Conference Paper
Sustainability and Banking Stability in GCC Economies: Threshold Effect of Green Innovation, Bank Competition and Institutional Quality
No.
ERF32AC_224
Publisher
ERF
Date
May, 2026
Topic
G. Financial Economics
This study aims to analyze the non-linear effect between ESG performance and bank stability. More precisely, it aims to explore the threshold effect of green innovation, bank competition, and institutional quality on the link between ESG performance and banking stability. To do this, the sample of this study contains 49 banks operating in the GCC region during the period 2017-2023. The study applies a Dynamic Panel Threshold Regression (DPTR) model to assess whether green innovation, bank competition, and institutional quality act as a threshold mechanism that transforms the ESG–stability nexus. The outcomes reveal a statistically significant green innovation threshold at 0.334 (33.4%), below which ESG exerts a negative effect on bank stability. Above this threshold, it begins to improve bank stability. In addition, the results show that there is a threshold effect of bank competition on this nexus. The threshold value estimated at 0.360, beyond which (low competition) ESG weakens bank stability. Finally, the outcomes indicate the existence of a threshold effect (estimated at 0.250) of institutional quality. More precisely, in case of high institutional quality (beyond the 0.250), ESG performance enhances the GCC bank stability. For policymakers, these results underline the strategic importance of green innovation, bank competition, and institutional quality to strengthen CSR practices to ensure sustainability and banking stability.
Authors
Ahmed Chafai
Assistant Professor in Economics, Faculty of Economics...