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Can banking competitiveness stimulate the development of regional green finance?

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  • Xiang, Weiming
  • Ma, Chen

Abstract

This study examines the impact of competition among commercial banks on the advancement of regional green finance, utilizing data from 276 Chinese cities (2007–2023) and the Herfindahl-Hirschman Index (HHI) as a metric for competition. Employing a two-way fixed effects model and stringent robustness tests, we ascertain that reduced banking concentration (more competition) substantially enhances the expansion of green finance. This effect functions through two primary mechanisms: competitive pressure augments banks' credit capacities (through enhanced green project evaluation and customized products) and draws in green firms (by lowering entry barriers). The impact is particularly pronounced in less financially developed areas (mid-western China, southeast of the Hu Huanyong Line), where competition mitigates structural finance deficiencies. These findings highlight the significance of competitive banking as a driver of green finance, providing practical guidance to governments and banks seeking to expedite sustainable economic changes.

Suggested Citation

  • Xiang, Weiming & Ma, Chen, 2025. "Can banking competitiveness stimulate the development of regional green finance?," International Review of Economics & Finance, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025006276
    DOI: 10.1016/j.iref.2025.104464
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    1. Tao, Miaomiao & Che, Shuai & Klein, Tony, 2026. "Climate risk exposure and banking competition: Evidence from China’s listed banks," Finance Research Letters, Elsevier, vol. 88(C).
    2. Hu, Zuwu & Li, Hongjuan & Liu, Ling, 2026. "Green finance responses to global environmental accords: A quasi-natural experiment centered on the Paris Agreement," Finance Research Letters, Elsevier, vol. 89(C).

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