Sustainability reporting as a shield: Exploring ESG disclosures, governance, and stock crash risks in Islamic and conventional banks

This study examines the relationship between sustainability reporting and stock price crashes, with a focus on the significant effects of corporate governance factors —such as board size and audit committee composition —on Asian Islamic and conventional banks over 2008–2022, leveraging information-driven strategies. This study has employed 2SLS model to investigate the significance of this nexus, and the findings suggest that ESG factors have a significant, positive relationship with stock price crash risk in Asian emerging economies. Furthermore, a sub-sample analysis indicated that sustainability disclosure has a positive impact on stock crashes in Islamic banks, compared to conventional ones. System GMM and Generalized Estimation Equation (GEE) models have been utilized for robustness, indicating that ESG disclosure improves market dynamics, boosts investors’ confidence, and minimizes agency conflicts. Further, this study offers valuable insights and perspectives from the context of Asian Islamic and Conventional banks, providing relevant theoretical and managerial implications for policymakers and investors.