The Impact of Sustainable Practices on Creating Value for Banks in Emerging Countries

Abstract

Objective: Analyze the impact of sustainable practices on the value of banks, located in 28 countries in emerging economies of Latin America, Caribbean, Africa, Asia, Europe and Middle East.   Theoretical framework: The current lack of consensus on the impact of sustainable practices in the banking industry may be an indication of the existence of friction related to market efficiency, resulting from informational asymmetry, agency conflicts and lack of adequate signaling between different stakeholders. Methodology: Hypothesis H1 - Sustainable practices impact the value of the banks in the study is verified through a regression with pooled data and robustness tests.   Results and conclusions: Banks consider that the adoption of sustainable practices does not add value in the short term.   Research implications: A possible explanation for this fact is presented by the overinvestment hypothesis. According to it, the application of resources in sustainable activities causes banks to divert resources from their main objective of maximizing shareholder wealth to meet the demands of other stakeholders - which leads to a reduction in their value.   Originality/value: Among the differences in this study is the analysis of banks located in emerging countries. The result obtained provides feedback to the financial market in its investment decisions in banks that adopt sustainable practices, especially in developing countries. Another aspect to be highlighted is the maintenance or change of policies adopted - by countries' regulatory entities - in terms of encouraging the adoption of sustainable practices by institutions.