Conceptualising the ESG-Performance Nexus: A Theoretical Framework for Indian Banking Sector Analysis

AbstractThis study will define the comprehensive conceptual framework with the objective of testing the relationship betweenEnvironmental, Social, and Governance performance and financial performance of Indian private and public sectorbanks. On the diverse theoretical frameworks such as Stakeholder Theory, Legitimacy Theory, Institutional Theory,Resource-Based View (RBV), Agency Theory, and Resource Dependence Theory (RDT), the framework discusses theimportance of incorporating ESG factors in value creation, regulatory compliance, and the creation of reputationallegitimacy. The framework assumes that ESG performance represents a strategic intangible asset that adds to financialperformance in the shape of Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) and alsoaligns with stakeholder values and societal expectations. The framework considers Indian banks' diverse institutionalsettings, such as variation in public and private ownership structures, and highlights the agency of internal abilities andexternal pressures in influencing ESG integration. The objective of this study is to develop a theoretically elaborate andempirically assessable model that shapes policy guidelines for ESG disclosure and promotes sustainable banking practices inIndia.