THE IMPACT OF GREEN BANKING PRACTICES ON BANKS’ COST OF CAPITAL; EVIDENCE FROM A DEVELOPING COUNTRY
DOI:
https://doi.org/10.37435/nbr.v6i2.89Keywords:
Green Banking, Cost of Capital, Cost of Equity, Cost of Debt, EnvironmentAbstract
Purpose: This study aims to explore whether green banking practices by Pakistani banks have any impact on their cost of equity and cost of debt.
Design/Methodology: We constructed a specifically designed composite green banking index to measure the extent of green banking practices from banks within the sample. Cost of capital is represented by the cost of debt and cost of equity. Banks listed on Pakistan’s KSE-100 Index over a period of the 10 years i.e. from 2010 to 2019 is used as our study sample. Panel Data Regression analysis is used to test the hypothesized relationships.
Findings: Green banking is still in its evolution phase among Pakistani banks. While the debt market is stricter and is incorporating these practices in advancing financing to the banks, there is still a need for investor education and awareness at the equity market level, which has not yet been incorporated in the pricing of the banking stocks.
Originality: Green banking is still in its evolution phase among Pakistani banks. While the debt market is stricter and is incorporating these practices in advancing financing to the banks, there is still a need for investor education and awareness at the equity market level, which has not yet been incorporated in the pricing of the banking stocks.
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