The impact of banks’ financial performance on environmental performance in Africa

Abstract

<p>To better understand Africa’s banks and the environment, this study investigates the impact of financial performance on environmental performance in Africa. We examined financial performance, environmental performance, and some control indicators dated from 2000 to 2016 by applying panel quantile regression and panel vector autoregressive techniques. Our results indicate that (i) in North African countries, carbon emission had a significant negative impact on financial performance on the 25th quantile and (ii) in the South, carbon emission had a statistically positive impact on financial performance on the 25th and 50th quantiles with the marginal effect increases from the lower quantile to the highest quantile. Also, bank deposits statistically negatively impacted financial performance on the 25th and 50th quantiles for both North and South economies. The dynamic panel quantile results show dissimilar effects at different quantiles. Also, the panel vector autoregressive results show that in North Africa carbon emission had a positive impact. Our results validate the stability test of the panel vector autoregressive model. The granger causality results in the North show a bilateral causal link between carbon emission and bank credit, carbon emission, and bank deposit. Since sustainability has become one of our era’s most thorny issues, this paper provides extensive policy directives to assist African nations in boosting a greener future. </p>