The purpose of this study is to examine the link between financial inclusion (FI) and Environmental, Social and Governance (ESG) Disclosure in Jordanian Banks, besides studying the modified role of board characteristics in this relationship.
This study is based on panel time-series data covering 14 banks (12 conventional banks and 2 Islamic banks) over the period from 2018 to 2023, using a regression analysis method and the Generalized Least Squares method. FI was measured across three domains: access to financial services, usage of these services and financial depth. Meanwhile, the board characteristics were measured through indicators such as board size, independence, gender diversity, number of meetings and financial expertise. Sustainability disclosure was measured using an index composed of 49 items distributed across the three domains.
The empirical data shows a statistically significant positive effect of FI on ESG disclosure of banks. In addition, the finding also supports the assumption that board of directors attributes serve as a moderating variable and increase the extent of this relationship, especially in the dimension of use of financial services and financial depth, and no interactive influence of these variables was observed in the direction of access to financial services.
Banks need to work to enhance FI by developing comprehensive and sustainable financial services. It is also recommended to improve the characteristics of boards of directors to strengthen oversight and decision-making that supports sustainability. Regulators can also encourage banks to adopt unified standards for sustainability disclosure. Future studies can expand the use of qualitative indicators and questionnaire tools to understand the non-quantitative factors affecting this relationship, as well as expand to include other countries in the MENA region.
This study bridges the gap in the available literature and offers empirical recommendations for design of inclusive and sustainable finance by integrating the concept of governance into the domain of FI and sustainability.
