Banking Competition and the Green Transformation of Chinese Enterprises
Since implementing the reform and opening-up policy,China has steadily grown into the world's largest industrial nation.However,tightening resource constraints and escalating climate issues have introduced new challenges and shocks to the long-term,high-quality development of China's economy.Recognizing the importance of environmental issues,China has embraced the development idea that"lucid waters and lush mountains are invaluable assets",viewing environmental protection and economic development as dialectically unified,which is reflected in the quantifiable environmental targets outlined in its Outline of the 14th Five-Year Plan(2021-2025)for National Economic and Social Development and the Long-Range Objectives Through the Year 2035.Given the substantial financial resources required for green transformation of enterprises,finance has become a pivotal tool in supporting China's green economic transformation.Within this context,the banking system,the cornerstone of China's financial architecture,plays a crucial role.Compared to monopolistic banking structures,competitive banking structures offer more direct external funding support for firm transformation,thereby significantly facilitating firm innovation.Therefore,competitive banking structures may reduce firms'credit constraints for green transformation,leading to unintended environmental externalities.This study employs a dataset matching listed companies'environmental news text data with regional bank branch data to empirically analyze the impact of banking competition structure on firm green transformation.This study chooses the firm environmental news text sentiment value to measure firm green transformation.Unlike self-disclosed firm data,environmental news texts on listed companies,dispersed across various authoritative media and characterized by decentralization,offer a more objective analytical dimension.This study employs baseline regression and a series of robustness tests to discern the causal relationship between banking competition structures and firm green transformation.These robustness tests include altering the bank competition variables,employing multidimensional measures of firm environmental news sentiment,high-dimensional fixed effects,instrumental variable methods,difference-in-differences(DID),and subsample regression analyses.In addition,this paper further identifies the transmission mechanisms between bank competition structure and corporate green transformation,including reducing financing costs,promoting technology upgrades,and boosting asset transformation.Finally,this paper conducts a heterogeneity analysis from the perspectives of credit availability,green credit policies,and regional transformation pressures,as well as an analysis of economic outcomes.This paper finds that banking competition has significant environmental externalities.Specifically,one standard deviation increase in the city bank competition index corresponds to approximately a 7.64％rise in the sentiment of environmental news texts within the region.Mechanism tests suggest that banking competition affects firms'environmental performance by reducing the cost of external financing,fostering technological upgrades,and facilitating asset transformation.Cross-sectional tests indicate that the magnitude of banking competition's environmental externalities is influenced by firms'credit accessibility,green credit policies,and regional transformation pressures.Specifically,the effect of banking competition on green transformation is more pronounced in firms with poorer credit accessibility,addressing the credit resource allocation issue in monopolistic banking structures.Compared to green credit policies,banking competition serves as a more inclusive and market-driven financial element,effectively promoting emission reduction in heavily polluting firms and supporting the transformation and upgrading of enterprises in resource-based cities.This paper contributes to existing literature in three ways.Firstly,focusing on the environmental externalities of banking competition structures,it broadens the theoretical scope of existing research on banking competition and enriches literature on optimal financial structures.Secondly,unlike existing studies that primarily focus on green financial instruments such as green credit,this paper highlights how banking competition directly alleviates firm financing constraints during the transformation process,offering novel insights for developing green and transition finance systems.Lastly,this paper has distinct policy implications.The identified environmental externalities of the banking competition structure represent a positive,unintended consequence of China's persistent marketization reforms in the banking sector.Policy recommendations include further deepening financial market reforms and enhancing banking market competition to improve financial services for the real economy,aiming to align the objectives of high-quality financial development with firms'green transformation.
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