Does Bank Competition Promote Corporate Green Innovation? Evidence from the Location of Bank Branches

Yufeng Xia and Peisen Liu

China & World Economy, 2022, vol. 30, issue 2, 84-116

Abstract: Based on the geographic coordinates of bank branches and firms, this study analyzes the impact of firm‐level bank competition on corporate green innovation and its underlying mechanisms. The findings of this study are mainly as follows. First, bank competition promotes corporate green innovation by reducing transaction costs, increasing the possibility and quantity of firms applying for green patents. Second, bank competition increases the share of green innovation while reducing the share of nongreen innovation. Third, environmental regulation strengthens the promotion effect of bank competition on corporate green innovation, and the strengthening effect is greatest when environmental regulation is between its 50th and 75th quantile. The proportion of state‐owned banks weakens the promotion effect of bank competition on corporate green innovation. This paper is helpful to understand the impact of the banking system on sustainable economic development.

Date: 2022
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