Environmental sustainability is a major concern of contemporary societies, businesses, and governments. However, there is a lack of knowledge as to how countries can achieve the goal to end poverty, whilst protecting the planet. It is the objective of our study to examine the moderating role of institutional quality on the financial development and environmental quality nexus in South Asia. Our sample consists of panel data of five South Asian countries (India, Bangladesh, Nepal, Sri Lanka and Pakistan) from 1984 to 2018. We find that financial development increases CO2 emissions in this region, implying that countries in South Asia have utilized financial development for capitalization, instead of improving production technology. Institutional quality moderates the negative impact of financial development on environmental sustainability. An implication of our findings is that efforts to improve institutional quality may help to promote sustainable development in South Asia.
PurposeThe authors examine the impact of credit, liquidity and operational risks on the financial performance of commercial banks of South Asia.Design/methodology/approachData are extracted from DataStream of 76 commercial banks of four countries, i.e. Pakistan, India, Bangladesh and Sri Lanka for the period 2009–2018. The generalized method of moments (GMM) is used to analyze the results.FindingsAll three risks are significantly associated with financial performance. The authors find that Z-score positively affects the bank performance, whereas the nonperforming loans (NPLs) ratio has a negative impact on financial performance of bank. Liquidity risk analyses show the current and loan-to-deposit (LTD) ratios positively and negatively, respectively, affect financial performance. While operational risk positively affects financial performance. The authors further present the significant effects of joint occurrence of credit and liquidity risks on financial performance.Practical implicationsFor managing credit risk, banking management should ensure the policies for granting loans and timely reimbursement of the loan installments from customers. Bank managers should regularly monitor the liquidity position by maintaining the necessary levels of loans and deposits. Management should retain a healthy capital charge to meet operational risks.Originality/valueCredit, liquidity and operational risks are considered the most important categories of risk which are faced by financial institutions. To the best of the authors’ knowledge, this is the first study which investigates the impact of these risks on banks’ financial performance in selected South Asian countries. The results of this study have relevance and probable generalizability about the impact of risks on the performance of banks in emerging markets.
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