Abstract:
Sustainable investment (ESG) factors are increasingly analyzed to identify
the potential
benefit o of banksbanks’ cost efficiency. The banking sector influences the whole economy
through the credit channel and balances its stability. The interplay of these elements
motivated the main objective of the study to examine the effect of a bank’s sustainable
investment on the cost efficiency of banks and the role of banking sector stability in this
relationship. Using panel data from 25 countries in sub sub-Saharan Africa over the period
2010 to 2017, the study used stochastic frontier analysis to estimate the cost efficiency
scores, then the study used GMM to establish the effect sustainable investment has on
cost efficiency and the influence of bank stability in this effect. The findings indicate indicated that the cost efficiency of banks in sub sub-Sahar an African countries is at least 70%.
Environmental projects negatively impact cost efficiency in banks, while socially
responsible banks have no impact. Governance factors improve efficiency in sub sub-Saharan
African banks. Environmentally friendly banks are less risky and stable, enhancing
efficiency. Socially responsible banks' cost efficiency is not influenced by bank stability,
and governance factors positively impact cost efficiency but independent of bank
stability. It was recommended that banks should improve their cost efficiency by
identifying areas where they can reduce costs by up to 30%. Banks should invest more
into social and governance projects and also in environment project projects as it enhances the
stability of banks while improving their cost eff iciencyiciency.
Description:
A Thesis in the Department of Applied Finance and Policy Management, School of Business, submitted to the School of Graduate Studies, in partial fulfillment of the requirements for the award of Master of Philosophy (Finance) in the University of Education, Winneba
SEPTEMBER, 2023