The Relationship Between ESG and Corruption Events in the Banking Industry: An Empirical Analysis

We analyse the relationship between Environmental, Social, and Governance (ESG) practices and the probability of being involved in corruption in banking. We draw on two opposing theoretical frameworks (i.e., the stakeholder view and the impression management view), to assess whether ESG-oriented banks are genuinely concerned about anti-corruption practices or potentially involved in deceptive strategies. Using a sample of 46 Eurozone banks over the 2013–2022, our results suggest the existence of a beneficial negative association between ESG and corruption supporting the stakeholder theory. We show that such result is mainly driven by the G pillar, highlighting the key role in corporate governance in preventing corruption events. Moreover, we find that bank-level characteristics, corporate governance mechanisms, and country-level institutional factors play a key role in shaping such relationship. Our findings have important policy and managerial implications in terms of prevention of corruption scandals that can jeopardise the effectiveness of bank financial intermediation. Jel classification: G21, G28, K20