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 sustainability-for-performance sensitivity metric is mainly positive, and improves in banks with quality corporate governance mechanisms. This indicates that the sustainability-for-performance 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.