Bank competition, government interest in green initiatives and carbon emissions reduction: An empirical analysis using city-level data from China

Xu Chen, Huilin Xu and Sajid Anwar

The North American Journal of Economics and Finance, 2024, vol. 72, issue C

Abstract: Finance plays a pivotal role in the transition to a sustainable economic development model. In China, the banking sector, a key component of its financial landscape, operates within an increasingly competitive environment, exerting profound effects on the efficient allocation of resources. This paper employs instrumental variables regression and text analysis techniques to meticulously examine the impact of bank competition on carbon emissions and elucidate the underlying mechanisms. We also investigate the synergistic influence of government engagement in green initiatives and bank competition on carbon emissions reduction, drawing insights from data encompassing Chinese cities during the years 2006 to 2019. Our empirical analysis unveils a significant carbon emissions reduction effect resulting from bank competition. This effect is primarily driven by the facilitation of green innovation and the promotion of manufacturing servitization. Notably, this impact is more pronounced in cities that are not dependent on resource extraction and those situated outside regional financial centers. Additionally, the level of government interest in green initiatives amplifies the carbon reduction effect of bank competition. This paper contributes to the enhancement of the banking market structure, aligning it with eco-friendly development goals.

Keywords: Bank competition; Carbon emissions; Government policies; Green innovation; Manufacturing servitization (search for similar items in EconPapers)
JEL-codes: G21 G28 Q50 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:72:y:2024:i:c:s106294082400069x

DOI: 10.1016/j.najef.2024.102144

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