Does bank competition curb corporate pollution emissions? Evidence from the geographical location of bank branches

Abstract

This study interprets enterprise pollution reduction from the perspective of the financial market. Using data on Chinese industrial enterprises, this paper tests the impacts of bank competition on enterprise pollution emissions. The findings show that bank competition has a significant total effect and technique effect on pollutant reduction. Bank competition reduces pollutant emissions by easing financing constraints, increasing the implementation of internal pollution control, and improving the efficiency of bank credit resource allocation. Further research shows that both bank type and bank branch level could moderate the pollution reduction effects and such effects vary a lot under different environmental regulation intensities. We expand the relevant literature on the economic consequences of banking competition and have certain theoretical and practical reference significance for the future reform of the banking industry.

Keywords: Bank competition; Environmental regulation; Financing constraints; Geographical location; Pollutant emissions.