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Green Credit Policy and asset-debt maturity mismatch in highly polluting enterprises: Evidence from China

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  • Liu, Taixing
  • Yin, Zhichao
  • Fan, Miaomiao
  • Korkmaz, Aslihan Gizem
  • Yue, Pengpeng

Abstract

China’s Green Credit Policy (GCP) promotes environmentally sustainable practices, which are crucial for ecological responsibility. Despite its importance, the policy’s impact on asset-debt maturity mismatches—a key determinant of financial stability—has not been systematically examined. This research scrutinizes the consequences of the Green Credit Guidelines on asset-debt maturity mismatches in China’s heavily polluting enterprises, employing a difference-in-differences (DID) methodology. An analysis of data from Chinese-listed companies from 2009 to 2017 reveals that the implementation of the guidelines has precipitated a marked shift towards short-term debt as a financing mechanism for long-term assets, particularly noticeable in state-owned and large-scale enterprises. The effects intensify in regions with stringent environmental regulations and companies possessing significant collateral. Moreover, the guidelines amplify financial constraints and decrease long-term debts, prompting firms to strategically embrace greater asset-debt maturity mismatches in response to more rigorous financial conditions. Our findings indicate that although the GCP is designed to promote eco-friendly practices, it inadvertently affects corporate financial decisions, underscoring the complex relationship between environmental policy and financial strategy. This study enhances the understanding of the financial repercussions of environmental policies on corporate actions, offering valuable perspectives to regulators and financial institutions.

Suggested Citation

  • Liu, Taixing & Yin, Zhichao & Fan, Miaomiao & Korkmaz, Aslihan Gizem & Yue, Pengpeng, 2024. "Green Credit Policy and asset-debt maturity mismatch in highly polluting enterprises: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 946-965.
    • Handle: RePEc:eee:ecanpo:v:83:y:2024:i:c:p:946-965
    DOI: 10.1016/j.eap.2024.08.002
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    2. Wang, Jingru & Liu, Tinghua & Aziz, Noshaba & Sui, Hongguang, 2024. "Exploring the role of trade credit in facilitating low-carbon development: Insights from Chinese enterprises," International Review of Financial Analysis, Elsevier, vol. 96(PB).
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    More about this item

    Keywords

    Green credit guidelines; Asset-debt maturity mismatch; Financial constraints; Environmental policies; Corporate financial behavior;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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