The Green-Fragility Nexus and The Rivalry: Should Banks Care?
Abstract/Description
- Purpose
Environmental concerns have become a deciding factor for investors and firms' customers. Integrating the two areas of competition-stability/fragility and environment-stability/fragility nexus, this research explores whether competition matters in the relationship between environmental practices and stability in the market.
- Data and Methods
A panel of 448 banks from 73 countries for 2007-20 is used, and the sample is further divided into developed and developing countries. Catering the endogeneity, heterogeneity, and serial autocorrelation concerns, we employ a system GMM estimator to arrive at efficient estimates.
- Findings
Environmental practices negatively impact the banks' stability across total samples and subsamples. The impact of competition positively affects banks' fragility, supporting the competition-fragility view. In developing countries, however, no significant evidence is found. In the total sample, it appears that the impact of the environment is lower in high competition. In contrast, the impact of environmental practices is greater in high competition in developing countries. The environmental practices in developed countries are prone to competition in the market. In developing countries, competition is found to be lightly positively moderating the impact of environmental practices on stability.
- Originality/Value
It is recommended that developed countries should have low or moderate levels of competition to encourage environmental practices. For developing countries, however, high competition should be preferred to encourage banks to consider environmental practices as one of their core business strategies.
- Practical Implications:
Banks in developed countries should develop a strategy that focuses on a moderate level of environmental investments. Banks in developing countries can capitalize more on sustainable practices to attract more investors and customers. Regulators and policymakers are encouraged to monitor the level of competition carefully. Considering market competition is important when developing policies on environmental investments.
Track
Finance
Session Number/Theme
2A: Finance
Session Chair
Dr. Azima Khan ; Dr. Ameenullah Aman
Start Date/Time
30-5-2024 3:25 PM
End Date/Time
30-5-2024 4:55 PM
Location
MCS – 3 AMAN CED Building
Recommended Citation
Khattak, M. A. (2024). The Green-Fragility Nexus and The Rivalry: Should Banks Care?. 3rd IBA SBS International Conference 2024. Retrieved from https://ir.iba.edu.pk/sbsic/2024/program/21
COinS
The Green-Fragility Nexus and The Rivalry: Should Banks Care?
MCS – 3 AMAN CED Building
- Purpose
Environmental concerns have become a deciding factor for investors and firms' customers. Integrating the two areas of competition-stability/fragility and environment-stability/fragility nexus, this research explores whether competition matters in the relationship between environmental practices and stability in the market.
- Data and Methods
A panel of 448 banks from 73 countries for 2007-20 is used, and the sample is further divided into developed and developing countries. Catering the endogeneity, heterogeneity, and serial autocorrelation concerns, we employ a system GMM estimator to arrive at efficient estimates.
- Findings
Environmental practices negatively impact the banks' stability across total samples and subsamples. The impact of competition positively affects banks' fragility, supporting the competition-fragility view. In developing countries, however, no significant evidence is found. In the total sample, it appears that the impact of the environment is lower in high competition. In contrast, the impact of environmental practices is greater in high competition in developing countries. The environmental practices in developed countries are prone to competition in the market. In developing countries, competition is found to be lightly positively moderating the impact of environmental practices on stability.
- Originality/Value
It is recommended that developed countries should have low or moderate levels of competition to encourage environmental practices. For developing countries, however, high competition should be preferred to encourage banks to consider environmental practices as one of their core business strategies.
- Practical Implications:
Banks in developed countries should develop a strategy that focuses on a moderate level of environmental investments. Banks in developing countries can capitalize more on sustainable practices to attract more investors and customers. Regulators and policymakers are encouraged to monitor the level of competition carefully. Considering market competition is important when developing policies on environmental investments.
