Is sustainability reporting a way forward? Evidence from banking industry

Purpose This paper aims to examine the influence of sustainability reporting on bank performance. Furthermore, this study investigates the impact of the country’s economic development, financial system and crisis in moderating sustainability reporting and bank performance relationship. Design/methodology/approach The sample consists of 400 listed banks from 19 countries over the 2009–2022 period. Panel fixed-effect regression is applied, and System Generalized Method of Moments is used as robustness to address endogeneity concerns. The results are robust and survive several sensitivity tests. Findings The results, aligning with legitimacy and agency theories, suggest a negative relationship between sustainability reporting and bank performance. Based on further classifications, results suggest the negative (positive) impact of country’s financial system (economic development) in moderating the sustainability reporting and bank performance nexus. Finally, this study documents the positive influence of sustainability reporting on bank performance during the crisis period. Overall, the findings fail to support the reduced information asymmetry accruing from higher sustainability disclosures in developing and bank-based economies. Practical implications This study has important implications for regulators, policymakers and other stakeholders, especially in light of recent banking scandals that have deteriorated stakeholders' faith in financial institutions' reporting quality. Originality/value This study extends the scant literature on sustainability reporting in banking from a cost-benefit vantage point. Furthermore, to the best of the author’s knowledge, no previous research has examined the moderating role of the country’s financial structure and crisis in sustainability reporting and bank performance relationship.