Boosting green recovery: Green credit policy in heavily polluted industries and stock price crash risk

Abstract

With increasing resource consumption and waste, green financing has become an important means to achieve green recovery. The purpose of this paper is to investigate the effect of green financing on behavioral decision-making in heavily polluted industries that rely on natural resources. Using Green Credit Guidelines as a shock, this paper constructs a DID model and finds that green finance policy reduces the future crash risk of heavily polluting listed firms. This association is more pronounced in firms with weaker internal controls, lower audit quality, and a higher level of marketization. Further analyses show that information transparency and information efficiency are crucial economic channels. The findings of this paper are conducive to green recovery and transformation of the energy industry, thus saving resources.