Thesis (MSc) - Cyprus International University. Institute of Graduate Studies and Research International Banking and Finance Department

Includes bibliography (sheets 44-48)

ABSTRACT
The aim of the study is to examine the impact of environmental innovation on bank
stability. The banking sector greatly affects the economy and with the increase in the
trend for green practices and innovation, they have been pressured to develop
sustainable practices and products and become more eco-friendly. This research is
guided by the following objectives; to determine the impact of environmental
innovation on bank stability and to ascertain the level of awareness and acceptance of
green innovation in the banking industry. Data was collected from Eikion database
provided by Refinitiv and World Bank development indicators for 37 European banks
within the period of 2021 to 2021. Banks stability is measured as the natural log of
Zscore and environmental innovation was measured through the deviation of
environmental pillar score. The study conducted a panel data regression; pool OLS,
fixed effect and random effect model. Diagnostic test indicated that fixed effect model
is the suitable model for the sample analysis
The fixed effect model's results showed that there was no significant relationship
between environmental innovation and bank stability. Furthermore, it was noted that
European banks lack sufficient investment and proper awareness on environmental
innovation. Based on the findings from the study, it is recommended that
environmental innovation might improve bank stability in the future if banks are able
adopt and expand environmental innovation practices. Our empirical results provide
significant policy recommendations for banks to support green innovation, enhance
environmental performance, and guarantee bank stability.
Keywords: Bank Performance, Bank Stability, Environmental Innovation,
Environmental Pillar Score, Green Innovation, Sustainability