Can Banks Sustain the Growth in Renewable Energy Supply? An International Evidence

Tonmoy Choudhury (), Muhammad Kamran (), Hadrian Geri Djajadikerta () and Tapan Sarker ()
Additional contact information
Tonmoy Choudhury: Edith Cowan University
Muhammad Kamran: Edith Cowan University
Hadrian Geri Djajadikerta: Edith Cowan University
Tapan Sarker: Griffith University

The European Journal of Development Research, 2023, vol. 35, issue 1, No 2, 20-50

Abstract: Abstract Confronted with rapidly deteriorating climate change resulting from the use of fossil fuels, the transition to renewable energy has now become imminent. But this shift to renewable energy requires massive financial support from banks, affecting their default risk. Responding to the growing environmental concerns and reluctance among banks to increase their exposure in the renewable energy sector, this study presents unique and novel insights on the relationship between the share of renewable energy in the total energy supply of a country and banking risk. To this end, we obtained data for a sample of 80 international banks from 20 countries in the 2006–2017 period. On this data, we implemented a two-stage least squares (2SLS) regression analysis model. Our findings reveal that increasing the share of renewable energy in the total energy supply of a country significantly reduces banks’ default risk. To check the robustness of the results, we performed several tests which also endorsed the validity of our results.

Keywords: Renewable energy; Banking risk; 2SLS; Distance-to-default (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1057/s41287-021-00492-z Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:eurjdr:v:35:y:2023:i:1:d:10.1057_s41287-021-00492-z

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/41287/PS2

DOI: 10.1057/s41287-021-00492-z

Access Statistics for this article

The European Journal of Development Research is currently edited by Spencer Henson and Natalia Lorenzoni

More articles in The European Journal of Development Research from Palgrave Macmillan, European Association of Development Research and Training Institutes (EADI) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().