Do Stable Banks Disclose More Climate Risk? Governance Evidence from the MENA Region

Abstract

The current study aims to identify the factors influencing the disclosure of climate-related risk information by the MENA banking sector and how bank financial stability acts as a moderator. The study draws from agency theory, resource dependency theory, and organizational legitimacy theory. Textual analysis is used to analyze a panel data set comprising 46 banks of 13 MENA countries for the years 2020 to 2024 (230 observations). We investigate the impact of board independence, board size, and gender diversity on climate risk disclosure. It is found that while board size and gender diversity have a positive effect on CRD, there is no direct effect of board independence on CRD. However, after taking bank financial stability (Z-score) into account as a moderating variable, it is revealed that there is a significantly positive relationship between board independence and bank financial stability. Therefore, it can be said that independent board members are helpful in CRD only when banks have sound financial stability. This study provides various robustness tests through subsample analysis and alternative methods of estimating model parameters.