Bank ownership structures and sustainable banking initiatives: The moderating effect of governance mechanism

Adu, D. A.; Abedin, M. Z.; Hasan, M.

Abstract

Bank regulators in the Sub-Saharan Africa (SSA) region are increasingly focusing on effective bank ownership structures (BOS) as a key corporate governance (CG) mechanism to drive sustainable banking disclosures (SBD). However, it is unclear whether BOS can lead to an enhancement in SBD. Understanding these key associations can help policymakers and banks design sustainable strategies to promote SBD. In this study, we fill this gap by investigating the impact of BOS on SBD and determining the extent to which broad CG disclosure moderates this relationship. We conduct a dynamic two-step system generalized method of moments model over an extensive dataset. We demonstrate that the relationship between BOS and SBD is contingent on the quality of the CG mechanisms. Bank ownership by institutions and foreign investors (government) positively (negatively) impacts SBD. Also, there is a negative but insignificant relationship between director ownership and SBD. Finally, the relationship between BOS and SBD is positively moderated by the extent of CG disclosure. This moderating effect improves for banks with quality CG mechanisms. We identify CG disclosure as the possible channel through which BOS and SBD are interlinked. Our findings call for banks to adopt and implement good governance disclosures to improve SBD.

Citation

Adu, D. A., Abedin, M. Z., & Hasan, M. (2023). Bank ownership structures and sustainable banking initiatives: The moderating effect of governance mechanism. International Review of Financial Analysis, 89, Article 102736. https://doi.org/10.1016/j.irfa.2023.102736

• Journal Article Type: Article
• Acceptance Date: Jun 27, 2023
• Online Publication Date: Jun 30, 2023
• Publication Date: 2023-10
• Deposit Date: Oct 25, 2024
• Publicly Available Date: Dec 31, 2024
• Journal: International Review of Financial Analysis
• Print ISSN: 1057-5219
• Electronic ISSN: 1873-8079
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 89
• Article Number: 102736
• DOI: https://doi.org/10.1016/j.irfa.2023.102736
• Keywords: Bank ownership structures, Corporate governance, Sustainable banking initiatives, Environmental policy, Stakeholder engagement
• Public URL: https://nottingham-repository.worktribe.com/output/40870553
• Publisher URL: https://www.sciencedirect.com/science/article/abs/pii/S1057521923002521?via%3Dihub
• Other Repo URL: https://cronfa.swan.ac.uk/Record/cronfa64219