The Moderating Effect of Size of the Bank on the Relationship Between Environmental, Social, and Governance (ESG) Practices and the Financial Performance of Listed Commercial Banks in Africa
| dc.contributor.author | Njuguna, Isaac Muchiri | |
| dc.contributor.author | Mwangi, Lucy Wamugo | |
| dc.contributor.author | Waweru, Fredrick Warui | |
| dc.date.accessioned | 2026-01-09T08:37:03Z | |
| dc.date.available | 2026-01-09T08:37:03Z | |
| dc.date.issued | 2025-12 | |
| dc.description | Research Article | |
| dc.description.abstract | This study investigated the moderating effect of bank size on the relationship between Environmental, Social, and Governance (ESG) practices and the financial performance of listed commercial banks in Africa. Panel data were collected for fifteen banks across South Africa, Egypt, and Morocco over ten years (2013–2022), with ESG pillar scores sourced from the London Stock Exchange Group database and financial performance proxied by Return on Assets (ROA). Using fixed effects regression with lagged ESG variables, bank size (log of total assets) was tested as a moderator, while a Covid-19 dummy captured 2020–2021 shocks. Results from the baseline moderation model show that Environmental Score (β = 0.0001823, p = 0.005) and Governance Score (β = 0.0001298, p < 0.001) had significant positive effects on ROA, while Social Score (β = 0.0000074, p = 0.629), bank size (β = 0.0003479, p = 0.216), and Covid-19 (β = –0.000534, p = 0.995) were insignificant. The model explained 56.1% of the variation in profitability (R² overall = 0.5608, F(5,130) = 15.41, Prob > F = 0.000). In the extended interaction model, environmental (β = 0.000202, p = 0.004) and governance (β = 0.000226, p < 0.001) effects remained significant, while social turned negative and insignificant (β = –0.000062, p = 0.131). Crucially, the governance × size interaction was significant and negative (β = –0.0000048, p = 0.003), suggesting that the profitability benefits of governance weaken in larger banks. Interactions involving environmental (β = –0.000003, p = 0.246) and social (β = 0.00000615, p = 0.079) were statistically insignificant. The interaction model explained 59.6% of profitability variation (R² overall = 0.5957, F (8,127) = 11.75, Prob > F = 0.000). The findings demonstrate that while environmental and governance practices consistently enhance financial performance, their effects are not uniform across bank sizes. Specifically, larger banks face diminishing governance-related gains, highlighting the importance of streamlining governance structures in large institutions and strengthening ESG disclosure standards across African markets | |
| dc.identifier.citation | Njuguna, I. M., Mwangi, L. W., & Waweru, F. W. (2025). The Moderating Effect of Size of The Bank on The Relationship Between Environmental, Social, and Governance (ESG) Practices and The Financial Performance of Listed Commercial Banks in Africa. Journal of Finance and Accounting, 5(11), 36- 53. | |
| dc.identifier.issn | 2789-0201 | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/32019 | |
| dc.language.iso | en | |
| dc.publisher | EdinBurg | |
| dc.title | The Moderating Effect of Size of the Bank on the Relationship Between Environmental, Social, and Governance (ESG) Practices and the Financial Performance of Listed Commercial Banks in Africa | |
| dc.type | Article |