ESG performance and governance disclosure : their impact on the corporate financial performance of spanish listed banks

Abstract

This thesis examines the relationship between Environmental, Social, and Governance (ESG) engagement and the financial performance of Spanish listed banks. It focuses on the governance dimension and distinguishes between internal ESG performance and external ESG disclosure. Using fixed-effects panel regressions, the study analyses data from six publicly listed banks over the period 2002–2023, drawing from two financial databases: Refinitiv and Bloomberg. Three financial performance indicators are tested (Return on Assets (ROA), Return on Equity (ROE), and Stock Return) against three independent variables: ESG Score, Governance Score, and Governance Disclosure Score. The results show that ESG Score is positively associated with Stock Return but has no significant effect on internal profitability. Governance Score, as a measure of performance, is not significantly linked to any financial outcome. In contrast, Governance Disclosure Score shows a positive and statistically significant effect on Stock Return and a weaker association with ROE, suggesting that transparency may be more influential than governance practices alone. These findings support the relevance of Signalling and Legitimacy Theory in explaining ESG-financial dynamics and highlight the importance of treating ESG performance and disclosure as distinct constructs. The thesis contributes to the literature by offering empirical evidence from a national context that remains underexplored, providing insights into how sustainability-related strategies are interpreted by financial markets.