The Impact of Green Banking Practices on Bank Financial Performance, Study Based on Commercial Banks of Sri Lanka

Abstract

Introduction: This study focused on the Impact of Green Banking Practices on Bank Financial Performance Study Based on Commercial Banks of Sri Lanka. Local or foreign researchers have not done any research considering the recent effect of green banking practices by evaluating the quantitative data on financial performance.

Methodology: To address the three objectives; impact of green costs on the bank’s financial performance, the impact of corporate governance and its moderate relationship between green banking practices and banks’ financial performances, the effect of country regulation, and moderate the relationship between green banking practices and the financial performance of 10 licensed commercial banks in Sri Lanka under registration in the Colombo Stock Exchange, this study uses six variables including one dependent variable, one independent variable, two moderate variables, and two control variables. The study used secondary data from banks' annual reports and worldwide Governance Indicators from 2015 to 2023 and used panel regression to analyze the data.

Findings: The study found green costs are negatively significant with ROA, demonstrating that short-term costs related to green initiatives could have a negative impact on short-term financial performance. While country regulatory, and corporate governance showed a significant positive relationship with ROA.

Conclusion: This research suggests that bank financial performance is significantly impacted by green cost, green governance, and green country. Strong corporate governance procedures are crucial for promoting sustainable growth.