Impact of ESG on Non-Performing Loans in a Negative Interest Rate Environment
| Athanasios P. Fassas | Athanasios Theologis |
| Department of Accounting & Finance, University of Thessaly
& Hellenic Open University Email: afassas@uth.gr |
PhD Candidate, Department of Accounting and Finance University of Thessaly,
Gaiopolis-Larissa 41500 Email: Sakistheologis@yahoo.gr |
Abstract
We examine the effect of negative interest rates on non- performing loans, and the moderating role of ESG performance on the aforementioned relationship, for European banks. We find that negative interest rates are related positively to non- performing loans and that ESG performance mitigates, to some extent, the “seek for yield” during times of extraordinary monetary policy. These findings suggest that stakeholder theory and agency theory predictions link risk aversion and information asymmetry reduction due to social and ethical concerns and prioritization, especially during negative interest rates period, to higher quality of a bank’s loan portfolio.
Keywords: NPL, Negative Interest, ESG
JEL Classifications: G21, E52, M14