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Responsibility in the shadows: How does firms’ shadow banking reshape carbon emission performance?

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  • Chen, Wenting
  • Lin, Ruxing
  • Ma, Guangcheng

Abstract

This paper systematically reviews theories of financing constraints and resource allocation, and constructs a theoretical framework for the relationship between corporate shadow banking and carbon emissions performance. An empirical analysis is conducted using a sample of A-share listed firms in China from 2007 to 2023. The study finds that corporate shadow banking can significantly improve carbon emission performance. Robustness tests, including replacing proxy variables, adjusting the sample range, and using instrumental variable regression, confirm the validity of these conclusions. Mechanism analysis identifies four competing pathways: green R&D investment and environmental equipment investment serve as positive channels, while financial asset allocation and high-pollution capacity expansion generate negative effects. Heterogeneity analysis reveals that the positive effect is stronger among firms facing tighter financing constraints, stricter environmental regulation, high regional financial development, and faster industry growth.

Suggested Citation

  • Chen, Wenting & Lin, Ruxing & Ma, Guangcheng, 2026. "Responsibility in the shadows: How does firms’ shadow banking reshape carbon emission performance?," Finance Research Letters, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:finlet:v:103:y:2026:i:c:s1544612326006914
    DOI: 10.1016/j.frl.2026.110163
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