Level Of Financial Development Research Articles

Can green finance policy promote ecosystem product value realization? Evidence from a quasi-natural experiment in China

This study takes the Green Finance Pilot Zones (GFPZ) policy in China as a quasi-natural experiment and employs the synthetic control method to test the policy effect of GFPZ on ecosystem product value realization, using the province-level gross ecosystem product (GEP) panel data from 2011 to 2020. The results reveal that GFPZ significantly promotes the value realization of ecosystem products, this positive impact remains robust after the test of spatial placebo studies, leave-one-out estimation, difference-in-differences (DID) method, and controlling the effects of other policy impacts. Meanwhile, the ecological transformation of industries and ecological industry development serves as the critical mechanism pathways for GFPZ to realize the value of ecosystem products. In addition, we identify significant spatial spillover effects resulting from GFPZ implementation. Heterogeneity analysis reveals that the impact of the GFPZ policy on ecosystem product value realization is more significant in the central, the western regions, and the areas with high financial development levels. Moreover, for heterogeneous policy goals, GFPZ has greater policy impacts in ecologically vulnerable regions, followed by industrial upgrading regions, while the impact on the resource development region is not significant. These findings provide empirical evidence on the attributions of green finance policy to sustainable development and underscore the pressing need for enhancing the effective adaptation of green finance policy to local circumstances, making full use of green finance tools to promote ecosystem product value realization and advance sustainable development.

The impact of the digital economy on high-quality agricultural development--Based on the regulatory effects of financial development.

The digital economy, as a new economic form with high information density, provides a new driving force for the realization of high-quality agricultural development. Panel data of 31 provinces in China from 2011 to 2020 were selected for analysis. The static panel data interaction effect model and panel threshold model were used to verify the nonlinear influence mechanism and heterogeneity of financial development in the process of the digital economy affecting high-quality agricultural development. The findings are as follows. (1) During the study period, the high-quality development of China's agriculture showed a steady upward trend; however, the regional differences were significant, and the eastern part was larger than the central and western part. (2) The digital economy can promote high-quality agricultural development. (3) The digital economy has a double threshold effect in the process of affecting high-quality agricultural development, which depends on the level of financial development. When the threshold is exceeded, the digital economy has a more significant promoting effect on high-quality agricultural development. (4) The impact of the digital economy on high-quality agricultural development is heterogeneous. From the perspective of different regions, the impact effect is greatest in the eastern region, while the effect is smaller in the central and western regions. From different resource endowments, the positive impact effect is greatest in the major grain-selling areas, followed by the major grain producing areas, but the positive digital economy driving effect is not significant in the balance of production and sales areas. Finally, three policy suggestions are proposed. First, the Chinese government should increase investments in and support for digital technology to promote the integration of the digital economy and agriculture. Second, the Chinese government should promote the development of digital inclusive finance in areas with financial development below the threshold. Third, different regions should implement differentiated digital economies to promote high-quality agricultural development.

Overflowing waters, diluted investments: The enduring impact of historical Yellow River floods on enterprise fixed assets investments

Unraveling the long shadow of historical natural disasters, this study explores how the Yellow River floods shape enterprise fixed asset investments in an institutional and cultural context. Leveraging the regression discontinuity approach, we uncover a significant negative impact of these floods on investments, primarily due to weakened property rights and increased reliance on religious coping mechanisms. Further analysis suggests that the enduring impact of floods on investment persists even after controlling for confounding short-term natural disasters, financial development level, and the Tangshan Earthquake. In addition, the impact of historical Yellow River flood arises from cumulative consequences, rather than individual flood outcomes. Overall, this study not only sheds light on the dynamics between historical natural disasters and enterprise economic behavior, but also contributes to a deeper understanding regarding the broader, long-term economic impacts of climate change.

Revisiting the relation between financial inclusion and economic growth: a global analysis using panel threshold regression

This study revisits the relationship between financial inclusion and economic growth using data from 153 countries. Despite the extensive discourse on the role of financial inclusion in spurring economic growth, empirical evidence presents mixed outcomes. Financial inclusion, measured as account ownership at a financial institution or with a mobile-money-service provider, is pivotal to integrating the unbanked population into the economic mainstream, fostering inclusive economic growth. Our analysis demonstrates that the relationship exhibits positive yet varying effects across different thresholds of financial development. Thus, while financial inclusion consistently correlates with economic growth, the magnitude and impact of this relationship vary between countries at different levels of financial development, highlighting the importance of the tailoring of financial inclusion policies to consider the specific developmental stage of the financial sector. Results also reveal that the effects of financial inclusion and financial development vary across income groups and regions, and with regard to economic fragility.

