ABSTRACT
This chapter examines the relationship between the environmental performance and the financial and market-based performance of banks in the Gulf Cooperative Council (GCC) countries. The chapter further investigates if the effects of environmental performance on earnings per share and price volatility vary between Islamic and conventional banks. To achieve this objective, the chapter reviews various documents published by national and international bodies related to green banking and finance in the GCC countries. Then, an empirical study is conducted on a sample of 18 Islamic banks and 30 conventional banks for the period 2010–2019. The empirical results show that Islamic banks, despite larger in size on average compared to conventional banks, have statistically significant lower emissions than conventional banks. However, Islamic banks have lower earnings per share (EPS) and stock price volatility than conventional banks which supports the risk–return trade-off hypothesis. Moreover, Islamic banks with better environmental performance have higher EPS. These findings have important implications for managers and regulators.
JEL codes: G21, Q56
