Green Versus Non-green Banks: A Differences-In-Differences CAMEL-Based Approach

Ioannis Malandrakis () and Konstantinos Drakos
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Ioannis Malandrakis: Athens University of Economics and Business

A chapter in Operational Research Methods in Business, Finance and Economics, 2023, pp 37-80 from Springer

Abstract: Abstract We employ a panel data set of 165 banks (global and non-global) from thirty-eight countries around the world covering the time period 1999–2015, and we examine whether there are any discernible performance differences between green and non-green banks using panel data techniques (the random effects and the multilevel model). The variables of interest are fundamental CAMEL factors. Moreover, we adopt the Differences-In-Differences approach to examine whether green (“treatment” group) and non-green (“control” group) banks exhibit differential behavior, and we use the outbreak of the financial crisis (2008) as the time of intervention. We find that both green and non-green banks are affected by nearly the same bank-specific factors, and that they do not exhibit heterogeneous behavior with respect to several fundamental aspects. Our results show that green banks perform better than their non-green counterparts only in terms of Total Capital ratio and Tier 1 Capital ratio during and after the financial crisis. As for the rest of the CAMEL factors, it seems that both groups exhibit the same behavior, especially in the post-crisis period. Furthermore, it seems that neither country nor region has any significant effect on CAMEL variables values (it is rather a matter of bank characteristics, either green or non-green). We also find that the financial crisis had (a) a positive effect on capital adequacy (excluding leverage ratio, which seems to have remained unaffected), on asset quality (excluding NPLs ratio) and management quality; (b) a negative effect on earnings ability; and (c) a negative impact on liquidity, for both bank types.

Keywords: CAMEL factors; Financial crisis; Green banking; Panel data models; Sustainable finance (search for similar items in EconPapers)
JEL-codes: C32 C33 G01 G21 G29 Q56 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnopch:978-3-031-31241-0_3

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DOI: 10.1007/978-3-031-31241-0_3

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