GREEN COMMITMENT AND FINANCIAL STABILITY: THE IMPACT OF ENVIRONMENTAL RESPONSIBILITY COSTS ON BANK EQUITY CAPITAL

Abstract

This study examined the effect of environmental responsibility costs, specifically community development expenditure, on the equity capital of banks listed on the Nigerian Exchange Group (NGX), while controlling for firm size. Using panel data from 13 banks over the period 2014 to 2023, the study employed panel least squares regression to assess how green commitments impact banks’ financial obligations, measured by equity financing. Results showed that community development expenditure positively and significantly affected equity capital, with a coefficient of 0.025 (p = 0.012). Conversely, firm size had a significant negative effect (coefficient = -0.088, p = 0.004), suggesting that larger banks tend to rely less on equity financing despite their environmental responsibility efforts. These findings include that banks’ investments in environmental and community development initiatives can strengthen their equity capital, helping to balance green commitment with financial obligations. The study recommends that banks intensify their environmental responsibility expenditures as a strategic approach to improving equity financing and that policymakers develop frameworks encouraging sustainable financing practices aligned with green commitments