Green Credit Policy and asset-debt maturity mismatch in highly polluting enterprises: Evidence from China

Taixing Liu, Zhichao Yin, Miaomiao Fan, Aslihan Gizem Korkmaz and Pengpeng Yue

Economic Analysis and Policy, 2024, vol. 83, issue C, 946-965

Abstract: China’s Green Credit Policy (GCP) promotes environmentally sustainable practices, which are crucial for ecological responsibility. Despite its importance, the policy’s impact on asset-debt maturity mismatches—a key determinant of financial stability—has not been systematically examined. This research scrutinizes the consequences of the Green Credit Guidelines on asset-debt maturity mismatches in China’s heavily polluting enterprises, employing a difference-in-differences (DID) methodology. An analysis of data from Chinese-listed companies from 2009 to 2017 reveals that the implementation of the guidelines has precipitated a marked shift towards short-term debt as a financing mechanism for long-term assets, particularly noticeable in state-owned and large-scale enterprises. The effects intensify in regions with stringent environmental regulations and companies possessing significant collateral. Moreover, the guidelines amplify financial constraints and decrease long-term debts, prompting firms to strategically embrace greater asset-debt maturity mismatches in response to more rigorous financial conditions. Our findings indicate that although the GCP is designed to promote eco-friendly practices, it inadvertently affects corporate financial decisions, underscoring the complex relationship between environmental policy and financial strategy. This study enhances the understanding of the financial repercussions of environmental policies on corporate actions, offering valuable perspectives to regulators and financial institutions.

Keywords: Green credit guidelines; Asset-debt maturity mismatch; Financial constraints; Environmental policies; Corporate financial behavior (search for similar items in EconPapers)
JEL-codes: G28 G32 O16 Q58 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:83:y:2024:i:c:p:946-965

DOI: 10.1016/j.eap.2024.08.002

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