How Does Industrial Intellectualization Affect Energy Intensity? Evidence from China

Since the 21st century, as the digital economy has flourished and the Fourth Industrial Revolution has deepened, emerging technologies have exerted a significant influence on social development, leading to the rapid informatization and digitalization of society. Therefore, in the digital age, industrial intellectualization and energy intensity may interact. In this study, an industrial intelligent system is constructed considering three aspects, and the relationship is explored between industrial intellectualization and energy intensity from 2006 to 2018 in China. Industrial intellectualization can effectively improve energy efficiency and thus restrain energy intensity with a significant lag effect. In addition, China’s energy intensity is highly spatially autocorrelated and spatially agglomerated. The negative spatial spillover effect of industrial intellectualization on energy intensity is also of concern. Finally, the nonlinear effects of industrial intellectualization on energy intensity are comprehensively analyzed under different levels of economic growth, technological progress, industrial restructuring, educational progress, financial development, and environmental regulation.

The loss of political connections and the fluctuation of corporate stock prices: Moderating effect based on media attention

This article examines the impact and mechanism of political connections on stock price fluctuations after the resignation of independent directors with “official” status, based on the exogenous influence of Document No. 18 of the Central Organization Department. Using panel data of A-share listed companies on the Shanghai and Shenzhen stock markets from 2012 to 2020, the experimental group and control group for political affiliation deficiency events were determined through propensity score matching (PSM), and a quasi natural experiment was constructed using differences in differences (DID) for empirical research. By examining the relationship between regional financial development, lack of political connections, and stock price fluctuations, we found that regions with higher levels of financial development are more prone to stock price fluctuations due to the lack of political connections, which is related to higher levels of debt financing in regions with higher levels of financial development. In addition, the increasing level of debt exacerbates conflicts and inconsistencies among stakeholders, which is not conducive to the stability of the company's stock price. Through the above research, relevant suggestions have been provided to enterprises, media, and governments. For example, enterprises should clarify the boundary between government and enterprise, focus on long-term strategic goals, build core competitiveness, and thereby enhance their own value; The media should play a correct role in information transmission and public opinion guidance, and play a positive role in the economic development of the industry; The government should promote market-oriented construction and establish positive government enterprise relationships.

Can fintech pave the way for a transition towards low-carbon economy? Examination based on machine learning algorithm.

Realizing the coordination between the economic and environmental systems through a green growth model is an important goal for China to enter the high-quality development stage. Meanwhile, financial technology (fintech) is rapidly developing in China. To explore the relationship between the two, this research uses panel data from 276 cities in China from 2011 to 2022 and empirically tests through constructing econometric models and machine learning algorithms. The empirical result shows that fintech has an impact on green growth. Specifically, there is a U-shaped relationship between fintech and green growth, meaning that before a certain stage, fintech may have a certain inhibitory effect on green growth. After fintech exceeds a certain development level, it will promote the improvement of green growth. Further mediation tests show that innovation plays a mediating role in the impact of fintech on green growth. Additionally, this research also conducts consistency tests based on different criteria including the location, scale, and financial development level of cities. Based on the research findings, policy suggestions are proposed in this paper to promote the development of fintech and stimulate the growth of the green economy. Overall, our research sheds more light on the fintech-green growth linkage and provides new insights into comprehending the role of fintech in advancing towards a low-carbon economy.

