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Environmental credit regulatory policies and bank loans of heavily polluting firms

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  • Ding, Xin
  • Kang, Yixuan
  • Narayan, Paresh Kumar
  • Fan, Yusheng

Abstract

We use the environmental credit rating policy as a quasi-natural experiment to analyze how these policies affect bank loans to heavily polluting firms in China. Utilizing a panel dataset of A-share listed firms and difference-in-differences models, we find that policies (a) reduce the scale and proportion of long-term loans, (b) increase loan costs and financial distress risks, and (c) enhance social responsibility for heavily polluting firms. State-owned firms face stronger regulation, while those in regions with advanced digital financial markets and lower carbon emissions encounter smaller credit constraints.

Suggested Citation

  • Ding, Xin & Kang, Yixuan & Narayan, Paresh Kumar & Fan, Yusheng, 2025. "Environmental credit regulatory policies and bank loans of heavily polluting firms," Energy Economics, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324007588
    DOI: 10.1016/j.eneco.2024.108049
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    1. Fan Wu & Kaifeng Duan, 2025. "Building Sustainable Financial Capacity: How Supply Chain Digitalization Facilitates Credit Access by Adjustment Capability," Sustainability, MDPI, vol. 17(20), pages 1-27, October.
    2. Jiang, Ping & Ma, Yunxiao, 2025. "How AI reduces pollutant emissions: The dual mechanisms of productivity enhancement and financing constraint alleviation," Pacific-Basin Finance Journal, Elsevier, vol. 94(C).
    3. Chen, Weixiong & Hao, Hanyu, 2025. "Environmental regulation and outward FDI of Chinese listed companies: The role of technological innovations," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1797-1816.
    4. Fang, Chenli & Wang, Zhitao & Zhao, Lu, 2025. "Environmental regulations and the greenwashing of corporate ESG reports," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1469-1481.

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