The impact of ESG risks on bank stability in Indonesia
The influence of Environmental, Social, and Governance (ESG) risks on bank stability has become a critical area of study in the banking sector. This study examines the influence of ESG risks on bank stability using unbalanced panel data from 134 commercial banks in Indonesia from 2003 to 2022. Emplo...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2024-12-01
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| Series: | Banks and Bank Systems |
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| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21279/BBS_2024_04_Defung.pdf |
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| author | Felisitas Defung Rizky Yudaruddin Nita Priska Ambarita Norliza Che-Yahya Nur Zahidah Bahrudin |
| author_facet | Felisitas Defung Rizky Yudaruddin Nita Priska Ambarita Norliza Che-Yahya Nur Zahidah Bahrudin |
| author_sort | Felisitas Defung |
| collection | DOAJ |
| description | The influence of Environmental, Social, and Governance (ESG) risks on bank stability has become a critical area of study in the banking sector. This study examines the influence of ESG risks on bank stability using unbalanced panel data from 134 commercial banks in Indonesia from 2003 to 2022. Employing a fixed effects model, the findings reveal a significant negative effect of ESG risks on bank stability, where higher ESG risks significantly reduce bank stability. Specifically, government-owned banks face a greater stability decline than private banks due to their often higher exposure to regulatory and reputational pressures. Smaller banks are more adversely affected than larger ones because they lack the resources and diversification to effectively mitigate ESG risks. Additionally, non-listed banks experience a larger decrease in stability than listed banks, as the latter tend to have stricter governance structures and more robust risk management practices. These findings underscore the need for tailored risk management strategies to address ESG risks, particularly for government-owned, smaller, and non-listed banks. |
| format | Article |
| id | doaj-art-8f4a7724fd884eeebea1952ac2740a8a |
| institution | DOAJ |
| issn | 1816-7403 1991-7074 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj-art-8f4a7724fd884eeebea1952ac2740a8a2025-08-20T02:40:27ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742024-12-0119419420410.21511/bbs.19(4).2024.1521279The impact of ESG risks on bank stability in IndonesiaFelisitas Defung0https://orcid.org/0000-0003-2654-4690Rizky Yudaruddin1https://orcid.org/0000-0002-0850-9747Nita Priska Ambarita2https://orcid.org/0000-0002-6294-8898Norliza Che-Yahya3https://orcid.org/0000-0002-9794-2007Nur Zahidah Bahrudin4https://orcid.org/0000-0002-6607-9810Ph.D., Lecturer, Faculty of Economics and Business, Department of Management, Mulawarman University, IndonesiaPh.D., Assistant Professor, Faculty of Economics and Business, Department of Economics, Mulawarman University, IndonesiaPh.D., Lecturer, Faculty of Economics and Business, Department of Management, Mulawarman University, IndonesiaPh.D., Lecturer, Faculty of Business and Mangement, Department of Economics and Financial Studies, Universiti Teknologi MARA [MARA Technological University], MalaysiaPh.D., Lecturer, Faculty of Business and Mangement, Department of Economics and Financial Studies, Universiti Teknologi MARA [MARA Technological University], MalaysiaThe influence of Environmental, Social, and Governance (ESG) risks on bank stability has become a critical area of study in the banking sector. This study examines the influence of ESG risks on bank stability using unbalanced panel data from 134 commercial banks in Indonesia from 2003 to 2022. Employing a fixed effects model, the findings reveal a significant negative effect of ESG risks on bank stability, where higher ESG risks significantly reduce bank stability. Specifically, government-owned banks face a greater stability decline than private banks due to their often higher exposure to regulatory and reputational pressures. Smaller banks are more adversely affected than larger ones because they lack the resources and diversification to effectively mitigate ESG risks. Additionally, non-listed banks experience a larger decrease in stability than listed banks, as the latter tend to have stricter governance structures and more robust risk management practices. These findings underscore the need for tailored risk management strategies to address ESG risks, particularly for government-owned, smaller, and non-listed banks.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21279/BBS_2024_04_Defung.pdfbankruptcycontrolecologicalscalesustainabilitythreat |
| spellingShingle | Felisitas Defung Rizky Yudaruddin Nita Priska Ambarita Norliza Che-Yahya Nur Zahidah Bahrudin The impact of ESG risks on bank stability in Indonesia Banks and Bank Systems bankruptcy control ecological scale sustainability threat |
| title | The impact of ESG risks on bank stability in Indonesia |
| title_full | The impact of ESG risks on bank stability in Indonesia |
| title_fullStr | The impact of ESG risks on bank stability in Indonesia |
| title_full_unstemmed | The impact of ESG risks on bank stability in Indonesia |
| title_short | The impact of ESG risks on bank stability in Indonesia |
| title_sort | impact of esg risks on bank stability in indonesia |
| topic | bankruptcy control ecological scale sustainability threat |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/21279/BBS_2024_04_Defung.pdf |
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