Does a bank-dominated financial system benefit the development of renewable energy in developing countries? The case of China

Drawing on panel data encompassing 31 Chinese provinces during the period from 2007 to 2019 and employing a panel fixed-effects model, this study examines the influence of bank-dominated financial systems on the development of renewable energy alongside its specific operational mechanisms. The findings indicate that, compared to a market-dominated financial system, a bank-dominated financial system plays a significantly positive role in promoting renewable energy development. Heterogeneity analyses reveal that a bank-dominated financial system is particularly effective in fostering renewable energy development in provinces with lower levels of green finance, weaker environmental regulations, and lagging renewable energy sectors. Mechanism tests further demonstrate that a bank-dominated financial system can enhance the development of renewable energy by optimizing industrial structures and improving the level of green innovation. Ultimately, the study's conclusions underscore the pivotal role of bank-dominated financial systems in propelling the evolution of renewable energy within the Chinese context. • This study estimates the impact of a bank-dominated financial system on renewable energy development. • Bank-dominated financial system plays a constructive role in advancing the renewable energy sector. • The effect is pronounced in regions with limited green finance and lax environmental regulations. • Industrial structure optimization and green innovation enhancement are two main mechanisms.