Date of Award


Degree Type


Degree Name


Degree Program

Financial Economics


Economics and Finance

Major Professor

Hassan, M Kabir

Second Advisor

Lane, Walter J

Third Advisor

Turunen-Red, Arja

Fourth Advisor

Price, Gregory


This dissertation is comprised of two distinct empirical papers which I document in two separate chapters. In the first chapter, I empirically examine the impact of banks’ environmental, social, and governance (ESG) practices on banking efficiency. Using a sample of 578 international banks over the years 2011-2019, I employ a data envelopment analysis (DEA) method to estimate banks’ technical efficiency scores. My baseline Tobit regressions reveal that high ESG performance significantly reduces banks’ efficiency. Further, I find that this relationship is non-linear at very high levels of ESG scores. These findings are consistent across the social (S) and governance (G) dimensions of ESG, across banks with different sizes and specializations, and across banks from America, Asia, and Oceania regions. I separately control for World Bank’s country-wise governance indicators and find consistent results for each of them. My results survive a couple of robustness tests based on Simar and Wilson (2007) two-stage efficiency analysis and fractional probit regressions. For further robustness, I test for and subsequently obtain persistence of the diminishing efficiency. I use a two-step system Generalized Method of Moments (GMM) estimation to deal with potential endogeneity. My channel regressions suggest that the negative effect is mainly attributed to significant reductions in bank loans and other operating assets. With this novel evidence, this chapter imparts new direction for further research in the growing literature of ESG issues in banking and finance. In the second chapter, I empirically explore the impact of political connections of U.S. suppliers and buyers. Prior evidence, although mixed, suggest that firm performance is significantly associated with its own political contributions. However, the link between firms’ performance and political connections of their suppliers and buyers is yet to be explored. I examine whether performance of U.S. firms is affected by the changes in political contributions of their supplier and buyers. Based on a large sample of U.S. nonfinancial firms and their politically connected suppliers and buyers from 1996 to 2018, my baseline findings reveal that firms’ profitability, value, liquidity, and debt level reduce significantly in response to increases in lobbying expenditures of their suppliers, supporting the bargaining power perspective of political connections. Further, I find that firms exhibit stronger liquidity and increased internal investments following rises in lobbying expenditures of their buyers, suggesting the cash-flow perspective of political contributions. These findings survive a set of robustness tests based on change-on-change regressions and propensity score matching. This chapter provides the first evidence on the link between firm performance and political contributions of their suppliers and buyers. This study shall be of substantial interest to academics, business organizations, and investors who are concerned about the impact that political connections impose on U.S. corporations.


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