Assessing the impact of government-led green supply chain demonstration on firms' financial distress: The role of environmental information disclosure quality and supply chain concentration

Abstract

Amidst the global advancement of sustainable production, the green supply chain initiative is becoming increasingly significant in harmonizing environmental and economic interests. This study delves into the financial implications of such initiatives, focusing on a particular government-led green supply chain demonstration project. Utilizing a difference-in-differences model and data from firms involved in the project between 2010 and 2021, findings indicate a notable reduction in firms' financial distress. This result, framed within the resource-based view perspective, shed lights on how green policy value permeates a company's internal capabilities, aligning environmental goals with financial performance. Additionally, we found that when companies enhance the quality of their environmental information disclosure and decrease the concentration of their supply chain, the inhibitory effect of this demonstration policy on financial distress is amplified. This underscores the pivotal value of enhancing information transparency and maintaining a flexible supply chain structure in green supply chain practices. In conclusion, this study emphasizes the empirical link between sustainable operations and financial resilience, laying a strong theoretical groundwork for businesses to proactively adopt green practices and aiding in the government's crafting of environmental policies.