Is the establishment of city commercial banks more efficient in promoting green innovation?

Abstract

Green innovation is an important way to realize the "double carbon" target, but financial support is necessary and important. This paper uses the multi-period difference-in-difference method to estimate the impact of city commercial banks on city green innovation. The data sample is the panel data of 285 prefecture-level cities in China from 2003 to 2019. Based on the empirical results, it can be concluded that city commercial banks can significantly promote green innovation, but have no significant contribution to the unbiased technological progress expressed by total factor productivity, i.e., overall innovation, while indicating that they are more efficient in promoting green innovation than overall innovation. This finding is still valid after a series of robustness, placebo, and parallel trend tests. After considering the moderating effect of environmental regulations, we find that market-incentive environmental regulation has a significant moderating effect on green innovation promotion, whereas command-control environmental regulation does not. On this basis, we propose policy recommendations to promote the development of city commercial banks; strengthen green innovation in central and western China, be both rigid and flexible in their approach to environmental regulation; and improve legal regulations.