Corporate environmental information disclosure and bank financing: Moderating effect of formal and informal institutions

Abstract

This paper investigates the effect of the quality of environmental information disclosure of firms on their bank financing and further examines the moderating effect of formal and informal institutions on this effect using China as a laboratory. We find that the quality of environmental information disclosure is positively (negatively) related to the scale (cost) of bank financing. Furthermore, the formal institution (proxied by the official issuance of the Green Credit Guidelines) strengthens the above relationship. Moreover, the informal institution (proxied by bank connection) weakens the association between the quality of environmental information disclosure and bank financing. Our results are valid after addressing the potential endogeneity between environmental information disclosure and bank financing and remain unchanged in various robustness tests. Our findings affirm the decision usefulness of corporate environmental information disclosure that can be used by companies as an effective strategy for obtaining bank financing and the ethical integrity of borrowers to banks as an important group of capital market participants.

Green financing for sustainable development: Insights from multiple cases of Vietnamese commercial banks

“…With regard to the drivers for green financing, our research reports that the green financing initiatives have been internally stimulated from the top management, who shows the high extent of sustainability awareness is in alignment with the sustainability movement in both the international and national business environment (Li et al, 2022). Besides, influences from NGOs and international partners as well as pressures from foreign business partners and governments have motivated commercial banks to engage in sustainability practices which include green financing (Zhou et al, 2022).…”

“…At the national level, according to He et al (2019), the Chinese Central Bank has released the guidance related to green finance transactions in the financial industry. Aligned with this movement, commercial banks around the world have demonstrated their willingness to promote or introduce the green financial products and services despite the risks and uncertainties such as the lack of standardized regulations and default risks in different regions, limited scope, and the recent negative influences caused by the Covid‐19 pandemic to different economies (Li et al, 2022; Toxopeus et al, 2021).…”

“…Moreover, although many attempts have been made to study green finance, the literature streams on green finance are mainly focused on the relationship between green finance and other green practices such as renewable energy (Li et al, 2021; Taghizadeh‐Hesary & Yoshino, 2020; Zhang et al, 2020); climate change mitigation (Wu et al, 2021); environmental and social responsibility improvement (Awawdeh et al, 2021; Sinha et al, 2021; Zhou et al, 2020); and regional sustainable development (Islam et al, 2014; Li et al, 2022). There is a scarcity of research that focuses directly on the actions taken by banks, green finance products, and services introduced by banks with diversified backgrounds and settings, as well as the key determinants on green finance practices in banks.…”

How Does an Environmental Information Disclosure of a Buyer’s Enterprise Affect Green Technological Innovations of Sellers’ Enterprise?

“…Corporate environmental information disclosure can have different economic consequences, and relevant studies have focused on the effects of environmental information disclosure on corporate value, environmental performance, and stakeholders. By improving the level of environmental information disclosure, companies can demonstrate their effective environmental risk management capabilities and corporate development prospects, can promote their environmental performance, enhance investor confidence [ 22 ], help companies increase their share prices in the short term [ 23 ], and increase corporate value by reducing equity capital and increasing expected cash flows [ 24 ]. Environmental information disclosure shows that companies actively fulfill their environmental responsibilities and that there are spillover effects of environmental responsibility that can cross corporate boundaries and have an impact on other companies [ 25 ].…”

The impact of environmental information disclosure quality on green innovation of high-polluting enterprises

“…The second is the impact of EID. Improving the quality of EID can effectively enhance corporate value and corporate performance ( Li et al, 2017 ; Wang et al, 2020 ), reduce corporate risk ( Chang et al, 2021 ), and alleviate the financing constraints faced by companies ( Li Q. et al, 2022 ), but the effect on a company’s profitability is questionable ( Yin et al, 2019 ; Pedron et al, 2021 ). The literature has also looked at the connection between EID and green innovation, mainly as a quasi-natural experiment to look into the effects of installing an EID system on green innovation at the city level ( Li G. et al, 2022 ; Zhang S. et al, 2022 ).…”