Does the availability of credit resources reduce corporate pollution emissions? Evidence from the geographic network of banks in China

ABSTRACT

The impact of bank branch expansion on macroeconomic and micro-firm behaviour has been one of the primary focuses in related research fields. However, research has thus far ignored the unintended impact of the increased availability of credit resources on firms’ pollution emissions. Therefore, based on firm-level data in China, we explore the impact of the availability of credit resources on firm pollution reduction. The empirical results of this study are as follows. (1) Increased availability of credit resources to firms can significantly reduce pollution emissions. This finding remains robust after a series of robustness tests. (2) The possible path to reduced emissions is through increasing capital investment in production and technological innovation, rather than increasing capital investment in governance. (3) The market access policy for small and medium-sized commercial bank branches further strengthens the effect of credit resource availability on pollution reduction. And the reduction effect is more significant for firms facing strong environmental regulations and weak economic target constraints. These findings provide a new perspective for enterprises to reduce emissions.

KEYWORDS:

• Credit resources
• Pollution emissions
• Capital investment in production
• Capital investment in governance

JEL CLASSIFICATION:

• D22
• G30
• Q56

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The work was supported by the Ministry of Education, Humanities and Social Science [22YJC790122], the National Natural Science Foundation of China [72204080], and the Innovation Fund Projects of the Shanghai University of Finance and Economics [CXJJ-2022-421].