Does financial agglomeration promote the increase of energy efficiency in China?

Whether financial agglomeration is conducive to the improvement of energy efficiency is of great significance for China to better follow the path of energy conservation and emission reduction, and green sustainable development. Based on the balanced panel data of 285 cities in China from 2005 to 2017, this paper analyzes the impact of financial agglomeration on energy efficiency. Theoretical analysis shows that financial agglomeration can influence energy efficiency through scale economy effect, innovation driving effect, information spillover effect and structural adjustment effect. Dynamic spatial econometric results show that, from a national perspective, financial agglomeration has a positive impact on energy efficiency. However, from the perspective of different regions and different city sizes, it is found that financial agglomeration can have different effects on energy efficiency. Financial agglomeration has a significant positive impact on energy efficiency in eastern and central regions, megacities and big cities. Financial agglomeration has a significant negative impact on energy efficiency in western China, and has no significant effect on energy efficiency in medium-sized and small cities. Finally, based on the conclusions of the study, specific proposals for financial agglomeration to improve energy efficiency are proposed. •Studying the paths through which financial agglomeration affects energy efficiency.•Using the geographic concentration of banks to measure financial agglomeration.•Financial agglomeration can significantly improve China's energy efficiency.•Financial agglomeration's impact has significant regional and city size differences.•It is necessary to deepen green financial reform in financial agglomeration areas.