Heterogeneous debt financing and environmental research & development: Evidence from China

Chun Guo, Wunhong Su, Xiaobao Song and Xingxing Hu

International Review of Economics & Finance, 2022, vol. 82, issue C, 65-81

Abstract: This study investigates the relationship between heterogeneous debt financing and environmental research and development (R&D) based on debt heterogeneity hypothesis using Chinese listed firms from 2011 to 2019. Results show that firms with higher trade credit are more likely to engage in environmental R&D, while firms with more bank credit unlikely conduct environmental R&D. Bank credit restrains firms' environmental R&D through aggravating its financing constraints, and trade credit stimulates firms' environmental R&D by increasing its excess cash holdings. Considering firms heterogeneity, the negative effect of state-owned firms' bank credit on environmental R&D is more pronounced than that of non-state-owned firms. In contrast, trade credit's positive impact on environmental R&D only exists in state-owned firms. Further researches suggest that the Environment Protection Law promotes firms to engage in environmental R&D, but it only weakens the relationship between bank credit and environmental R&D. The study reveals that heterogeneous debt financing can exert different effects on environmental R&D, which expands theoretical connotation of the debt heterogeneity hypothesis, and enriches the literature on environmental R&D.

Keywords: Environmental research and development; Heterogeneous debt financing; Bank credit; Debt heterogeneity hypothesis; Trade credit; Property right; Environment protection law (search for similar items in EconPapers)
JEL-codes: O31 O32 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:82:y:2022:i:c:p:65-81

DOI: 10.1016/j.iref.2022.06.002

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