Nudging corporate environmental responsibility through green finance? Quasi-natural experimental evidence from China

Hongyun Huang, William Mbanyele, Fengrong Wang, Chenxi Zhang and Xin Zhao

Journal of Business Research, 2023, vol. 167, issue C

Abstract: Green finance has drawn increased worldwide attention from policymakers as a financial mechanism that could potentially encourage corporations to actively engage in sustainable activities. However, despite a growing body of studies investigating the economic outcomes of green financial policies, there is still a lack of research that systematically quantifies the social welfare implications of green finance. Hence, this study aims to fill this research gap by establishing the causal effect of green finance on corporate environmental responsibility. Exploiting the “bottom-up” enforcement of the green finance pilots in 2017 in China as a quasi-natural experiment and the difference-in-difference-in-difference identification strategy, we find that green finance significantly enhances corporate environmental responsibility performance in high-polluting industries relative to their counterparts, and this evidence continues to survive a battery of robustness checks. Moreover, we explore three underlying mechanisms that possibly explain this beneficial effect: risk-taking, external governance and financing channels. Furthermore, we uncover that corporate environmental responsibility serves as a plausible non-economic channel that combines green finance with economic benefits by stimulating green innovation, promoting total factor productivity and expanding market share. Overall, our study offers new insights on both the economic and non-economic consequences of green finance on business performance.

Keywords: Green finance; Corporate environmental responsibility; Financial constraints; Risk-taking; External governance; Difference-in-Difference-in-Difference (search for similar items in EconPapers)
JEL-codes: G21 G32 O16 Q01 Q55 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:167:y:2023:i:c:s0148296323005064

DOI: 10.1016/j.jbusres.2023.114147

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