Bank risk-taking and ESG choices in the MENA region: does gender diversity matter?

Abstract

Purpose This study aims to examine the impact of Environmental, Social and Governance (ESG) practices on the bank’s financial performance and risk-taking, in the Middle East North Africa (MENA) region, using the moderating role of gender diversity. Design/methodology/approach This study uses data of 39 banks listed in the MENA region, sourced from Refinitiv database from 2015 to 2020, and employs dynamic generalized method of moments to correct endogeneity and reduce the issue of omitted variables bias. Findings The findings indicate that ESG practices have no effect on the financial performance, nor on risk-taking. Moreover, gender diversity is a negative moderator of both relationships. We test the robustness of our findings by using Blau index as an alternative measure of gender diversity. Results show that ESG practices have a significant and positive effect on the bank’s financial performance, and that women on boards positively influence this association. However, the relationship between ESG practices and bank’s risk-taking is still insignificant. Originality/value Previous studies have investigated the impact of ESG practices on risk-taking. Yet, related studies in banking are still limited. Moreover, only a few studies examine the moderating role of gender diversity. To the best of our knowledge, this is the first study examining the effect of ESG choices on banks’ performance in the MENA region and the moderating role of gender diversity.