Can designed financial systems drive out highly polluting firms? An evaluation of an experimental economic policy

Dongyang Zhang, Pengcheng Du and Yaowen Chen

Finance Research Letters, 2019, vol. 31, issue C

Abstract: This paper discusses the causal effects of designed financial systems on the viability of firms, surveying both heavily and lightly polluting firms by investigating their financial mechanisms. Using a large panel of Chinese manufacturing firms, we overcome endogenous issues with DIDID and yield several findings. First, a designed financial system measured by China's 11th Five-Year Plan increases the exit rate of highly polluting firms. Second, heavily polluting firms left markets as a result of reducing investment and suffering from growing financing costs. Third, firms’ profitability, investment and production cost significantly affect the exit rate of firms.

Keywords: Firm survival; China; 11th 5-Year Plan; Pollution; Difference-in-difference-in-difference (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:31:y:2019:i:c:s1544612319306877

DOI: 10.1016/j.frl.2019.08.032

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