Does the availability of credit resources reduce corporate pollution emissions? Evidence from the geographic network of banks in China

Abstract

ABSTRACT The impact of bank branch expansion on macroeconomic and micro-firm behaviour has been one of the primary focuses in related research fields. However, research has thus far ignored the unintended impact of the increased availability of credit resources on firms’ pollution emissions. Therefore, based on firm-level data in China, we explore the impact of the availability of credit resources on firm pollution reduction. The empirical results of this study are as follows. (1) Increased availability of credit resources to firms can significantly reduce pollution emissions. This finding remains robust after a series of robustness tests. (2) The possible path to reduced emissions is through increasing capital investment in production and technological innovation, rather than increasing capital investment in governance. (3) The market access policy for small and medium-sized commercial bank branches further strengthens the effect of credit resource availability on pollution reduction. And the reduction effect is more significant for firms facing strong environmental regulations and weak economic target constraints. These findings provide a new perspective for enterprises to reduce emissions.