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Green credit policy and stock price crash risk of heavily polluting enterprises: Evidence from China

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  • Shao, Hanhua
  • Wang, Yuansheng
  • Wang, Yao
  • Li, Yuanjia

Abstract

This study investigates how green credit guidelines (GCG) influence the stock price crash risk of heavily polluting enterprises by taking the implementation of GCG as a quasi-natural experiment. Using company-level data on China’s A-shares, we reveal that the implementation of GCG significantly increases the stock price crash risk of heavily polluting enterprises. Our channel test results suggest that GCG increases the stock price crash risk of heavily polluting enterprises by imposing financial constraints and decreasing the quality of information disclosure. Our cross-sectional test results indicate that the impact of GCG on stock price crash risk is more pronounced in state-owned enterprises and those with lower corporate governance and lower information transparency. Overall, by innovatively linking environmental regulations with stock market performance, we offer novel evidence of the unexpected impact of environmental policy on financial market stability.

Suggested Citation

  • Shao, Hanhua & Wang, Yuansheng & Wang, Yao & Li, Yuanjia, 2022. "Green credit policy and stock price crash risk of heavily polluting enterprises: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 271-287.
    • Handle: RePEc:eee:ecanpo:v:75:y:2022:i:c:p:271-287
    DOI: 10.1016/j.eap.2022.05.007
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    Cited by:

    1. Zhang, Weike & Luo, Qian & Zhang, Yufeng & Yu, Ao, 2023. "Does green credit policy matter for corporate exploratory innovation? Evidence from Chinese enterprises," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 820-834.
    2. Lin, Boqiang & Pan, Ting, 2024. "The impact of green credit on green transformation of heavily polluting enterprises: Reverse forcing or forward pushing?," Energy Policy, Elsevier, vol. 184(C).
    3. Cen, Tao, 2023. "Green finance reform and stock price crash risk: Evidence from Chinese heavily polluting companies," Finance Research Letters, Elsevier, vol. 56(C).
    4. Wang, Hu & Jiang, Shuyang, 2023. "Green bond issuance and stock price informativeness," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 120-133.
    5. Li, Cong & Liu, Jiaxuan & Liu, Yuwei & Wang, Xiaoyu, 2023. "Can digitalization empowerment improve the efficiency of corporate capital allocation? —Evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1794-1810.
    6. Ren, Yangqiu & Hu, Guoliu & Wan, Qing, 2024. "Environmental Protection tax and diversified transition of heavily polluting enterprises: Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1570-1592.
    7. Linh Tu Ho & Christopher Gan & Zhenzhen Zhao, 2024. "Climate-Related Regulations and Financial Markets: A Meta-Analytic Literature Review," JRFM, MDPI, vol. 17(9), pages 1-19, September.
    8. Zhao, Liange & Wang, Dongmei & Wang, Xueyuan & Zhang, Zhijian, 2023. "Impact of green finance on total factor productivity of heavily polluting enterprises: Evidence from green finance reform and innovation pilot zone," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 765-785.
    9. Liu, Xiaojun & Ma, Yong & Xu, Zhongyue, 2024. "Economic policy uncertainty, risk perception and stock price crash risk: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 865-876.

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    More about this item

    Keywords

    Green credit guidelines; Stock price crash risk; Heavily polluting enterprises; DID (difference-in-difference) model;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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