Bank loans are firms’ main external financing channel in China. Therefore, banking structural change has a great effect on firms’ behavior. CBIRC has published a series of policies that deregulate banking markets, which provides opportunities for small and medium-size banks’ rapid development. Compared to monopoly lending markets, competitive lending markets can better alleviate small and medium-sized firms’ financing difficulties. Among China’s banking loans, mortgage loan is the most popular. Fixed assets are firms’ important mortgages of bank loans. Therefore, banks can use mortgages to evaluate firms’ loan risk and make decisions accordingly. Existing research shows that banking competition can ease firms’ financial constraints. However, under the circumstance of financial markets in China’s transition economy, whether the increasing banking competition can improve the governance effect of bank loans on firms’ investments is not clear. Therefore, to analyze how changing banking competition affects firms’ investments is of great significance to improve financial resource allocation efficiency and enhance financial service to the real economy.　　Under this condition, this paper uses banks’ financial license data provided by CBIRC to construct provincial banking structural competition change measure, and analyze how the change affects provincial industrial firms’ investment efficiency. We find that increasing banking structural competition can improve industrial firms’ investment efficiency, including both underinvestment and overinvestment. In addition, for firms with lower （higher） fixed assets ratio, banking competition is more likely to modify firms’ underinvestment （overinvestment）. Further analysis shows that after the enactment of China Property Law in 2007, the effects of banking structural competition on firms’ investment efficiency are more significant. Overall, the results indicate that, increasing banking structural competition can improve banks’ evaluation of firms’ fixed assets, and further increase firms’ investment efficiency through the financing channel.　　This paper has several contributions: Firstly, most researches on the banking structure and firms’ behaviors are from the financing prospective. This paper analyzes how banking structural competition affects firms’ investment efficiency, which can further testify the impact of financial environment on firms’ resource allocation efficiency. Secondly, the results show that, fixed assets, as mortgagees, provide an important transmission role in the effect of banking structural competition on firms’ investment efficiency, which further shows the influencing mechanism of financial supply-side structural reform on the real economy. Thirdly, this paper shows that better financial market structure can have a good governance effect on the real economy and improve resource allocation efficiency. With China’s deepening financial supply-side structural reform, analyzing how financial reform affects the real economy and the corresponding mechanism can provide policy suggestions on how to improve financial services to the real economy and prevent financial systematic risks.