Green Gospel Effect of Local Financial Expansion: Evidence from Urban Commercial Banks in China

Abstract China's local financial expansion, represented by the development of urban commercial banks, is an important factor affecting the environmental behavior of enterprises, but previous studies have paid less attention to this. We found that both the marginal expansion and the scale expansion of local finance in China help to reduce the sulfur dioxide emission intensity and improve the environmental performance of enterprises, which indicates that there is a green gospel effect of local financial expansion in China. In terms of the impact path, local financial expansion can not only reduce the sulfur dioxide generation intensity, improve the front environmental performance of enterprises; but also increase the sulfur dioxide removal intensity and improve the terminal environmental performance. However, in the context of high fiscal pressure on local governments, local financial expansion exacerbates sulfur dioxide emission and generation intensity of enterprises, worsening environmental performance and creating a green curse effect. Further study finds that the cross-regional expansion of urban commercial banks can strengthen the green gospel effect; the improvement of enterprises’ environmental performance by local financial expansion is mainly found in polluting industries and non-SOEs.