Can green credit policy under the concept of green economy curb corporate financialization to promote sustainable development?

Abstract

Under the concept of green economy, discovering how to utilize the Green Credit Guidelines in a way that guides enterprises to focus on their industries and to promote sustainable development has become an important and urgent objective. It is also conducive to the successful implementation of the “double-carbon target”. This paper uses Chinese A-share listed enterprises from 2007–2018 as its research object to explore whether green credit policy is conducive to reducing the financialization behavior of heavily polluting enterprises to curb their transformation from real to virtual. It is found that the financialization of heavily polluting enterprises has significantly decreased since the implementation of the Green Credit Guidelines in 2012, and these results remain unchanged after a series of robustness tests. A heterogeneity analysis shows that state-owned enterprises are subject to stronger policy effects than non-state-owned enterprises; furthermore, the studied policy effects are stronger in the eastern regions of China than in its central and western regions, and these effects are stronger in green provinces than in polluting provinces. A mechanism study finds that credit constraints and corporate innovation play a partially mediating role in the effect of green credit policy on corporate financialization. Further studies find that both the level of internal corporate governance and external monitoring contribute to the disincentivizing effect of green credit policy on financialization. Moreover, through an exploration of the possible economic consequences of the examined policy, it is found that the green credit policy reduces corporate financialization in favor of reducing inefficient corporate investment and major shareholders’ tunneling so that the level of corporate investor protection is improved. The findings validate the effectiveness of the Green Credit Guidelines and provide empirical evidence and empirical support for reducing corporate financialization to curb enterprises’ transformation from real to virtual and thus promoting the development of sustainability.

Tax Aggressiveness and Corporate Financialization in Brazil

“…This phenomenon is observed universally across various sectors and is attributed to factors such as rising operational costs and changes in traditional banking practices (Tao et al, 2021;Liu et al, 2022;Yang & Li, 2023). Other contributing factors include advancements in technology, business diversification, and liquidity needs (Hu et al, 2023).…”

“…In China, there is an ongoing debate about reforming the financial system to focus more on the real economy (Liu et al, 2022;Hu et al, 2023;Xue et al, 2023). The expansion of digital technology post-Covid-19 has aided in recovery but also exacerbated inequality (Sui & Yao, 2023).…”

“…In the Chinese capital market, a high level of tax aggressiveness is positively correlated with the adoption of corporate financialization strategies (Hu et al, 2023;Zhu et al, 2023). This approach is attractive to managers seeking to minimize tax risks and maximize short-term profits (Zhu et al, 2023).…”

Stakeholders’ Engagement in the Company’s Management as a Driver of Green Competitiveness within Sustainable Development

“…It should be noted that the business sector has already started to incorporate relevant policies to strengthen its green competitiveness and advantages in the world market. In addition, companies that prioritize green growth are likely to be more competitive in the long run as they are able to meet the evolving green needs and expectations of customers, employees, and stakeholders [2,3]. At the same time, stakeholders and consumers are increasingly becoming aware of environmental issues and are actively seeking out environmentally friendly products and services.…”

“…By outlining environmentally sustainable products and services, companies can tap into this growing demand and increase their market share [4,5]. Furthermore, implementing environmentally sustainable practices allows for declining green costs for companies in the long term, such as reducing energy consumption and waste generation, utility bills for resources, operating costs, and green taxes [2,6]. Scholars [3,4] confirm that companies that promote green competitiveness through close collaboration and communication with stakeholders have higher customer loyalty and better relationships with regulators and local communities.…”