Commercial Bank Expansion and Environmental Pollution: Micro Evidence from Industrial Firms in China

Abstract

This paper uses the web crawler method to obtain information on the distribution of commercial bank branches in China and uses the multidimensional fixed-effects model to explore the impact of commercial bank expansion on firm pollution emissions and its mechanism. The findings reveal that commercial bank expansion significantly reduces firms’ pollution emissions and that there is an optimal geographical radius for this suppression effect. The number of commercial bank branches within 20 km of the firm has the biggest inhibiting influence on the firm’s pollution emission, which diminishes as geographical distance increases. This dampening effect remains robust after testing using the instrumental variable method and the Difference-In-Differences method. Examination of heterogeneity demonstrates that the influence of commercial bank expansion on firm pollution emission depends on the degree of regional low-carbon policies and laws, the level of pollution in the industry, and capital intensity of the industry, as well as the firm’s size and ownership. The mechanism test proves that commercial bank expansion reduces firm pollution emissions by promoting technological progress and increasing their investment in pollution reduction.