IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v87y2025icp1092-1112.html

The impact of fiscal incentives and regulatory constraints on China’s Green bond rating evaluations: An evolutionary game analysis and empirical study

Author

Listed:
  • Zhao, Hanyi
  • Ba, Shusong
  • Zhao, Xuefeng
  • Zhou, Xiangyun

Abstract

The emergence and growth of green bonds is primarily propelled by policy measures. The players in the green bond rating and evaluation market exhibit significant responsiveness and reliance on government stimuli and regulatory sanctions. This paper considers the four-party participants in the green bond rating evaluation supervision system as an interactive whole and develops a four-party evolutionary game model of ”double rating + double supervision” under incomplete information based on Peng Ke’s (2020) research on the rating supervision model. The model is used to analyze the impact of asymmetric fiscal incentives and regulatory constraints on the quality of green bond rating evaluation information and regulatory effectiveness. Empirical tests are conducted on green bond issuance data from 2016 to 2021 to examine the impact of incentive policies and regulatory constraints on the validity of green bond rating evaluation information. The research findings indicate that the quality of green bond rating evaluation information is influenced by the degree of regulatory penalties imposed by regulators and the Green Bond Committee, direct regulatory costs, and government financial incentives. The strategic sensitivity of green bond rating evaluation agencies to strict regulatory measures is greater than that of government financial incentives.

