The effect of ESG disclosure and green building policy on stock return between Islamic banks and conventional banks
Mega Ayu Widayanti (a) - Sulistya Rusgianto (b) - Hesti Eka Setianingsih (c)

Department of Sharia Economics, Airlangga University , Surabaya, Indonesia

Abstract

The application of dual banking system in a country and the rise of sustainability issues encourage researcher to examine the effect of Environmental, Social, and Governance (ESG) disclosure and green building policy stock returns of banks. Because, both Islamic and conventional banks have an important role in achieving sustainability, especially for Islamic banks as a religious command to realize maqashid sharia. Data referred to 17 Islamic banks and 17 conventional banks from 8 countries (Arab Saudi, Dubai (UAE), Qatar, Kuwait, Malaysia, Indonesia, Pakistan, and Bahrain) in 5 periods between 2018-2022. We used panel least squares with fixed effects (dummy variables) for cross-sections and EViews to process the data. The estimated results show that coefficient variables of environmental, social, governance, and green building policy both in Islamic banks and conventional banks are not statistically significant to the stock return. This study tries to test the non-financial performance such as ESG disclosure and green building policy on stock return of Islamic banks and conventional banks which is still not much studied in Islamic banking. Investors should consider the ESG and green building policy in their investment decision and banking sector need to increase their awareness on implementing ESG and green building policy.

Keywords: ESG disclosure- green building policy- stock return- Islamic banks- conventional banks

Topic: Islamic capital market