The Effects of Green Banking Practices on Financial Performance of Listed Banking Companies in Bangladesh

Abstract

This study examines the effects of green banking practices on the financial performance of banks listed in the DSE of Bangladesh covering the period from 2011 to 2020. To move the economy on a sustainable path green banking practices is essential. Green banking practice is a way of contributing environmental and economical performance in the community by providing green finance and initiating green costs in its various sectors, it takes an important part to raise an organization’s financial performance through diminishing costs. Green banking is becoming a key issue in the whole world especially in developing countries like Bangladesh. This has been theorized by economists that there is a financial incentive if there is a number of practice in green banking. In this arena, a proactive role can be played by banks besides its operational activities known as the journey of renovation for a greener economy by participating in green finance. The aim of this study is to empirically find the relationship between green banking practices and banks' financial performance by using the panel data set, taking financial variables like return on asset, return on equity, and market value to proxy the banks’ performance, and employing green banking practice variables like green cost and volume of the risk management committee. Finally, this study finds that there is a positive relationship between green banking practices and financial performance. The findings generated from this study can be a proper guideline for the bank regulators to take effective decisions regarding environmental issues and thereby make a social contribution, and after all, play a vital role in economic growth. The practitioners, governments, decision-makers, academicians, and future researchers can use this study as a policy dialog.