Financial Development and Energy Environmental Performance: Evidence from China's Regional Economies

Financial development makes many contributions to promoting economic growth. With the deterioration of the ecological environment, scholars have begun to consider the role of financial development in sustainable economic development. This paper investigates the influence of financial development on China's energy environmental performance (EEP) by utilizing panel data from 2002 to 2017. The findings demonstrate that financial development has a significant impact on regional EEP, and the results remain robust through a series of assessments. The technological innovation level and human capital are the transmission paths through which financial development affects regional EEP. Furthermore, using the difference-in-differences (DID) method, we not only prove the causal relationship between financial development and EEP but also show that the allocation of financial assets can significantly affect energy consumption efficiency. Finally, heterogeneity analysis shows that financial development has varying impacts on energy efficiency in distinct regions across China. The influence of financial development on EEP displays a clear "Matthew Effect". To the best of our knowledge, our findings offer greater insight into the energy-saving and emission-reduction effects of financial development.