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Environmental regulation and corporate financial risk: The role of credit guarantees

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  • Wang, Junfeng
  • Wang, Huimin

Abstract

This research explores the relationship between environmental regulation and corporate financial risk in the face of increasing public environmental concerns worldwide. Taking advantage of public-listed firms in Shanghai and Shenzhen stock markets from 2010 to 2022, this study finds strong evidence that environmental regulations inversely affect corporate financial risk after controlling for various firm-specific variables. The findings are robust to a series of robustness tests. In addition, this study further demonstrates that credit guarantees positively moderate the relationship between environmental regulation and firms’ financial risk. Overall, our study contributes to the fast-growing literature on the impact of environmental-related issues on firm outcomes and generates profound policy implications.

Suggested Citation

  • Wang, Junfeng & Wang, Huimin, 2024. "Environmental regulation and corporate financial risk: The role of credit guarantees," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003878
    DOI: 10.1016/j.frl.2024.105357
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