ESG Disclosure, Risk-taking and Value-An Empirical Study of Commercial Banks in Asia

This study investigates the relationship among Asian commercial banks’ environmental, social and governance (ESG) scores, risk-taking and value. The empirical results find that for banks either already in high or low risk, an increase in ESG scores is significantly associated with a decrease in risk and a decrease in bank value. These two results corroborate the stakeholder theory and the overinvestment theory, respectively. In addition, this paper also tests the correlation between risk-taking and ESG, concluding that although ESG posts negative effect on bank’s value, ESG and risk together are significantly associated with an increase in bank value, compensating for the inevitable impact of higher ESG resulting in reduced bank value.