IDEAS home Printed from https://ideas.repec.org/a/eee/pacfin/v73y2022ics0927538x22000464.html
   My bibliography  Save this article

Credit policy, uncertainty, and firm R&D investment: A quasi-natural experiment based on the Green Credit Guidelines

Author

Listed:
  • Zhang, Dongyang
  • Kong, Qunxi

Abstract

We investigate the impact of green credit policy on the R&D investment of “two high and one leftover” enterprises using China's 2012 “Green Credit Guidelines” and the difference-in-difference method. The first key finding is that the implementation of green credit policy is detrimental to the R&D investment of “two high and one leftover” enterprises, as verified by relevant robustness tests. Second, the heterogeneity analysis reveals that the impact of green credit policy on enterprise R&D investment is shaped by market environment, geography, and firm type. Third, economic policy uncertainty influences the disincentivizing effect of green credit policy on R&D investment.

Suggested Citation

  • Zhang, Dongyang & Kong, Qunxi, 2022. "Credit policy, uncertainty, and firm R&D investment: A quasi-natural experiment based on the Green Credit Guidelines," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000464
    DOI: 10.1016/j.pacfin.2022.101751
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927538X22000464
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.pacfin.2022.101751?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas W. Bates & Kathleen M. Kahle & René M. Stulz, 2009. "Why Do U.S. Firms Hold So Much More Cash than They Used To?," Journal of Finance, American Finance Association, vol. 64(5), pages 1985-2021, October.
    2. Pástor, Ľuboš & Veronesi, Pietro, 2013. "Political uncertainty and risk premia," Journal of Financial Economics, Elsevier, vol. 110(3), pages 520-545.
    3. Hering, Laura & Poncet, Sandra, 2014. "Environmental policy and exports: Evidence from Chinese cities," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 296-318.
    4. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    5. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(1), pages 85-106.
    6. Kong, Qunxi & Tong, Xin & Peng, Dan & Wong, Zoey & Chen, Huy, 2021. "How factor market distortions affect OFDI: An explanation based on investment propensity and productivity effects," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 459-472.
    7. Brandon Julio & Youngsuk Yook, 2012. "Political Uncertainty and Corporate Investment Cycles," Journal of Finance, American Finance Association, vol. 67(1), pages 45-84, February.
    8. Zhang, Dongyang & Kong, Qunxi, 2022. "Do energy policies bring about corporate overinvestment? Empirical evidence from Chinese listed companies," Energy Economics, Elsevier, vol. 105(C).
    9. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-985, December.
    10. Han, Seungjin & Qiu, Jiaping, 2007. "Corporate precautionary cash holdings," Journal of Corporate Finance, Elsevier, vol. 13(1), pages 43-57, March.
    11. Kong, Qunxi & Li, Rongrong & Peng, Dan & Wong, Zoey, 2021. "High-technology development zones and innovation in knowledge-intensive service firms: Evidence from Chinese A-share listed firms," International Review of Financial Analysis, Elsevier, vol. 78(C).
    12. Kong, Qunxi & Shen, Chenrong & Li, Rongrong & Wong, Zoey, 2021. "High-speed railway opening and urban green productivity in the post-COVID-19: Evidence from green finance," Global Finance Journal, Elsevier, vol. 49(C).
    13. He, Lingyun & Liu, Rongyan & Zhong, Zhangqi & Wang, Deqing & Xia, Yufei, 2019. "Can green financial development promote renewable energy investment efficiency? A consideration of bank credit," Renewable Energy, Elsevier, vol. 143(C), pages 974-984.
    14. repec:cup:jfinqa:v:46:y:2011:i:06:p:1545-1580_00 is not listed on IDEAS
    15. Waisman, Maya & Ye, Pengfei & Zhu, Yun, 2015. "The effect of political uncertainty on the cost of corporate debt," Journal of Financial Stability, Elsevier, vol. 16(C), pages 106-117.
    16. Kong, Qunxi & Shen, Chenrong & Sun, Wei & Shao, Wei, 2021. "KIBS Import Technological Complexity and Manufacturing Value Chain Upgrading from a Financial Constraint Perspective," Finance Research Letters, Elsevier, vol. 41(C).
    17. Wong, Zoey & Li, Rongrong & Zhang, Yidie & Kong, Qunxi & Cai, Molly, 2021. "Financial services, spatial agglomeration, and the quality of urban economic growth–based on an empirical analysis of 268 cities in China," Finance Research Letters, Elsevier, vol. 43(C).
    18. Ayyagari, Meghana & Demirgüç-Kunt, Asli & Maksimovic, Vojislav, 2011. "Firm Innovation in Emerging Markets: The Role of Finance, Governance, and Competition," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(6), pages 1545-1580, December.
