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Abstract
The Chinese government has increased its emphasis on ‘green GDP’ and restricted bank lending to polluting firms. However, government interference may distort bank credit allocation and worsen the external financing environment of polluting firms. Bank competition as a market-based mechanism may play a role in pollution abatement. By matching the Annual Surveys of Industrial Firms dataset with the Ministry of Environmental Protection survey data and the city-level bank competition data, this article explores the effects of banking sector structure on firm-level pollution emissions under the context of bank deregulation. The findings of this study are mainly in four aspects. First, more bank competition can reduce pollution emissions per unit output value. Second, bank competition affects enterprise pollution emissions through alleviating financial constraints. To be more specific, credit availability, credit amount as well as credit cost are the channels for bank competition to affect enterprise pollution emissions. Third, strict environment regulation strengthens the negative effect of bank competition on pollution emissions. Fourth, the mandatory administrative means of impeding banks from lending to polluters did not achieve the aim of pollution reduction. This study provides evidence that the financial system of banks can have a material impact on firms’ pollution emissions.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 The speech of Pan Yue, deputy director of the State Environmental Protection Administration, at the first National Conference on Environmental Policy and Legal Affairs. Available at https://www.douban.com/note/144679418/.
2 For details of these policies, please visit https://www.banklaw.com/laws/bd52106a99ee11e89b644ccc6a5a6fc1.html, http://zfs.mee.gov.cn/hjjj/gjfbdjjzcx/lsxdzc/201502/t20150209_295658.shtml and http://www.gov.cn/banshi/2007-07/31/content_701623.htm.
3 The big four state-owned banks are the Bank of China (BOC), the Agricultural Bank of China (ABC), the China Construction Bank (CCB), the Industrial and Commercial Bank of China (ICBC).
4 This policy was issued in 2006, and the full text of this administrative rule can be referred at http://www.gov.cn/ziliao/flfg/2006-11/15/content_443807.htm.
5 This policy was issued in 2007, and the full text of this administrative rule can be referred at http://www.gov.cn/gzdt/2007-04/06/content_574161.htm.
6 This policy was issued in 2009, and the full text of this administrative rule can be referred at http://www.gov.cn/gzdt/2009-04/30/content_1301338.htm.
7 Please refer to http://www.china.com.cn/environment/2007-06/14/content_8385588.htm for more information.
8 The means of COD emissions per unit output value and SO2 emissions per unit output value were calculated based on the research data directly and are not reported in Table 2.
9 ASIF is an annual survey conducted by China’s National Bureau of Statistics. The survey covers all state-owned and non-state-owned manufacturing enterprises with annual sales above 5 million yuan or 20 million yuan (after 2011). ASIF offers detailed firm-level accounting information and other firm characteristics of listed and unlisted companies.
10 Although using listed Chinese companies database can provide more recent empirical evidence, study databased solely on listed firms may lead to biased results, and thus, unable to find the pollution reduction effect of bank competition.
11 Some studies used a more recent cross-sectional data of year 2013 (Zhang & Zheng, Citation2019; Zhang, Du, Zhuge, et al., Citation2019). Although the data of this study is not up-to-date, the construction of panel data of 1998–2012 can resolve many deficiencies of cross-sectional data, such as controlling for firm and year fixed effects. Therefore, this paper promotes the research on Chinese firms’ pollution reduction by using a more representative panel data.
12 The relevant policies and regulations can be referred at http://zfs.mee.gov.cn/hjjj/gjfbdjjzcx/lsxdzc/201502/t20150209_295658.shtml, http://www.gov.cn/banshi/2007-07/31/content_701623.htm, https://www.banklaw.com/laws/bd52106a99ee11e89b644ccc6a5a6fc1.html, http://www.fsou.com/html/text/chl/1546/154663.html and http://futures.money.hexun.com/2349097.shtml.