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Green Factory Certification, information asymmetry, and stock liquidity

Author

Listed:
  • Zhu, Haobo
  • Pan, Hongyu
  • Wu, Zhen-Xing
  • Huang, Guan-Ying

Abstract

This paper investigates the causal effect of China’s Green Factory Certification (GFC) on firm stock liquidity. Using data from Chinese listed firms from 2011 to 2023, we treat GFC as a quasi-experiment and apply a staggered difference-in-differences specification to establish the causality. We find that firms receiving GFC experience significant improvements in stock liquidity compared to those uncertified. Mechanism analyses reveal that increased attention and enhanced financial information precision jointly reduce asymmetric information, thereby facilitating better liquidity. In addition, we find that the effects are more pronounced among non-state-owned enterprises, heavily polluting industries, and firms located in regions with weaker environmental regulations. Our findings highlight the potential of sustainability programs led by governments to improve financial market performance.

Suggested Citation

  • Zhu, Haobo & Pan, Hongyu & Wu, Zhen-Xing & Huang, Guan-Ying, 2025. "Green Factory Certification, information asymmetry, and stock liquidity," Finance Research Letters, Elsevier, vol. 85(PA).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pa:s1544612325010748
    DOI: 10.1016/j.frl.2025.107816
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    Cited by:

    1. Yu, Lianchao & Sha, Haobin & Ji, Peinan, 2025. "Government-led voluntary environmental regulation and corporate investment efficiency: Evidence from the green factory certification in China," Energy Economics, Elsevier, vol. 152(C).
    2. Wang, Yuanyuan & Tian, Hongping, 2026. "Does green factory certification mitigate corporate downside risk? Evidence from China listed companies," International Review of Economics & Finance, Elsevier, vol. 105(C).

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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