Executive team risk appetite, financial development and re-innovation strategy after enterprise innovation failure: evidence from China

PurposeThis article empirically tests the impact of risk appetite of the executive team on the re-innovation strategy after technological innovation failure using a panel regression model from the perspective of regional financial development level of enterprises.Design/methodology/approachBy means of time series global principal component analysis and panel regression model method, the study validated and analyzed the impact of risk appetite of the executive team on the re-innovation strategy after enterprise technological innovation failure.FindingsThe research found that the higher the risk appetite of executive team, the more inclined the enterprise is to choose the “focusing on quantity, ignoring quality” re-innovation strategy after technological innovation failure. The better the financial development level of the region where the enterprise is located, the better it can effectively reduce the re-innovation strategy of “focusing on quantity, ignoring quality” of the enterprise due to the high risk appetite of the executive team.Originality/valueThe findings of this study are helpful in improving the financial development level of the region where the enterprise is located. It can help the executive team of the enterprise to more objectively choose the innovation strategy after technological innovation failure, and reduce the phenomenon that the executive team of the enterprise only pays attention to the quantity of re-innovation and underestimates the quality of re-innovation after technological innovation failure due to its high risk appetite.

Research on the Impact of Sci-Tech Finance on Industrial TFP

The improvement of industrial Total Factor Productivity (TFP) is the basis for the high-quality development of China’s economy. Sci-tech finance affects industrial TFP through screening and allocation mechanism, governance mechanism, and integration mechanism. Based on provincial panel data from 2009 to 2016, this paper constructs a comprehensive index of regional Sci-tech finance and explores the impact of Sci-tech finance on industrial TFP from two perspectives: differences in financial development levels and transmission paths. The results show that Sci-tech finance has a significant role in promoting the industrial TFP, but this promotion needs to meet certain financial development conditions. In high-level financial development areas, the promotion effect is significant. It is not linear. The effect is a threshold effect with the diminishing marginal efficiency. Sci-tech finance mainly promotes industrial TFP through boosting the industry’s scientific and technological innovation capacity. Policies and channels of Sci-tech finance to support science and technology innovation are put forward.

The roles of inflation and financial development in the effectiveness of foreign aid: Evidence from Bangladesh

The long-run economic benefits of foreign aid in a recipient country depend on the absorptive capacity of the nation in terms of institutions, macroeconomic stability, and financial development. While the role of institutional quality on the aid-growth nexus has already been empirically determined, the moderating roles of inflation and financial development have not been investigated. Therefore, our study addresses these research gaps by examining the moderating roles of inflation and financial development on the impact of aid on economic growth in Bangladesh during 1980–2020 period. It utilizes the Autoregressive Distributed Lag (ARDL) bounds testing technique. This study reveals that the impact of aid on growth depends on the levels of inflation and financial development. If inflation rises above 9.85% threshold level, the marginal effect of aid on growth turns negative. In contrast, the marginal effect of aid on growth is positive even at the maximum level of financial development. The outcomes are robust to alternative proxies and structural breaks. The implication is that an increase in aid and financial development boosts economic growth, but high inflation limits the efficacy of aid. Therefore, to reap the long-term economic benefits of aid, countries should embrace the requisite macroeconomic stability and financial development.

Total Factor Productivity and Financial Development

The main objective of this study is to explore the relationship between total factor productivity and financial development for a group of Latin American countries consisting of Brazil, Colombia, Costa Rica and Mexico covering the period from 1996 to 2019. Total factor productivity, which is considered as one of the main drivers of sustainable economic growth, especially for emerging economies, is the measure of productive efficiency given by the ratio of aggregate output to aggregate inputs. Financial development refers to the development of financial institutions and financial markets. Latin American countries exhibit different levels of both total factor productivity and financial development mainly due to the emerging nature of their economies, which explains the motivation of choosing four of these countries as the sample to analyze the association between total factor productivity and financial development. Data for total factor productivity is taken from the Penn World Table while the Financial Development Index Database provided by the IMF is used in order to examine financial development. The results of this study indicate that countries with higher levels of total factor productivity also have higher levels of financial development. This finding can be interpreted as the outcome of the fact that there are macroeconomic and financial factors determining or similarly influencing both total factor productivity and financial development. Significant policy implications for emerging countries can be inferred from this close connection between total factor productivity and financial development, which constitutes the major contribution of this study to the literature.

