The establishment of city commercial banks and China’s green economy development

Promoting sustainable economic development has been pursued by all countries, and achieving green economic development is crucial to sustainable economic development. This study uses the non-radial direction distance function (NDDF) method to calculate the level of development of the green economy in Chinese cities during 2003–2014. Next, it uses the establishment of China’s city commercial banks as an exogenous policy shock to build a staggered difference-in-differences model to empirically test the impact of the establishment of city commercial banks on green economy development. This study found that, first, the establishment of city commercial banks significantly promoted green economy development. Second, in areas with a high proportion of small and medium-sized enterprises (SMEs), the establishment of city commercial banks is imperative to promoting green economy development. SMEs are crucial carriers to city commercial banks to promote green economy development. Third, financing constraints mitigation, green innovation, and pollution emission reduction are important channels for city commercial banks affecting green economy development. This study enriches the relevant research on the impact of financial market reform on green economy development.