices shape ESG digitization and performance in the hospitality industry. Design/methodology/approach The authors collect cross-sectional data via the online survey platform, gathering responses from 257 hotel firms across 42 countries and estimate the structural paths using partial least-squares (PLS) structural equation model. To reduce unobserved heterogeneity for robustness, the authors additionally implement finite mixture PLS (FIMIX-PLS), supported by a post hoc power analysis conducted through G*Power. Findings The results indicate that the three elements of DDC – digital sensing, digital seizing and digital reconfiguring – positively affect substantive and symbolic CDR of hospitality firms. Both CDRs simultaneously contribute positively to firms’ ESG digitization, whereas their direct effect on ESG performance is found to be insignificant. Given the positive impact of ESG digitization on ESG performance, this indicates that ESG digitization acts as a mediator, bridging the impact of both CDRs on ESG performance. Thus, DDC elements enhance CDRs, which, in turn, influence ESG performance indirectly through ESG digitization. Research limitations/implications The empirical support for the interconnected relationship between DDC, CDR and ESG performance provides hospitality and tourism managers with the latest understanding of the mechanism by which they can enhance sustainability performance. Originality/value This study addresses a significant gap in the prior literature by investigating how substantive and symbolic CDR practices differently impact ESG outcomes in the hospitality industry. From a dynamic capability perspective, the study integrates the concept of DDC with ESG and highlights their role in enhancing the effectiveness of CDR practices.

PurposeThis paper aims to investigate the relationship between corporate tax avoidance and environmental, social and governance (ESG) performance and the moderating effect of financial constraints on the relationship between corporate tax avoidance and ESG performance.Design/methodology/approachThe sample consists of a global data set involving 24,259 firm-year observations from 49 countries for the years 2011–2020. Corporate ESG performance was extracted from the Thomson Reuters database. The book-tax difference model was used for measuring corporate tax avoidance, while financially constrained firms were identified using the Kaplan and Zingales (1997) index.FindingsThe results show that firms with higher tax avoidance are associated with higher ESG performance, but lower ESG performance is shown for firms with higher financial constraints. The results further indicate that the positive impact of corporate tax avoidance on ESG performance becomes weaker for firms with higher financial constraints.Practical implicationsThe findings imply that policymakers and regulators should focus on mechanisms to promote more internal funds to assist firms in pursuing ESG-related initiatives, such as through tax incentives. Investors should understand the “smokescreen” effect of corporate tax avoidance on ESG performance, especially for firms with financial constraints.Originality/valueThis analysis provides international evidence on the link between tax avoidance and ESG and considers the joint effect of pressures for internal funds, through tax and financing constraints, on corporate ESG performance.

PurposeThe purpose of this study is to investigate whether the corporate environmental, social and governance (ESG) performance of companies is influenced by the barriers and opportunities created by three factors characterising a country’s governance landscape: democracy, political stability and regulatory quality. Additionally, this study separately explains the influence of the three country governance factors on the ESG performance of companies and how they are affected by the profitability of the company.Design/methodology/approachFixed effects multiple linear regression is performed on 6,035 firm-year observations drawn from 27 countries relating to 1,207 unique constituents of the S&P Global 1200 index for a five-year period from 2015 to 2019. Clustered standard errors robust to heteroscedasticity and serial correlation are estimated for a specification that includes Refinitiv ESG scores as the dependent variable, selected Worldwide Governance Indicators as the independent variables and several country- and firm-level controls.FindingsThe study finds that companies’ ESG performance is higher in countries with a lower level of democracy and political stability, and corporate governance performance is higher in countries with higher regulatory quality. A component-level analysis finds significant variation in the results across the different ESG pillars. Firm profitability moderates the relationship between country-level governance factors and companies’ ESG performance.Practical implicationsThe study reveals that national governments can prompt companies to enhance their governance performance, invariably leading to greater engagement in sustainability by improving their regulatory environment and enforcement mechanisms. Thus, the implementation of regulations targeting corporate environmental and social performance is not always needed to prompt better corporate ESG performance.Social implicationsThis study shows that internationalised companies proactively work towards achieving sustainability in countries where the country governance landscape is ineffective and inadequate to enable it.Originality/valueThis study addresses the association between country-level governance and firm-level ESG performance, in contrast to firm-level corporate social responsibility disclosure that has been the focus of prior research. As disclosures can be symbolic and may not reflect actual ESG performance, the results of prior studies examining the relationship between country-level governance performance and corporate social responsibility disclosure is inappropriate to explain the factors affecting the ESG performance of companies.

