Country-level sustainability and cross-border banking flows
Sustainability Accounting, Management and Policy Journal
ISSN: 2040-8021
Article publication date: 12 January 2022
Issue publication date: 17 March 2022
Abstract
Purpose
This paper aims to investigate the association between country-level sustainability scores and cross-border bank-to-non-bank flows within countries.
Design/methodology/approach
The authors analyze cross-border banking flows into the real sector firms of 26 developed countries from 2006 to 2017. The authors use a dynamic panel ordinary least square along with an instrumental variable and a generalized method of moments regressions to test the relationship between country-level sustainability scores and cross-border banking flows. Additionally, the authors apply Fama-MacBeth cross-sectional regression and non-parametric portfolio tests to obtain robust results.
Findings
The impact of country-level sustainability scores on cross-border banking flows is positive and significant. This finding is consistent with the signaling theory, which states that a country’s sustainability score is a signal to attract more international fund flows. Notably, the authors deduce that environmental sustainability is more important than the social and governance pillars.
Practical implications
The findings indicate that the real sector firms located in countries having higher sustainability scores can receive more international bank flows. Consequently, policymakers should focus more on country-level sustainability investments to improve the financing of resident firms.
Social implications
Policymakers should focus more on country-level sustainability investments to improve the financing of resident firms.
Originality/value
To the best of the authors’ knowledge, no existing study has investigated the signaling function of country-level sustainability scores in the cross-border banking flow conjecture. By investigating this relationship for real sector firms, this study portrays how the non-banking sector can benefit from such a policy that promotes sustainable practices at the country level.
Keywords
Acknowledgements
The authors courteously thank Max Schieler from RobecoSAM AG for providing country-level sustainability score dataset. The authors gratefully acknowledge helpful feedback and comments from Nejat Seyhun, Levent Guntay, Mehmet Ali Soytas, Sati Mehmet Ozsoy, Zeynep Onder, and Eray Yucel; the participants at the symposium of “JIFMIM – Cross-country Perspectives in Finance – Sustainable Finance” in 2019; the participants at the first Quinquennial Conference of “Regulating Business in Times of Turbulence: Thinking out of the Box for a Sustainable Future” in 2020; and the participants of the 36th Eurasia Business and Economics Society (EBES). This study is modified from a chapter of Gözde Sungu-Esen’s Ph.D. dissertation at Ozyegin University Business School.
Citation
Avci, S.B. and Sungu-Esen, G. (2022), "Country-level sustainability and cross-border banking flows", Sustainability Accounting, Management and Policy Journal, Vol. 13 No. 3, pp. 626-652. https://doi.org/10.1108/SAMPJ-07-2021-0273
Publisher
:Emerald Publishing Limited
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