Green credit policy and stock price crash risk of heavily polluting enterprises: Evidence from China

Hanhua Shao, Yuansheng Wang, Yao Wang and Yuanjia Li

Economic Analysis and Policy, 2022, vol. 75, issue C, 271-287

Abstract: This study investigates how green credit guidelines (GCG) influence the stock price crash risk of heavily polluting enterprises by taking the implementation of GCG as a quasi-natural experiment. Using company-level data on China’s A-shares, we reveal that the implementation of GCG significantly increases the stock price crash risk of heavily polluting enterprises. Our channel test results suggest that GCG increases the stock price crash risk of heavily polluting enterprises by imposing financial constraints and decreasing the quality of information disclosure. Our cross-sectional test results indicate that the impact of GCG on stock price crash risk is more pronounced in state-owned enterprises and those with lower corporate governance and lower information transparency. Overall, by innovatively linking environmental regulations with stock market performance, we offer novel evidence of the unexpected impact of environmental policy on financial market stability.

Keywords: Green credit guidelines; Stock price crash risk; Heavily polluting enterprises; DID (difference-in-difference) model (search for similar items in EconPapers)
JEL-codes: G32 G38 Q52 Q56 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:75:y:2022:i:c:p:271-287

DOI: 10.1016/j.eap.2022.05.007

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