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The role of fintech in promoting green finance, and profitability: Evidence from the banking sector in the euro zone

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  • Mirza, Nawazish
  • Umar, Muhammad
  • Afzal, Ayesha
  • Firdousi, Saba Fazal

Abstract

Technological innovations have disrupted business models, including those of financial services. New technologies optimize various functional aspects of the banking firms and it is critical to assess if they can expedite green finance while supporting bank profitability. The paper employs a comprehensive sample of European banks between 2011 and 2021 by using a panel fixed effects regression model to study the relationship between the adoption of financial technology and bank profitability. The results show a positive relationship between investment in financial technology and green lending attributable to the search, diligence, and monitoring efficiency of new technologies Similarly, results indicate a direct influence of fintech investment on the risk-adjusted return on capital associated with low cost, expanded product base, and lower economic capital. Findings also show the important role of firm size, human capital efficiency, and market concentration in determining bank profitability and green lending decision. These results have important implications for the role of financial technology in green finance and sustainability-related goals.

Suggested Citation

  • Mirza, Nawazish & Umar, Muhammad & Afzal, Ayesha & Firdousi, Saba Fazal, 2023. "The role of fintech in promoting green finance, and profitability: Evidence from the banking sector in the euro zone," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 33-40.
    • Handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:33-40
    DOI: 10.1016/j.eap.2023.02.001
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    3. Hoda M. Aboalsamh & Laith T. Khrais & Sami A. Albahussain, 2023. "Pioneering Perception of Green Fintech in Promoting Sustainable Digital Services Application within Smart Cities," Sustainability, MDPI, vol. 15(14), pages 1-13, July.
    4. HOROBEȚ Alexandra & MNOHOGHITNEI Irina & BELAȘCU Lucian & CROITORU Ionuț Marius, 2023. "Esg Reporting And Capital Market Investors: Insights From The Global Technology And Fintech Industries," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 18(2), pages 178-195, August.
    5. Fang, Shuya & Fang, Wei, 2023. "How fiscal decentralization and trade diversification influence sustainable development: Moderating role of resources dependency," Resources Policy, Elsevier, vol. 84(C).
    6. Zhang, Mingming & Wong, Wing-Keung & Kim Oanh, Thai Thi & Muda, Iskandar & Islam, Saiful & Hishan, Sanil S. & Abduvaxitovna, Shamansurova Zilola, 2023. "Regulating environmental pollution through natural resources and technology innovation: Revisiting the environment Kuznet curve in China through quantile-based ARDL estimations," Resources Policy, Elsevier, vol. 85(PA).
    7. Wei, Xuecheng & Hu, Weihua, 2023. "Revisiting resources curse hypothesis in China: Exploring the asymmetric effect of green investment and green innovation," Resources Policy, Elsevier, vol. 85(PB).
    8. Zhao, Liange & Wang, Dongmei & Wang, Xueyuan & Zhang, Zhijian, 2023. "Impact of green finance on total factor productivity of heavily polluting enterprises: Evidence from green finance reform and innovation pilot zone," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 765-785.
    9. Shan, Shan & Mirza, Nawazish & Umar, Muhammad & Hasnaoui, Amir, 2023. "The nexus of sustainable development, blue financing, digitalization, and financial intermediation," Technological Forecasting and Social Change, Elsevier, vol. 195(C).

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    More about this item

    Keywords

    Green finance; Sustainable development; Financial technology; Risk-adjusted return on capital;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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