The effect of national culture and social capital on banking ESG performance: Evidence from Europe

This study explores the role of a country's culture and social capital in the performance of European banks concerning Environmental, Social, and Governance (ESG) factors. We applied a random effects model using ESG data of 112 banks from 25 countries for 7 years (2017–2023). Our empirical findings suggest that the dimensions of national culture have a statistically significant impact on the ESG performance of European banks. Specifically, power distance and uncertainty avoidance have a positive association with banking ESG scores. However, empirical findings indicate that individualism, indulgence and social capital have a statistically significant negative impact on the ESG performance of European banks. Our findings related to masculinity and long-term orientation show that those dimensions do not affect the ESG scores of European banks. Finally, we found no significant impact of cultural dimensions and social capital on the performance of the environmental and governance sub-pillars when solely examined. • Empirical findings suggest that the dimensions of national culture have a statistically significant impact on the ESG performance of European banks. • Power distance and uncertainty avoidance have a positive association with banking ESG scores. • Individualism, indulgence and social capital have a statistically significant negative impact on the ESG performance of European banks. • Masculinity and long-term orientation do not affect the ESG scores of European banks.