Official environmental credit evaluation and corporate debt concentration

Lin Fan, Jiali Wang, Zhongguo Lin and Huibin Du

International Review of Financial Analysis, 2025, vol. 104, issue PA

Abstract: Debt concentration significantly influences the capital structure and financial flexibility of firms. Concurrently, the official environmental credit evaluation serves as an authoritative indicator for evaluating firms’ environmental performance, and notably influences the financing negotiation relationship between firms and creditors, thereby profoundly affecting their financing capabilities and debt management strategies. Utilizing data of Chinese A-share listed firms from 2009 to 2021, we investigate the impact of official environmental credit evaluation on firms’ debt concentration. The results show that firms with good environmental credit evaluations have a dispersed debt structure. In addition, when firms are in markets with higher risks, more serious information asymmetry or higher competition, the negative effect of good environmental credit evaluations on debt concentration is more obvious, reflecting a positive signaling effect. The dispersion of corporate debt is primarily driven by an increase in bank loans and commercial credit and a decrease in bonds. Our study underscores the authority and efficacy of official environmental evaluations over third-party ratings.

Keywords: Official environmental credit evaluation; Debt concentration; Signal effects; Environmental performance; Capital structure (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:104:y:2025:i:pa:s1057521925003552

DOI: 10.1016/j.irfa.2025.104268

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