The impact of commercial bank branch expansion on energy efficiency: Micro evidence from China

The debate has long prevailed as to whether the financial sectors can enhance energy efficiency. We attempt to provide new insight into this debate from the perspective of commercial bank branch expansion. This paper manually collects the longitude and latitude of commercial bank branches and manufacturing firms in China, and constructs multiple bank branch expansion variables at the firm level. Then, by utilizing Environmental Survey and Reporting database, Annual Survey of Industrial Firms, and firm-level patent application dataset from 1998 to 2009, this paper empirically examines the impact of commercial bank branch expansion on firms' energy efficiency for the first time and discusses the potential impact channels. We find that the expansion of commercial bank branches within a radius of 10 km of firms has improved the manufacturing firms' energy efficiency. Furthermore, we also confirm that there exist multiple heterogeneous nexuses between the bank branch expansion and energy efficiency. Finally, the financial availability caused by the bank branch expansion is not able to affect the energy efficiency, whereas the bank competition will increase the energy efficiency. Also, the bank branch expansion increases energy efficiency by promoting capital renewal instead of technological innovation.