    19. Hamamoto, Mitsutsugu, 2006. "Environmental regulation and the productivity of Japanese manufacturing industries," Resource and Energy Economics, Elsevier, vol. 28(4), pages 299-312, November.
    20. Lemmon, Michael & Roberts, Michael R., 2010. "The Response of Corporate Financing and Investment to Changes in the Supply of Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(3), pages 555-587, June.
    21. Kong, Qunxi & Chen, Afei & Wong, Zoey & Peng, Dan, 2021. "Factor price distortion, efficiency loss and enterprises' outward foreign direct investment," International Review of Financial Analysis, Elsevier, vol. 78(C).
    22. Kong, Qunxi & Peng, Dan & Ruijia, Zhang & Wong, Zoey, 2021. "Resource misallocation, production efficiency and outward foreign direct investment decisions of Chinese enterprises," Research in International Business and Finance, Elsevier, vol. 55(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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).
    2. Xu, Guiyang & Li, Guanggui & Sun, Peibo & Peng, Dan, 2023. "Inefficient investment and digital transformation: What is the role of financing constraints?," Finance Research Letters, Elsevier, vol. 51(C).
    3. Lee, Chien-Chiang & Chang, Yu-Fang & Wang, En-Ze, 2022. "Crossing the rivers by feeling the stones: The effect of China's green credit policy on manufacturing firms' carbon emission intensity," Energy Economics, Elsevier, vol. 116(C).
    4. Zhang, Dongyang, 2023. "Subsidy expiration and greenwashing decision: Is there a role of bankruptcy risk?," Energy Economics, Elsevier, vol. 118(C).
    5. Yu Liu & Huiping Ding & Biao Sun, 2022. "Does Green Credit Policy Promote or Inhibit Firms’ Green Innovation in China? Moderating Effect of Environmental Information Disclosure," Sustainability, MDPI, vol. 15(1), pages 1-17, December.
    6. Yi Chen & Zhongwen Xu & Xuehao Wang & Yining Yang, 2023. "How does green credit policy improve corporate social responsibility in China? An analysis based on carbon‐intensive listed firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 889-904, March.
    7. Zhang, Dongyang, 2023. "Can environmental monitoring power transition curb corporate greenwashing behavior?," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 199-218.
    8. 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.
    9. Viktor Koval & Olga Laktionova & Dzintra Atstāja & Janis Grasis & Iryna Lomachynska & Roman Shchur, 2022. "Green Financial Instruments of Cleaner Production Technologies," Sustainability, MDPI, vol. 14(17), pages 1-17, August.
    10. Zhang, Cheng & Zhou, Bo, 2023. "Where should the money go? The green effect of governmental guidance when sustainable finance impacts brown firms," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    11. Xuelian Li & Tinghui Lu & Jyh-Horng Lin, 2022. "Bank Interest Margin and Green Lending Policy under Sunflower Management," Sustainability, MDPI, vol. 14(14), pages 1-15, July.
    12. Xing, Xiaoyun & Guo, Kun & Zhang, Dayong & Ji, Qiang, 2024. "On the interactive effects of climate policies: Insights from a stock-flow consistent model," Applied Energy, Elsevier, vol. 358(C).
    13. Zhou, Chao & Liao, Jinglin, 2024. "Home country digital finance development and post-entry internationalization speed of emerging market SMEs: Empirical evidence from China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    14. Ying Sun & Li Liu, 2022. "Green Credit Policy and Enterprise Green M&As: An Empirical Test from China," Sustainability, MDPI, vol. 14(23), pages 1-22, November.
    15. Mo Du & Ruirui Zhang & Shanglei Chai & Qiang Li & Ruixuan Sun & Wenjun Chu, 2022. "Can Green Finance Policies Stimulate Technological Innovation and Financial Performance? Evidence from Chinese Listed Green Enterprises," Sustainability, MDPI, vol. 14(15), pages 1-28, July.
    16. Yadu Zhang & Yiteng Zhang & Zuoren Sun, 2023. "The Impact of Carbon Emission Trading Policy on Enterprise ESG Performance: Evidence from China," Sustainability, MDPI, vol. 15(10), pages 1-27, May.
    17. Cao, Zhenzi & Tao, Ling, 2023. "Green finance and economic resilience: Investigating the nexus with natural resources through econometric analysis," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 929-940.
    18. Zheng, Shuxia & Zhang, Xiaoming & Wang, Hu, 2023. "Green credit policy and the stock price synchronicity of heavily polluting enterprises," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 251-264.
