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

Author

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  • Guo, Chun
  • Su, Wunhong
  • Song, Xiaobao
  • Hu, Xingxing

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.

Suggested Citation

  • Guo, Chun & Su, Wunhong & Song, Xiaobao & Hu, Xingxing, 2022. "Heterogeneous debt financing and environmental research & development: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 65-81.
    • Handle: RePEc:eee:reveco:v:82:y:2022:i:c:p:65-81
    DOI: 10.1016/j.iref.2022.06.002
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    More about this item

    Keywords

    Environmental research and development; Heterogeneous debt financing; Bank credit; Debt heterogeneity hypothesis; Trade credit; Property right; Environment protection law;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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