Impact of climate risk on financial stability: Cross-country evidence

There is a growing awareness that climate change is a new source of risk to the financial system, but cross-country evidence on the impact of climate risk on financial stability is lacking. This study empirically investigates the impact of climate risk on financial stability using panel data from 2007 to 2019 in 53 countries. The findings of this study reveal that climate risk negatively affects financial stability, and this adverse impact will show differences due to the different levels of economic development, financial development, and competition among countries. Furthermore, macroprudential policies have effectively maintained the financial stability of countries affected by climate risk. However, the macroprudential policies imposed on borrowers are different from balance-based and buffer-based macroprudential tools. In addition, good national governance quality can contain the impact of climate risk on financial stability. After suffering from climate risk, strengthening political stability, improving government efficiency, supervision, and legal system, strictly controlling corruption and improving the right to speak and accountability are conducive to the country's maintenance of financial stability to varying degrees. This study not only enriches the existing research in the field of climate financial risk, but also provides a reference for government departments to reduce the impact of climate risk and maintain financial stability.

Tax policy cyclicality and financial development

This paper adds to the existing literature by examining the macroeconomic, political and institutional determinants of tax policy cyclicality conditional on financial development. We find that an increase in trade and financial openness leads to pro-cyclical VAT and counter-cyclical CIT rate response in high financially developed economies, while an increase in financial openness is associated with counter-cyclical VAT and PIT responses when the levels of financial development are low. A high public debt ratio leads to a counter-cyclical VAT rate response in economies with low financial development. Political power and fiscal institutions are factors that affect the tax policy cyclicality only in less financially developed economies.

The heterogeneous impact of green public procurement on corporate green innovation

Effectively strengthening support for corporate green innovation and promoting green transformation has become the key to promoting coordinated economic and social development in China. As a demand-oriented innovation incentive policy, green public procurement is vital for promoting green innovation. Data from A-share listed firms (2013–2019) are analyzed to explore the impact of green public procurement on corporate green innovation including the heterogeneous effects under different environmental regulation intensity levels. The results show that green public procurement significantly promotes corporate green innovation, especially in areas with strong environmental regulation. Heterogeneity analyses at the firm, industry, and regional levels show that the promotion effect of green public procurement on corporate green innovation is more significant for non-state-owned, small-scale, and ISO 14001-certified enterprises; technology-intensive industries, and enterprises in eastern China and regions with high financial development levels. This study has implications for improving the effectiveness and accuracy of green public procurement policies.

Managing liquidity along the supply chain: Supplier‐base concentration and corporate cash policy

AbstractWe find that customer firms with more concentrated supplier bases tend to hold higher levels of cash reserves. The positive relation between supplier‐base concentration and cash holdings is more pronounced for firms with nonstate ownership, higher market competition, worse inventory efficiency, more relationship‐specific investment, central positions in the production networks, and headquarters located in regions with lower levels of financial development. Furthermore, we show that debt issuance enhances firms' cash holdings when they have concentrated suppliers, and supplier‐base concentration increases firms' cash spending on R&D investment. Our study highlights the importance of supplier structure in shaping corporate cash policy.

The Relationship between Natural Resource Abundance and Human Development in Belt and Road Initiative Countries: The Role of Financial Development

The goal of this study is to explore the relationship between natural resource abundance and human development. In particular, account for the role of financial development. This study uses data from 51 BRI countries over the period 2000-2018. Concerning the HDI, the results suggest U-shaped relationship between total natural resource rents and HDI. Similarly, gas rents, mineral rents and oil rents are non-linearly related to HDI in BRI countries. For example, in the case of total rents, once its share in GDP exceeds 42.8%, further dependence on natural resources leads to increase in HDI. In our sample, only Iraq, Kuwait, Saudi Arabia and Oman were above the turning points at some observation years. The interaction term is positive and significant. This implies that increase in natural resource rents in countries with higher levels of financial development does not lead to a reduction of human development. In a similar vein, domestic credit to private sector alleviates negative effect of oil and mineral rents.

Impact of remittances on domestic investment in West African countries: the mediating role of financial development

Several studies have analyzed the effect of remittances and financial development on growth or investment with little attention on their interactive effect. This study examines the relationship between remittances, financial development and domestic investment under different levels of financial development in a panel of 10 Sub-Saharan African countries. The research uses data covering the period 1975–2019 and employs panel Pooled Mean Group estimator. The results reveal that both remittances and financial development have positive effects on domestic investment. The positive interactive effect lends credence to that remittances and financial development act as complements in enhancing domestic investment. This suggests that financial sector is a strong transmission channel through which remittances positively affect investment in West African countries. The results further reveal that there exists a threshold effect of financial development in the remittances and investment nexus. More precisely, beyond a threshold of domestic credit to the private sector of about 21% of GDP, there is a positive and significant relationship between remittances and investment rate, while this relationship is negative under the threshold. It is, therefore, recommended that West African countries should adopt appropriate policies to increase their financial sector and lower transaction costs so that gains from remittances can effectively be channeled into investment and growth. In sum, issue of the mediating role of financial development needs to be taken into consideration in the examination of the nexus between remittances and investment.

