Debt maturity and firms’ environmental behavior: Evidence from the establishment of city commercial banks in China

This study investigates the impact of debt maturity on firms’ environmental behavior by matching data from the Chinese Annual Survey of Industrial Firms and the Environmental Survey and Reporting database. We employ the staggered difference-in-differences approach by exploiting the establishment of city commercial banks (CCBs) in China as a natural experiment. The results reveal that the establishment of CCBs reduced the emission intensity of industrial wastewater and waste gas by 8.3 % and 18.0 %, respectively. Mechanism analysis indicates that the CCBs intensified competition in the banking sector and increased the share of long-term debt in firms’ total debt, which facilitated investments in wastewater and waste gas treatment equipment. These findings underscore the critical role of financial development in environmental protection, as the shift from polluting to cleaner production requires financial support, particularly long-term financing, for the upgrade of production technology and/or production equipment.