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<p>This study investigates the causal relationship between the ESG disclosure and income-smoothing behavior in the global banking sector. Employing a robust OLS framework, GMM and 2SLS approach to address endogeneity, we analyze a dataset of 10,223 commercial banks across 51 countries from 2011 to 2022. We find that ESG disclosure significantly mitigates income smoothing by reducing information asymmetry and enhancing stakeholder monitoring. However, this effect is heterogeneous; it is observed primarily in developed economies, driven by more established sustainability standards and stronger regulatory enforcement. Furthermore, we document that listed banks engage in greater income smoothing than non-listed peers, and the constraining effect of ESG disclosure is most pronounced among profitable banks. These findings underscore the role of ESG transparency in reinforcing financial integrity but suggest that regulators must tailor disclosure mandates to local socioeconomic conditions rather than blindly adopting international standards.</p>

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How does ESG disclosure reduce income smoothing in banks? Cross-country evidence

  • 期刊论文

  • 发表日期：

    2026年2月24日

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  • Anh-Tuan Doan,
  • Vu-Hao Doan

摘要

This study investigates the causal relationship between the ESG disclosure and income-smoothing behavior in the global banking sector. Employing a robust OLS framework, GMM and 2SLS approach to address endogeneity, we analyze a dataset of 10,223 commercial banks across 51 countries from 2011 to 2022. We find that ESG disclosure significantly mitigates income smoothing by reducing information asymmetry and enhancing stakeholder monitoring. However, this effect is heterogeneous; it is observed primarily in developed economies, driven by more established sustainability standards and stronger regulatory enforcement. Furthermore, we document that listed banks engage in greater income smoothing than non-listed peers, and the constraining effect of ESG disclosure is most pronounced among profitable banks. These findings underscore the role of ESG transparency in reinforcing financial integrity but suggest that regulators must tailor disclosure mandates to local socioeconomic conditions rather than blindly adopting international standards.