Abstract
AbstractOur study investigates whether credible commitment to corporate green behaviours influences corporate finance. Specifically, using the unique setting Green Manufacturing (GM) program in China, we examine whether and how green manufacturing certification (GMC) endorsed by the government could lead to an increase in firms' bank loan financing. We find that GMC increases bank loan financing, mainly through alleviation of banks' concerns of information risk and default risk potentially arising from environmental risk. Heterogeneity analyses show that the positive effect of GMC on bank loan financing is more pronounced for non‐state‐owned enterprises, firms in polluting industries, in less eco‐friendly regions, and in Green Finance Pilot Program regions. Our findings suggest that the government plays an important role in discerning and endorsing corporate green behaviours, and thus directing banks' financial resource allocation decisions.
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