**Table 7.** Results of the sub-sample regressions.

Note: \*\*\*, \*\*, and \* indicate significance at 1%, 5%, and 10% levels, respectively.

According to the empirical results, the coefficient of financial development was positive for developed countries, but insignificant both in terms of statistics and economics. However, the coefficient of financial development was positive and significant at the 1% level for emerging market and developing countries, which was similar to the full sample regression. This indicated that the financial development has positive effect on carbon emissions in emerging market and developing countries, and had no obvious effect in developed countries.

This result may be explained by developed countries generally having well-developed industrial systems and strict environmental regulations. Therefore, enterprises tend to invest in technological innovation but not scale expansion, and the government prefers to support the development of green finance, which leads to more funding in environmental protection projects. Although the development of the financial sector also stimulates consumption, which can generate more emissions, these positive and negative effects tend to neutralize and eliminate the negative influence of financial development on carbon emissions.

Conversely, emerging market and developing countries often face tremendous pressure to develop economically, and the first priority is to increase output rather than environmental protection. The enterprises tend to expand production scale though credit rather than developing energy saving technology; therefore, the development of the financial sector could indirectly increase carbon emissions. The mitigation of financing the constraints of the consumers could also increase consumption and eventually enhance the positive effect of financial development.

These empirical results are similar with the works of Shahbaz et al. [22], Dogan and Turkekul [14] and Paramati et al. [28], which reflect the national difference of the effect of financial development on carbon emissions.

### *4.4. Results of Regressions with Di*ff*erent Proxy Variables of Financial Development*

The previous section analyzed the "aggregate" effect of financial development on carbon emissions with a comprehensive index proposed by Svirydzenka [41]. However, scholars commonly consider that financial development has rich connotation and can be further divided into different aspects, and the macro effect of financial development may vary if we focus on its different aspects. Therefore, in this section, we investigated the influence of different aspects of financial development on carbon emissions with a series of proxy variables of financial development, to detect the relationship of financial development and carbon emissions for a comprehensive angle, and to verify the reliability and accuracy of the previous empirical results.

The proxy variables of financial development used in this section were FD2–FD6. Generally, financial development is divided into the development of financial institution and the development of stock market (corresponding with indirect financing and direct financing respectively). We used FD2, FD3 and FD4 as the proxy variables of the development of financial institution, and FD5 and FD6 to be the proxy variables of the development of stock market. As the FD2, FD3, and FD4 indexes had a relatively adequate sample size, we not only estimated the full sample regression but also the sub-sample regressions when we used these three proxies. However, given the limited data availability, we only estimated the full sample regression when we used the FD5 and FD6 indexes. Tables 8–11 present the results of the regressions.


**Table 8.** Results of the full sample and sub-sample regressions (explanatory variables: financial development variable two, FD2).

Note: \*\*\*, \*\*, and \* indicate significance at 1%, 5%, and 10% levels, respectively.


**Table 9.** Results of the full sample and sub-sample regressions (explanatory variables: FD3).

Note: \*\*\*, \*\*, and \* indicate significance at 1%, 5%, and 10% levels, respectively.




#### **Table 10.** *Cont.*

Note: \*\*\*, \*\*, and \* indicate significance at 1%, 5%, and 10% levels, respectively.



Note: \*\*\*, \*\*, and \* indicate significance at 1%, 5%, and 10% levels, respectively.

Tables 8–10 show that the coefficients of FD2, FD3, and FD4 for the full sample regressions were 0.1589478, 0.1519494, and 0.1702764, respectively, and were significant at the 1% level. For the sub-sample regressions in Tables 8–10, the coefficients of developed countries were all small and insignificant, and the coefficients of emerging market and developing countries were all positive and significant at the 1% level. In addition, Table 11 shows that the coefficients of FD5 and FD6 were 0.0492784 and 0.0785047, respectively, which were significant at the 1% level.

By comparing the values of coefficients of FD2–6, we can readily notice that for FD2–4 and FD5–6 respectively, they were quite close with each other while the coefficients of FD2–4 were evidently larger than FD5–6, which implied that the development of financial institution had greater influence on carbon emissions than the development of the stock market (it was reasonable to believe this conclusion was reliable as we adopted more than one proxy variables for each aspect). This may have been caused by the following reasons: the stock market allows listed companies to access an

additional source of equity financing besides the debt financing, which leads to the consumption of more energy by stimulating the growth of business, and finally contributes to the increase of carbon emissions, however, the listed companies are strictly supervised by the financial authorities and the public, therefore they will emphasize the social responsibility of environmental protection and utilize more advanced technologies which could increase the energy efficiency and reduce carbon emissions. To the contrary, the companies acquire their loans mainly from financial institutions not subject to these limitations and consequently have less motivation on environmental protection during their productive activities. Therefore, the coefficients of FD5–6 which represent the development of the stock market, were relatively smaller compared with FD2–4 which represent the development of financial institution.

In addition, these empirical results also have the following implications: (1) while we divided the financial development into two aspects by adopting other five proxy variables, all of their coefficients were significantly positive, which were inconsistent with the result of regression using the index of FD1, this further proved that the financial development could significantly increase carbon emissions from the global perspective; (2) the results of sub-sample regressions in Tables 8–10 indicated that the financial development has no obvious effect on carbon emissions while it has a positive effect on carbon emissions in the emerging market and developing countries, which further proved the conclusion of the sub-sample regressions with FD1.
