Bank Competition and Corporate Environmental Performance
43 Pages Posted: 16 Jul 2020 Last revised: 8 Apr 2021
Date Written: June 24, 2020
In this study, we use a unique dataset that contains rich information about firms’ water pollutant emissions and exploit bank branching deregulation in China as an exogenous positive shock on bank competition to study the causal effects of bank competition on corporate environmental performance. We find that firms more exposed to the bank deregulation improve their environmental performance, measured by lower chemical oxygen demand (COD) emissions, after the shock compared with firms with lower exposure. 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 collateral are the main channels by which bank competition reduce firms’ toxic emissions after the deregulation.
Keywords: Bank competition, Credit conditions, Environmental performance, Corporate social responsibilities
JEL Classification: G21, Q53, Q55
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