    19. Zhang, Jinlong & Wu, Mingyue & Chen, Tingwei & Gao, Bin, 2024. "Green credit, financing constraints, and corporate investment: From the perspectives of scale and efficiency," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    20. Zhou, Bo & Zhang, Cheng, 2023. "When green finance meets banking competition: Evidence from hard-to-abate enterprises of China," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    21. Wang, Ziqi & Li, Rongrong & Kong, Qunxi, 2024. "Shanghai oil futures prices and firms' investment decisions: Evidence from Chinese manufacturing firms," Energy Economics, Elsevier, vol. 134(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bijoy Chandra Das & Fakhrul Hasan & Soma Rani Sutradhar, 2024. "The impact of economic policy uncertainty and inflation risk on corporate cash holdings," Review of Quantitative Finance and Accounting, Springer, vol. 62(3), pages 865-887, April.
    2. Kong, Qunxi & Li, Rongrong & Jiang, X. & Sun, Peibo & Peng, Dan, 2022. "Has transportation infrastructure development improved the quality of economic growth in China’s cities? A quasi-natural experiment based on the introduction of high-speed rail," Research in International Business and Finance, Elsevier, vol. 62(C).
    3. Christos Floros & Emilios Galariotis & Konstantinos Gkillas & Efstathios Magerakis & Constantin Zopounidis, 2024. "Time-varying firm cash holding and economic policy uncertainty nexus: a quantile regression approach," Annals of Operations Research, Springer, vol. 341(2), pages 859-895, October.
    4. Liu, Guanchun & Zhang, Chengsi, 2020. "Economic policy uncertainty and firms' investment and financing decisions in China," China Economic Review, Elsevier, vol. 63(C).
    5. Phan, Hieu V. & Nguyen, Nam H. & Nguyen, Hien T. & Hegde, Shantaram, 2019. "Policy uncertainty and firm cash holdings," Journal of Business Research, Elsevier, vol. 95(C), pages 71-82.
    6. Shabir, Mohsin & Jiang, Ping & Shahab, Yasir & Wang, Peng, 2023. "Geopolitical, economic uncertainty and bank risk: Do CEO power and board strength matter?," International Review of Financial Analysis, Elsevier, vol. 87(C).
    7. Choi, Sangyup & Furceri, Davide & Huang, Yi & Loungani, Prakash, 2018. "Aggregate uncertainty and sectoral productivity growth: The role of credit constraints," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 314-330.
    8. Long, Shaobo & Pei, Hongxia & Tian, Hao & Li, Fangfang, 2021. "Asymmetric impacts of economic policy uncertainty, capital cost, and raw material cost on China’s investment," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 129-144.
    9. Caixe, Daniel Ferreira, 2022. "Corporate governance and investment sensitivity to policy uncertainty in Brazil," Emerging Markets Review, Elsevier, vol. 51(PB).
    10. Zoey Wong & Afei Chen & Farhad Taghizadeh-Hesary & Rongrong Li & Qunxi Kong, 2023. "Financing Constraints and Firm’s Productivity Under the COVID-19 Epidemic Shock: Evidence of A-Shared Chinese Companies," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(1), pages 167-195, February.
    11. Chan, Kam Fong & Gray, Philip & Gray, Stephen & Zhong, Angel, 2020. "Political uncertainty, market anomalies and Presidential honeymoons," Journal of Banking & Finance, Elsevier, vol. 113(C).
    12. Cui, Xin & Wang, Chunfeng & Liao, Jing & Fang, Zhenming & Cheng, Feiyang, 2021. "Economic policy uncertainty exposure and corporate innovation investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    13. Azimli, Asil, 2022. "The impact of policy, political and economic uncertainty on corporate capital investment in the emerging markets of Eastern Europe and Turkey," Economic Systems, Elsevier, vol. 46(2).
    14. Chen, Yanyan, 2022. "Does political turnover affect corporate investment? Evidence from China," Emerging Markets Review, Elsevier, vol. 51(PA).
    15. Kotcharin, Suntichai & Maneenop, Sakkakom, 2020. "Geopolitical risk and corporate cash holdings in the shipping industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 136(C).
    16. Zhang, Dongyang & Kong, Qunxi, 2022. "Do energy policies bring about corporate overinvestment? Empirical evidence from Chinese listed companies," Energy Economics, Elsevier, vol. 105(C).
    17. Tran, Quoc Trung, 2021. "Economic policy uncertainty and cost of debt financing: International evidence," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    18. Ma, Huanyu & Hao, Dapeng, 2022. "Economic policy uncertainty, financial development, and financial constraints: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 368-386.
    19. My Nguyen & Justin Hung Nguyen, 2020. "Economic policy uncertainty and firm tax avoidance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 3935-3978, December.
    20. Shabir, Mohsin & Jiang, Ping & Bakhsh, Satar & Zhao, Zhongxiu, 2021. "Economic policy uncertainty and bank stability: Threshold effect of institutional quality and competition," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000464. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/pacfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.