Environmental regulations and trade credit activities of corporate sector: A new panel data evidence

Abstract

Trade credit activities include such business operations e.g., production, distribution, and consumption of industrial goods that have greater impact on environmental quality. Therefore, such business operations are directly affected from various environmental regulations and respond dynamically. Given that, this study articulates the impact of various environmental regulations on the trade credit activities of corporate firms. The empirical analysis is based upon annual data covering the span of 2007–2016 of non-financial sector firms founded in 11 Asian economies. We hypothesize that environmental regulations have a significant impact on trade credit activities and test this hypothesis by employing the two econometric techniques named panel PQR (Panel Quantile Regression) and system GMM (generalized method of moments) model. The statistical outputs corroborate the underlying logic of all alternative hypotheses, implying that the carbon tax rate has a negative while the other three environmental regulations including environmental tax, environmental policy stringency index, and green growth productivity have a positive and significant impact on accumulated trade-credit activities. The current empirical analysis particularly supports the notions of Porter's win-win hypothesis and suggests the various policy implications to both corporate managers and environmental policy officials.