The effect of corporate governance, risk and ESG
towards bank performance: does Fintech matter?

Binti mokhtar, N

Abstract

This thesis examines how corporate governance, risk, and ESG affect bank performance and provides
a novel theoretical framework for incorporating fintech into the relationship in the context of EU banks.
The banking sector is transitioning to become increasingly digitised. Corporate governance, risk, and
ESG management in banking are changing, and fintech involvement is currently popular on the market.
First, the study identifies a positive significant relationship between corporate governance and bank
performance. It demonstrates how improved corporate governance can boost bank performance and
how, in accordance with Agency Theory, improved governance will prevent the agency problem in
banks. Additionally, the results suggested that fintech acts as a moderator to enhance the relationship.
Second, the study find that bank risk negatively affects bank performance, suggesting that performance
would decrease as risk rises. Furthermore, it was demonstrated that fintech has a moderating impact on
the relationship between risk and bank performance. It demonstrates how fintech intervention helps
banks improve risk management by minimising and controlling the risk, in line with the Consumer
Theory's suggestion that an initiative like fintech or the enhancement of existing products and services,
improvement of operations to minimise risk, improved performance in banks. Third, it has been
discovered that ESG has a positive impact on bank performance, suggesting that implementing more
robust ESG practises will improve bank performance. According to the Theory of Stakeholders, it is
the obligation of a bank to add value for its stakeholders, and one way to do this is through ESG.
Additionally, it was concluded that fintech mediates the link between ESG and bank performance. This
indicates that banks with higher fintech engagement have better ESG results, which has indirectly
boosted performance.
Secondary data for the analysis was gathered from a variety of sources, including Orbis Bank Focus,
Refinitiv data stream, annual financial reports, the World Bank's Development Indicators, Worldwide
Governance Indicators, and CrunchBase (CB). The analysis included both static and dynamic panel
data approaches, including the fundamental Partial Least Square-Structural Equation Model (PLS
SEM), the second generation of data analysis, and Ordinary Least Square (OLS) for robustness. This
study will be useful to a wide range of stakeholders, including investors and managers, lenders, and
policymakers in the EU region and around the world. It will also provide academicians and researchers
with future research directions in the banking and fintech fields.

Citation

towards bank performance: does Fintech matter?. (Thesis). University of Salford

• Thesis Type: Thesis
• Acceptance Date: Jan 13, 2023
• Deposit Date: Feb 2, 2023
• Publicly Available Date: Feb 2, 2023
• Award Date: Aug 31, 2022