This study examines the potential bidirectional linkage between reputational risk exposure associated with Environmental, Social and Governance (ESG) factors and market valuation in the banking sector. We build a monthly panel dataset for 19 European listed banks from 2012 to 2020. We employ a Bayesian Panel Vector Autoregressive model to examine the dynamics between the two variables of interest. The findings show an inverse bidirectional causality between ESG reputational risk exposure and banks’ market valuation and suggests that the impact of ESG reputational risk shocks on market valuation is more significant for high-exposed banks. Our results are consistent with the stakeholder and slack resources theories and highlight the importance of ESG factors in influencing the banks’ market valuation. Moreover, the study demonstrates how prior financial performances impact the ESG reputational exposure. These insights provide guidance on how banks can manage their ESG risks to enhance brand identity and market value.

中文翻译：

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ESG 声誉风险和市场估值：来自欧洲银行业的证据

本研究探讨了与环境、社会和治理（ESG）因素相关的声誉风险暴露与银行业市场估值之间潜在的双向联系。我们构建了 2012 年至 2020 年 19 家欧洲上市银行的月度面板数据集。我们采用贝叶斯面板向量自回归模型来检查两个感兴趣变量之间的动态。研究结果显示，ESG 声誉风险暴露与银行市场估值之间存在反向双向因果关系，表明 ESG 声誉风险冲击对市场估值的影响对于高风险暴露的银行更为显着。我们的结果与利益相关者理论和松弛资源理论一致，并强调了 ESG 因素在影响银行市场估值方面的重要性。此外，该研究还展示了之前的财务业绩如何影响 ESG 声誉风险。这些见解为银行如何管理 ESG 风险以提高品牌形象和市场价值提供了指导。