The effectiveness of financial industry in promoting the high-quality development of energy industry

Zhenpeng Tang, Xinyi Lin and Houyin Long

Journal of Asian Economics, 2025, vol. 99, issue C

Abstract: The energy sector is central to global decarbonization, and the effective allocation of financial resources is vital to its development. However, the impact of financial resources on energy development remains ambiguous in existing literature. This study bridges this gap by theoretically and empirically analyzing the role of the financial resources allocated to the energy industry. We develop a novel theoretical model that integrates the energy and financial sectors, subsequently deriving an inverted U-shaped relationship between financial resources and energy development. Empirically, we use an energy-related indicator to capture financial resources directed towards the energy sector and validate the hypothesis using panel data from 30 Chinese provinces from 2006 to 2019. The result remains robust after addressing endogeneity concerns and a series of robustness tests. Heterogeneity analysis further shows that the inverted U-shaped relationship is more pronounced in regions with abundant energy resources and high financial development, while the effect in those characterized by underdeveloped financial systems is insignificant. Mechanism analysis reveals that financial resources influence energy development through financing constraints and investment efficiency. This study advances our understanding of the role of finance in energy sector development, offering key policy implications for optimizing financial allocation. Financial institutions should establish appropriate support thresholds to ensure optimal financial resource allocation to the energy sector, while addressing financing constraints and improving investment efficiency. Support strategies should be tailored to regional conditions, such as energy endowments and financial development levels.

Keywords: Energy industry; Financial resource allocation; Inverted U-shape (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007825000697
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:99:y:2025:i:c:s1049007825000697

DOI: 10.1016/j.asieco.2025.101945

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().