Corporate financial decision under green credit guidelines: evidence from China

Abstract

Developing green finance is an important measure for China to achieve a win-win situation between economy and ecology. This study adopts the implementation of Green Credit Guidelines (GCG) in China in 2012 as an intervening event and empirically examines its relative impact on corporate financing and investment using Difference-in-Difference and Difference-in-Difference-in-Difference models. Employing the financial data of A-share listed enterprises from 2009 to 2015, we find that the implementation of GCG restrains the financing and investment behavior of heavily polluting enterprises. The effects of GCG are influenced by institutional factors, and GCG has a more inhibitory effect in the higher polluting, state-owned, and eastern region registered enterprises. This result reveals the importance of GCG in adjusting financial leverage and promoting environmental protection. Policy implications, such as governments should improve incentive and punishment mechanism for heavily polluting enterprises and financial institutions should innovate in green credit business, are proposed.

Keywords:

• Financing behavior
• firm performance
• green credit guidelines
• heavily polluting enterprises
• investment behavior
• social externalities

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 http://www.gov.cn/zwgk/2011-12/20/content_2024895.htm

2 http://www.gov.cn/zwgk/2011-09/07/content_1941731.htm

3 http://www.cction.com/info/201304/92289.html

4 Appendix (supplementary materials) results are available upon request.

5 Wind database has built a complete and accurate first-class financial engineering and financial data warehouse with financial securities data as the core in China, covering stocks, funds, bonds, foreign exchange, insurance, futures, financial derivatives, spot trading, macro economy, financial news and other fields. (https://www.wind.com.cn/)

6 CSMAR database (China Stock Market & Accounting Research Database) is a research-oriented accurate database in the financial and economic development field based on academic research needs, drawing on the professional standards of authoritative databases such as CRSP, COMPUSTAT, TAQ, THOMSON, and combining with China’s actual national conditions. (https://www.gtarsc.com/)

Additional information

Funding

We would like to thank the financial supports from the Hunan Provincial Natural Science Foundation of China (grant number 2017JJ2094), Fundamental Research Funds for the Central Universities (CXJJ-2018-361), the National Natural Science Foundation of China (71871022), the Fok Ying Tung Education Foundation (161076), the Joint Development Program of Beijing Municipal Commission of Education, and the National Program for Support of Top-notch Young Professionals.

Notes on contributors

Yongji Zhang

Yongji Zhang, Associate Professor, Senior Accountant; School of Management and Economics, Beijing Institute of Technology, Beijing, China; Deputy Director of Information Disclosure and Corporate Governance Research Center; He has co-published more than 20 academic journal papers in the fields of asset pricing and financial management at home and abroad, co-authored and translated 18 works; The main research direction is asset pricing, corporate finance and risk management.

Shikai Cao

Shikai Cao, Master of Financial Statistics and Risk Management; School of Statistics and Mathematics, Central University of Finance and Economics, Beijing, China.

Xiaohan Lin

Xiaohan Lin, Master of Quantitative Economics; School of Statistics and Mathematics, Central University of Finance and Economics, Beijing, China.

Zhi Su

Zhi Su, Professor, PhD supervisor; School of Statistics and Mathematics & School of Finance, Central University of Finance and Economics, Beijing, China; Published more than 70 papers in domestic first-class journals such as ‘Chinese Social Sciences’, ‘Economic Research’, ‘Management World’, ‘World Economy’ and ‘Financial Research’. The main research directions are macroeconomics, financial markets and asset pricing; securities investment, corporate finance and business models; financial data mining and quantitative investment; deep neural networks and intelligent computing; financial technology, etc.

Ke Wang

Dr. Ke Wang is currently a Professor and the Chair of Department of Management Engineering, School of Management and Economics, Beijing Institute of Technology, Beijing, China. His research interests include energy, environmental and climate policy modelling, efficiency and productivity analysis. He has published more than 50 academic papers and 3 monographs.