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Environmental policies stringency and cross-border banking: The mediating role of green industries

Author

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  • Rapih, Subroto
  • Borges, Jorge Tavares
  • Susantiningrum,

Abstract

This study examines the impact of domestic environmental policy stringency (EPS) on cross-border bank inflows across 33 countries from 2000 to 2020. Using panel data estimation models, the results reveal that higher levels of EPS are associated with increased cross-border bank inflows. Furthermore, non-market-based EPS shows a stronger effect in attracting these inflows compared to market-based policies. Additionally, green industries in host countries partially mediate the relationship between EPS and cross-border bank inflows, suggesting that stringent EPS fosters a favorable investment climate through the promotion of green sectors. These findings highlight the crucial role of environmental regulations in shaping financial flows and resource distribution in the banking sector, offering valuable insights for policymakers aiming to attract sustainable investment.

Suggested Citation

  • Rapih, Subroto & Borges, Jorge Tavares & Susantiningrum,, 2025. "Environmental policies stringency and cross-border banking: The mediating role of green industries," Finance Research Letters, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:finlet:v:74:y:2025:i:c:s154461232401763x
    DOI: 10.1016/j.frl.2024.106734
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    More about this item

    Keywords

    Environmental policy stringency; Green Industries; Cross-border bank inflows; Climate finance; Panel data analysis;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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