Make every dollar count: The impact of green credit regulation on corporate green investment efficiency

This paper systematically examines the impact of green credit regulation on the efficiency of corporate green investment. The results show that green credit policy significantly decreases green investment efficiency for heavily polluting firms. This is further evidenced through the fact that these firms are more inclined to make symbolic efforts to pursue more credit resources rather than engaging in substantive green investments to drive real green transition. This negative effect is more pronounced for small, non-state-owned and non-foreign-funded firms. Our further analysis suggests that the intensity of environmental law enforcement, the level of financial development, and intellectual property protection can mitigate this negative effect of green credit policy on green investment efficiency. Our study is groundbreaking in that it makes the first attempt to calculate the future value that green investment can create, which serves the basis for analyzing the economic effects of green investment at the industry level. The findings indicate that labor-intensive industries with close ties to consumers' daily lives have a higher future value for green investment. Conversely, capital-intensive industries such as the metallurgical industry have a lower future value for green investment. These findings emphasize the need to improve green credit regulation and make genuine green investment to accelerate real green transition in emerging economies.

Impact of digital finance on urban ecological resilience: evidence from the Yangtze River Economic Belt in China.

From the emergence of the new coronavirus pandemic to extreme climatic catastrophes, the development and enhancement of urban ecological resilience has evolved into a critical and strategic imperative. Investigating the capacity of digital finance to promote urban ecological resilience bears substantial relevance to the sustainable advancement of urban centers. This study examines the influence of digital finance on urban ecological resilience by applying a benchmark regression model on data from 107 prefecture-level cities within the Yangtze River Economic Belt across 2011-2020. Additionally, this study delves into its mechanism and spatial spillover impacts via a mediating effect model and a spatial effect model. The findings revealed that (1) digital finance strengthens the ecological resilience of the locale and beneficially impacts the surrounding regions; (2) digital finance enhances urban ecological resilience by fostering technological innovation and reducing energy intensity; and (3) in the lower reaches of the Yangtze River, digital finance plays a greater role in improving urban ecological resilience. Cities with high level of traditional financial development, high level of economic development and high intensity of environmental regulation have a more obvious role in promoting urban ecological resilience. Within the paradigm of ecological civilization, it is advisable for governmental bodies to fortify inter-regional digital financial collaboration, refine the green financial infrastructure, and advocate for sustainable, low-carbon, high-quality urban development.

Financial efficiency and financial resource allocation of Beijing–Tianjin–Hebei urban agglomeration

This study focuses on improving financial efficiency and rationally allocating financial resources in the Beijing–Tianjin–Hebei, based on data from 2011 to 2019. Firstly, the Slack-Based Measure (SBM) model based on Shannon Entropy is adopted to measure financial efficiency in Beijing–Tianjin–Hebei. Secondly, a Beijing–Tianjin–Hebei inter-regional financial resource allocation scheme is proposed using the Generalized Equilibrium Efficient Frontier Data Envelopment Analysis (GEEFDEA) model. Finally, the external environmental factors influencing financial efficiency are explored using spatial and other econometric models. Efficiency measurement reveals that financial efficiency in Beijing–Tianjin–Hebei is unevenly developed. The financial efficiency of Beijing, Tianjin, and Zhangjiakou is high and stable, whereas the financial efficiency of Tangshan, Langfang, and Shijiazhuang is high, but fluctuates significantly. In comparison, the financial efficiency of other cities is low. The factors and the adjustment amount to improve urban financial efficiency are obtained by studying the allocation of financial resources. And it is found that Tianjin and Tangshan have more financial resource surpluses than other cities. By exploring influencing factors, it is found that the financial development level, innovation level, and infrastructure construction level of Beijing–Tianjin–Hebei significantly affect financial efficiency.