Does financial efficiency contribute to improvement in energy efficiency? Evidence from BRICS and next 11 countries

Purpose This study is aimed to measure the intertemporal financial efficiency of 16 emerging economy countries (BRICS and N-11) and further to investigate the mechanisms of financial development on energy efficiency covering the period 2008-2020. Design/methodology/approach The dynamic data envelopment analysis model is used to measure financial efficiency dynamically. The generalized method of moments is used to investigate the effects of financial efficiency on energy efficiency. In the proposed approach, energy efficiency is the dependent variable, whereas financial efficiency, GDP per capita, industrial structure upgrade index, urbanization level and export trade structure are the regressors. Generalized moment estimation is performed. Findings There is heterogeneity in the level of financial development at different stages of economic development. The impact of financial efficiency on energy efficiency is related to the type of industries to which financial institutions are allocated. With the financial development of emerging economies, enterprises in technology-intensive industries are becoming the main contributors to higher profits for financial institutions, the products and results of these enterprises reduce energy consumption and increase energy efficiency. In addition, residents with rising levels of wealth holdings prefer low-carbon and environmentally friendly products, which indirectly improves energy efficiency. Per capita GDP and urbanization have no significant impact on the energy efficiency of emerging economies. The optimization and upgrading of the industrial structure of emerging economies has played a role in promoting energy efficiency. The export trade structure has a restraining effect on energy efficiency. Originality/value The findings contribute value by supporting a positive link between Financial Development and Energy Efficiency in the emerging economies. Enterprises in technology-intensive industries have gradually become the main force that brings higher profits to financial institutions. The products and achievements of these enterprises will reduce energy consumption and improve energy efficiency. The findings of this study provide emerging economies with an objective view of their financial development and energy efficiency, while also providing governments and policymakers with ways to improve energy efficiency and achieve sustainable development.