Purpose In academia, there is controversy regarding the effectiveness of busy independent directors. Given the unique institutional setting in China, this paper aims to explore the effects of busy independent directors on companies’ environmental, social and governance (ESG) performance in the country. Design/methodology/approach Using samples of listed companies on the Shanghai Stock Exchange and the Shenzhen Stock Exchange from 2012 to 2022, the authors used a fixed-effect model to examine the effects of busy independent directors on companies’ ESG performance. The system generalised method of moments (GMM) model and the Heckman selection model were used for the robustness check. Findings The results support the notion that busy independent directors negatively affect companies’ ESG performance. Hence, the busyness hypothesis regarding the ineffectiveness of busy independent directors in overseeing companies’ ESG strategy implementation is supported. Despite contradicting the findings of studies in the USA, the results have been proven reliable by a robustness check. Additional analysis proves the negative effects of busy boards on ESG performance. The negative effect is significant in small companies, companies without foreign auditors and non-polluting companies. The mechanism analysis suggests that not attending board meetings causes busy independent directors to be ineffective in overseeing the ESG practices of companies. Originality/value This study enriches the discussion on the efficiency of busy independent directors in China. To enhance the board’s oversight role, regulators should address the issue of busy independent directors missing board meetings. Companies and credit rating agencies should consider directors’ outside commitments when assessing governance qualities.

We attempt to explore the impact of ESG (Environmental, Social, and Governance) performance on firms from a comprehensive and peer comparison perspective. We constructed a composite index encompassing profitability, growth, and security, and compared it with the median of peers to ultimately form a quality index for enterprises. Empirical results indicate that ESG performance contributes to improving the quality of firms and exhibits a certain degree of persistence. Among the three components, governance performance has the greatest impact, followed by social performance, while environmental performance is not significant. Mechanism research shows that ESG performance enhances corporate quality by alleviating financing constraints and improving labour productivity. Further analysis reveals that the more ESG investors there are, the weaker the impact of ESG performance on corporate quality; the better the financial fundamentals of a company, the greater the impact of ESG performance on corporate quality; and when firms operate in more competitive market environments, the impact of ESG performance on quality improvement is more pronounced.

Purpose Environmental, social and governance (ESG) performance has received significant attention around the world. Could robust ESG performance become a new advantage for supporting companies’ outward foreign direct investment (OFDI) in emerging markets? Prior studies have not articulated the nexus between ESG performance and OFDI. This paper aims to conduct both theoretical and empirical work to clarify the effect, especially the mechanisms of ESG performance on companies’ OFDI. Design/methodology/approach Using the data of A-share listed companies in China from 2010 to 2020, this paper empirically tests the effect and the mechanisms of ESG performance on companies’ OFDI. Findings Firstly, robust ESG performance increases the likelihood of companies engaging in OFDI and also augments the scale of such investments. Within the realm of ESG, environmental performance, social performance and governance performance all play important roles in fostering OFDI. Secondly, strong ESG performance promotes OFDI by enhancing the competitive edge and alleviating financial constraints. Also, environmental performance, social performance and governance performance individually contribute to supporting competitiveness and mitigating financial constraints. Thirdly, the effect of ESG performance on OFDI is particularly pronounced for companies targeting developed countries, those operating in heavily polluting sectors and those with significant institutional investor presence. Originality/value This study advances the applicability of the stakeholder theory in the realm of firm internationalization. Moreover, the findings of this paper provide new strategies for promoting the OFDI of companies in emerging market economies.

