ESG and bank stability in MENA region: examining the mediating role of income diversification

Purpose This study aims to investigate the impact of environmental, social and governance (ESG) practices on bank stability in the MENA region and explore the mediating role of income diversification. Design/methodology/approach Based on a panel of 109 banks from 11 MENA countries over 2011–2022, the structural equation modeling was used to examine the relationships between ESG practices, income diversification and bank stability. The mediation effect of income diversification is estimated using bootstrap analysis. Findings ESG adoption positively influences bank stability, with income diversification playing a significant mediating role. Among the ESG dimensions, environmental practices exert the strongest effect, followed by governance practices. Originality/value To the best of the authors’ knowledge, this is the first study in the MENA banking context to examine income diversification as a mediator between ESG practices and bank stability, providing novel insights into how ESG integration contributes to financial resilience.

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Publication Details

Journal
Journal of financial reporting & accounting
Published
2026-01-06
DOI
https://doi.org/10.1108/jfra-03-2025-0233
Primary Topic
Corporate Social Responsibility Reporting
Type
article
Field-Weighted Citation Impact
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article

ESG and bank stability in MENA region: examining the mediating role of income diversification

Houda Sassi, Naima Lassoued
Journal of financial reporting & accounting
Corporate Social Responsibility Reporting
article

ESG and bank stability in MENA region: examining the mediating role of income diversification

Houda Sassi, Naima Lassoued
article en

Abstract

Purpose This study aims to investigate the impact of environmental, social and governance (ESG) practices on bank stability in the MENA region and explore the mediating role of income diversification. Design/methodology/approach Based on a panel of 109 banks from 11 MENA countries over 2011–2022, the structural equation modeling was used to examine the relationships between ESG practices, income diversification and bank stability. The mediation effect of income diversification is estimated using bootstrap analysis. Findings ESG adoption positively influences bank stability, with income diversification playing a significant mediating role. Among the ESG dimensions, environmental practices exert the strongest effect, followed by governance practices. Originality/value To the best of the authors’ knowledge, this is the first study in the MENA banking context to examine income diversification as a mediator between ESG practices and bank stability, providing novel insights into how ESG integration contributes to financial resilience.

Journal of financial reporting & accounting
Carthage College (US), University of Carthage (TN), Manouba University (TN)
No poverty
Openalex Percentile: Top 96%
Corporate Social Responsibility Reporting
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ESG and bank stability in MENA region: examining the mediating role of income diversification — Houda Sassi, Naima Lassoued · Journal of financial reporting & accounting (2026) | TGRS Research Map | TGRS