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Does interest rate liberalization affect corporate green investment?

Author

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  • Wu, Wei
  • Yang, Shuang
  • Li, Ao
  • Chen, Yu
  • Chen, Sicen

Abstract

This paper investigates the impact of interest rate liberalization on corporate green investment by taking the cancellation of the lower limit of the loan interest rate of financial institutions by the People's Bank of China in July 2013 as an exogenous quasi-natural experiment. We find that the interest rate liberalization will boost corporate green investment. Specifically, for every one standard deviation increase in interest rate liberalization, the enterprise green investment intensity increases by 9.6% of the sample standard deviation on average. Moreover, underlying mechanisms show that interest rate liberalization reform can improve corporate green investment by easing financing constraints, improving market competition, and reducing business risks. In addition, the impacts are more profound on enterprises facing higher environmental supervision intensity, lower attention of capital market, higher degree of regional marketization, and lower degree of financialization. Extended analysis show that interest rate liberalization will further promote the substantive innovation of green technology and improve environmental performance after enhancing the green investment of enterprises. This study contributes to playing the role of financial services in the green transformation of the economy.

Suggested Citation

  • Wu, Wei & Yang, Shuang & Li, Ao & Chen, Yu & Chen, Sicen, 2024. "Does interest rate liberalization affect corporate green investment?," Energy Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:eneeco:v:131:y:2024:i:c:s0140988324000859
    DOI: 10.1016/j.eneco.2024.107377
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    References listed on IDEAS

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    Cited by:

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    2. Saidi, Hichem & Ozturk, Ilhan & Hakimi, Abdelaziz & Ullah, Sana, 2026. "Central bank independence–green investment nexus: Is energy inflation a barrier or stimulator?," Research in International Business and Finance, Elsevier, vol. 81(C).
    3. Cheng, Feiyang & Gao, Haoyu & Pan, Xiaofei & Qian, Meijun & Zhou, Qing (Clara), 2025. "China's debt market: Evolution, regulation, and global integration," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    4. Yue Feng & Junfeng Li, 2025. "Driving Corporate Green Investment: Investigating the Role of Common Ownership Along the Supply Chain in Environmental Sustainability," Sustainability, MDPI, vol. 17(17), pages 1-27, September.
    5. Wang, Tiantian & Wei, Qian & Sun, Ruiqi, 2025. "Interest rate liberalization and labor cost stickiness: A quasi-natural experiment from China," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1663-1675.
    6. Wu, Zihang & Zeng, Ning & Song, Jiansong, 2025. "Tax incentives and corporate technological innovation performance: An analysis from the perspective of R&D investment," International Review of Economics & Finance, Elsevier, vol. 102(C).
    7. Sun, Guangya & Sun, Yaping & Guo, Jing, 2025. "The impact of bank interest rate deregulations on firm exports: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1460-1475.
    8. Li, Xiao-Lin & Yang, Miao & Ge, Xinyu & Zhao, Chen, 2025. "Monetary policy uncertainty and corporate credit financing in China: The role of accounting information quality," Economic Modelling, Elsevier, vol. 144(C).

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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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