This study examines whether political instability influences corporate ESG (Environmental, Social, and Governance) performance by analyzing the effect of country-level political risk on firms' ESG outcomes. We further investigate how cash reserves, national cultural dimensions, and climate change adaptation capabilities moderate this relationship. Utilizing panel data from Refinitiv and the International Country Risk Guide (ICRG) across 31 countries (2002–2018) and employing fixed-effects regression as our primary methodology, we document three key findings: First, heightened political risk significantly reduces firms' ESG performance, a result robust to GMM estimation and instrumental variable techniques addressing endogeneity. Second, the adverse effect is attenuated in firms with limited cash holdings and in nations with advanced climate adaptation strategies. Third, national culture exhibits heterogeneous moderating effects. Our work extends the ESG literature by introducing political risk, measured through ICRG’s comprehensive framework, as a novel determinant in cross-national contexts, while offering actionable insights for policymakers and corporate stakeholders navigating politically volatile environments.

Purpose This study examines board cultural diversity's (BCD) impact on corporate environmental, social and governance (ESG) performance, and its variation across markets and economic conditions. Design/methodology/approach We use an 18-country panel dataset of 5,294 firm-year observations from 2009–2020 from the Thomson Refinitiv database for firm-level variables and World Bank for country-level data. The analysis employs ordinary least squares and dynamic system generalised method of moments estimators. Propensity score matching is used to address potential endogeneity. Findings The study finds BCD positively affects ESG performance across model specifications. The effect is stronger for environmental and social dimensions, with a limited impact on governance. When cultural diversity is more evenly distributed across board members, it influences governance. Finally, ESG performance is highly persistent, with past performance significantly shaping current outcomes. Research limitations/implications This study contributes to corporate governance theory by empirically showing that BCD positively impacts ESG performance. This deepens our understanding of how diverse leadership structures enhance firms' sustainability practices and transparency. BCD's influence on ESG reporting is a gradual, long-term process rather than having an immediate effect. Practical implications Investors should carefully consider directors' appointment, given their influence on ESG performance. BCD may be more effective as a strategic, forward-looking measure rather than a quick fix for current ESG performance. Originality/value We provide international evidence on ESG performance, particularly BCD's influence. Further, ESG performance is best modelled as a dynamic process influenced by past performance and evolving over time.

Purpose This study examines the impact of board characteristics on Environmental, Social and Governance (ESG) performance in Iberian companies. Design/methodology/approach Using a sample of 181 listed Iberian companies from 2013 to 2023, we apply the generalized method of moments (GMM) to control for heterogeneity and endogeneity issues in panel data. Findings Our results provide robust evidence on how specific board characteristics influence ESG performance. Gender diversity positively influences ESG performance, suggesting that greater female representation on boards enhances sustainability-oriented decision-making. Cultural diversity shows a mixed effect: while it enhances social performance, it negatively impacts overall ESG scores and environmental initiatives, possibly due to coordination challenges or conflicting strategic priorities. Executive compensation and pay gaps are negatively associated with ESG performance, indicating that inequitable or financially driven incentives may hinder long-term sustainability goals. CEO duality has contrasting effects: it improves environmental performance but weakens governance quality. Board size shows a non-linear relationship, with larger boards only improving ESG performance beyond a certain threshold. Practical implications Our findings suggest actionable insights: policymakers should support gender diversity legislation; investors may benefit from screening firms with low pay disparity and balanced leadership structures; companies should reassess compensation schemes to better align with ESG objectives. Originality/value This study offers a theoretically grounded and methodologically rigorous contribution by exploring the nuanced effects of board composition on ESG performance in the underexplored Iberian context. It also integrates agency theory and resource dependence theory to explain the mechanisms linking governance structures to ESG outcomes.