The influence of Environmental, Social, and Governance (ESG) risks on bank stability has become a critical area of study in the banking sector. This study examines the influence of ESG risks on bank stability using unbalanced panel data from 134 commercial banks in Indonesia from 2003 to 2022. Employing a fixed effects model, the findings reveal a significant negative effect of ESG risks on bank stability, where higher ESG risks significantly reduce bank stability. Specifically, government-owned banks face a greater stability decline than private banks due to their often higher exposure to regulatory and reputational pressures. Smaller banks are more adversely affected than larger ones because they lack the resources and diversification to effectively mitigate ESG risks. Additionally, non-listed banks experience a larger decrease in stability than listed banks, as the latter tend to have stricter governance structures and more robust risk management practices. These findings underscore the need for tailored risk management strategies to address ESG risks, particularly for government-owned, smaller, and non-listed banks.

Felisitas Defung

Rizky Yudaruddin

Nita Priska Ambarita

Norliza Che-Yahya

Nur Zahidah Bahrudin

Banks and Bank Systems

The journal focuses on the results of scientific researches on monetary policy issues in different countries and regions all over the world. It also analyzes the activities of international financial organizations, central banks, and bank institutions.    Key topics:  -Monetary Policy in Different Countries and Regions;  -Monetary and Payment Systems;  -International Financial Organizations and Institutions;  -Monetary Policy of Central Banks;  -Organizational Structure, Functions and Activities of Central Banks;  -State Policy and Regulation of Banking;  -Bank Competitiveness;  -Banks at the Financial Markets;  -Bank Associations and Conglomerates;  -International Payment Systems;  -Investment Banking;  -Financial Risks and Risk Management in Banks;  -Capital and Ownership Structure, Bankruptcy and Liquidation, Mergers and Acquisitions of Banks;  -Corporate Governance and Goodwill;  -Personnel Management in Banks;  -Econometric, Statistical Methods; Econometric Modeling of Bank Activities;  -Bank Ratings.

The journal "Banks and Bank Systems" focuses on the scientific research results related to monetary policy issues in various countries and regions around the world. It analyzes the activities of international financial organizations, central banks, and banking institutions. Key topics include: Monetary Policy in Different Countries and Regions; Monetary and Payment Systems; International Financial Organizations and Institutions; Monetary Policy of Central Banks; Organizational Structure, Functions, and Activities of Central Banks; State Policy and Regulation of Banking; Bank Competitiveness; Banks in Financial Markets; Bank Associations and Conglomerates; International Payment Systems; Investment Banking; Financial Risks and Risk Management in Banks; Capital and Ownership Structure, Bankruptcy and Liquidation, Mergers and Acquisitions of Banks; Corporate Governance and Goodwill; Personnel Management in Banks; Econometric and Statistical Methods; Econometric Modeling of Bank Activities; Bank Ratings.

《Banks and Bank Systems》期刊专注于全球各国和地区货币政策问题的科学研究成果。期刊分析国际金融组织、中央银行和银行机构的活动。主要主题包括：不同国家和地区的货币政策；货币和支付系统；国际金融组织和机构；中央银行的货币政策；中央银行的组织结构、职能和活动；国家政策与银行监管；银行竞争力；银行在金融市场中的角色；银行协会和金融集团；国际支付系统；投资银行；银行的金融风险与风险管理；资本与所有权结构、破产与清算、银行的并购；公司治理与商誉；银行的人力资源管理；计量经济学、统计方法；银行活动的计量经济学建模；银行评级。

The impact of ESG risks on bank stability in Indonesia

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