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Financial Dependencies, Environmental Regulation and Pollution Intensity: Evidence From China

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  • Mathilde Maurel

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique)

  • Thomas Pernet

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Zhao Ruili

    (SUIBE - Shangai University of International Business and Economics)

Abstract

We study how a bank's involvement in a firm's financing may be in line with environmental policies pursued by the Chinese central government. Specifically, we evaluate the effectiveness of credit reallocation away from polluting projects when the government imposes stringent environmental policies. We combine the industries' financial dependencies with time, including cross-cities variation in policy intensity to identify the causal effect on the sulfur dioxide (SO2) emission. We find that SO2 emissions are lower in industries with high reliance on credits and stricter environmental regulations. Furthermore, our results suggest that locations with strong environmental policies lead firms to seek funding in less regulated areas, which confirms the pollution haven hypothesis.

Suggested Citation

  • Mathilde Maurel & Thomas Pernet & Zhao Ruili, 2019. "Financial Dependencies, Environmental Regulation and Pollution Intensity: Evidence From China," Post-Print halshs-02423350, HAL.
    • Handle: RePEc:hal:journl:halshs-02423350
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02423350
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    Cited by:

    1. Mathilde Maurel & Thomas Pernet, 2021. "New evidence on the soft budget constraint: Chinese environmental policy effectiveness in SOE-dominated cities," Public Choice, Springer, vol. 187(1), pages 111-142, April.
    2. Chen, Jidong & Shi, Xinzheng & Zhang, Ming-ang & Zhang, Sihan, 2024. "Centralization of environmental administration and air pollution: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Banks; Financial Dependency; Environmental regulation; China;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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