Suggested Citation

  • Zhao, Hanyi & Ba, Shusong & Zhao, Xuefeng & Zhou, Xiangyun, 2025. "The impact of fiscal incentives and regulatory constraints on China’s Green bond rating evaluations: An evolutionary game analysis and empirical study," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1092-1112.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1092-1112
    DOI: 10.1016/j.eap.2025.04.026
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592625001560
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2025.04.026?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Mizen, Paul & Tsoukas, Serafeim, 2012. "Forecasting US bond default ratings allowing for previous and initial state dependence in an ordered probit model," International Journal of Forecasting, Elsevier, vol. 28(1), pages 273-287.
    2. Jonathan Newton, 2018. "Evolutionary Game Theory: A Renaissance," Games, MDPI, vol. 9(2), pages 1-67, May.
    3. Patrick Bolton & Xavier Freixas & Joel Shapiro, 2012. "The Credit Ratings Game," Journal of Finance, American Finance Association, vol. 67(1), pages 85-112, February.
    4. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    5. Mike Adams & Bruce Burton & Philip Hardwick, 2003. "The Determinants of Credit Ratings in the United Kingdom Insurance Industry," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 539-572.
    6. Volker G. Heinke, 2006. "Credit spread volatility, bond ratings and the risk reduction effect of watchlistings," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 293-303.
    7. Aysun Alp, 2013. "Structural Shifts in Credit Rating Standards," Journal of Finance, American Finance Association, vol. 68(6), pages 2435-2470, December.
    8. Thomas P. Lyon & John W. Maxwell, 2011. "Greenwash: Corporate Environmental Disclosure under Threat of Audit," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 3-41, March.
    9. Bar-Isaac, Heski & Shapiro, Joel, 2013. "Ratings quality over the business cycle," Journal of Financial Economics, Elsevier, vol. 108(1), pages 62-78.
    10. Darren J. Kisgen & Philip E. Strahan, 2010. "Do Regulations Based on Credit Ratings Affect a Firm's Cost of Capital?," The Review of Financial Studies, Society for Financial Studies, vol. 23(12), pages 4324-4347, December.
    11. Mike Adams & Bruce Burton & Philip Hardwick, 2003. "The Determinants of Credit Ratings in the United Kingdom Insurance Industry," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 539-572, April.
    12. Waldner, Franz & Klages, Rainer, 2012. "Symmetric Jacobian for local Lyapunov exponents and Lyapunov stability analysis revisited," Chaos, Solitons & Fractals, Elsevier, vol. 45(3), pages 325-340.
    13. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, December.
    14. He, Yan & Wang, Junbo & Wei, K.C. John, 2011. "Do bond rating changes affect the information asymmetry of stock trading?," Journal of Empirical Finance, Elsevier, vol. 18(1), pages 103-116, January.
    15. Khosroshahi, Hossein & Dimitrov, Stanko & Hejazi, Seyed Reza, 2021. "Pricing, greening, and transparency decisions considering the impact of government subsidies and CSR behavior in supply chain decisions," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    16. Jun Peng & Peter Brucato, 2004. "An empirical analysis of market and institutional mechanisms for alleviating information asymmetry in the municipal bond market," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 28(2), pages 226-238, June.
    17. Xiangyun Zhou & Yixiang Tian & Ping Zhang & Xiurong Chen, 2018. "Incentive and constraint regulations of rating inflation in collusion over the separation of economic cycles - Markov rating shopping dual reputation model," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-18, October.
    18. Hansson, Ingemar & Stuart, Charles, 1990. "Malthusian Selection of Preferences," American Economic Review, American Economic Association, vol. 80(3), pages 529-544, June.
    19. repec:fth:iniesr:487 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hanyi Zhao & Yixiang Tian & Xiangyun Zhou & Xuefeng Zhao, 2023. "Effectivenes of incentive constraint policies in enhancing green bond credit rating and certification: A theoretical and empirical study," PLOS ONE, Public Library of Science, vol. 18(11), pages 1-27, November.
    2. Bae, Kee-Hong & Driss, Hamdi & Roberts, Gordon S., 2019. "Does competition affect ratings quality? Evidence from Canadian corporate bonds," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 605-623.
    3. Deng, Kaihua & Qiao, Guannan, 2022. "Triple A default," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    4. Anna Bayona & Oana Peia & Razvan Vlahu, 2023. "Credit Ratings and Investments," Working Papers 776, DNB.
    5. Berwart, Erik & Guidolin, Massimo & Milidonis, Andreas, 2019. "An empirical analysis of changes in the relative timeliness of issuer-paid vs. investor-paid ratings," Journal of Corporate Finance, Elsevier, vol. 59(C), pages 88-118.
    6. Abad, Pilar & Ferreras, Rodrigo & Robles, M-Dolores, 2019. "Informational role of rating revisions after reputational events and regulation reforms," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 91-103.
    7. Vu, Huong & Alsakka, Rasha & ap Gwilym, Owain, 2022. "Does competition improve sovereign credit rating quality?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    8. Krystyniak, Karolina & Staneva, Viktoriya, 2024. "The myth of tightening credit rating standards in the market for corporate debt," Journal of Banking & Finance, Elsevier, vol. 162(C).
    9. Ozerturk, Saltuk, 2014. "Ratings as regulatory stamps," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 17-29.
    10. Biswas, Sonny & Koufopoulos, Kostas & Thakor, Anjan V., 2024. "Can information imprecision be valuable? The case of credit ratings," Journal of Financial Intermediation, Elsevier, vol. 60(C).
    11. Balios, Dimitris & Thomadakis, Stavros & Tsipouri, Lena, 2016. "Credit rating model development: An ordered analysis based on accounting data," Research in International Business and Finance, Elsevier, vol. 38(C), pages 122-136.
    12. Xia, Han, 2014. "Can investor-paid credit rating agencies improve the information quality of issuer-paid rating agencies?," Journal of Financial Economics, Elsevier, vol. 111(2), pages 450-468.
    13. Gerald J. Lobo & Luc Paugam & Hervé Stolowy & Pierre Astolfi, 2017. "The Effect of Business and Financial Market Cycles on Credit Ratings: Evidence from the Last Two Decades," Abacus, Accounting Foundation, University of Sydney, vol. 53(1), pages 59-93, March.
    14. Afik, Zvika & Galil, Koresh, 2025. "Have ratings become more accurate?," Journal of Banking & Finance, Elsevier, vol. 170(C).
    15. Driss, Hamdi & Drobetz, Wolfgang & El Ghoul, Sadok & Guedhami, Omrane, 2021. "Institutional investment horizons, corporate governance, and credit ratings: International evidence," Journal of Corporate Finance, Elsevier, vol. 67(C).
    16. Jess N. Cornaggia & Kimberly J. Cornaggia & John E. Hund, 2017. "Credit Ratings Across Asset Classes: A Long-Term Perspective," Review of Finance, European Finance Association, vol. 21(2), pages 465-509.
    17. Ballis, Antonis & Ioannidis, Christos & Sifodaskalakis, Emmanouil, 2024. "Structural shifts in bank credit ratings," Journal of Financial Stability, Elsevier, vol. 73(C).
    18. Jeon, Doh-Shin & Lovo, Stefano, 2013. "Credit rating industry: A helicopter tour of stylized facts and recent theories," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 643-651.
    19. Valentina Bruno & Jess Cornaggia & Kimberly J. Cornaggia, 2016. "Does Regulatory Certification Affect the Information Content of Credit Ratings?," Management Science, INFORMS, vol. 62(6), pages 1578-1597, June.
    20. Baghai, Ramin P. & Becker, Bo, 2018. "Non-rating revenue and conflicts of interest," Journal of Financial Economics, Elsevier, vol. 127(1), pages 94-112.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1092-1112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.