Bank Deregulation and Corporate Environmental Performance
2023 · Published in World Development 161: 106106 · DOI 10.1016/j.worlddev.2022.106106
PDF of Bank Deregulation and Corporate Environmental Performance
In one sentence
After bank branching deregulation in China, firms more exposed to the deregulation emit less pollution per unit of output.
Summary
The paper examines how bank deregulation affects corporate environmental performance, using bank branching deregulation in China and firm-level data on toxic emissions. Firms more exposed to the deregulation lower their chemical oxygen demand (COD) emission intensity compared with less exposed firms. Treated firms also become more productive and reduce the share of tangible assets in total assets, which points to technology upgrading and a change in asset mix as the channels. The paper documents an environmental consequence of banking liberalisation that is relevant for developing countries reforming their banking sectors.
Abstract as published
In this study, we examine the effect of bank deregulation on corporate environmental performance. We use a unique dataset that contains rich information on firms’ toxic emissions and exploit bank branching deregulation in China. We find that compared with firms with lower exposure, firms more exposed to the bank deregulation improve their environmental performance, measured by lower chemical oxygen demand (COD) emission intensity after the bank branching deregulation. We further demonstrate that treated firms’ production efficiency increases and the ratio of tangible assets to total assets decreases, which suggests that upgrading technology and asset mix are the main channels. In order to improve the efficiency of banking system, many developing countries are undergoing or moving toward liberalizing the banking industry, with the focus on firm environmental performance, this paper documents an important but unanticipated consequence resulted from bank deregulation.
Citation
Shiyi Chen, Tao Chen, Pingyi Lou, Hong Song, Chenyu Wu (2023). Bank deregulation and corporate environmental performance. World Development, 161, 106106. https://doi.org/10.1016/j.worlddev.2022.106106
BibTeX
@article{chen2023bank,
title = {{Bank deregulation and corporate environmental performance}},
author = {Shiyi Chen and Tao Chen and Pingyi Lou and Hong Song and Chenyu Wu},
journal = {World Development},
year = {2023},
volume = {161},
pages = {106106},
doi = {10.1016/j.worlddev.2022.106106}
}