Government environmental attention, credit supply and firms' green investment

Abstract

This study employs textual analysis to construct a dataset reflecting the level of environmental attention by local governments and utilizes data from Chinese A-share listed companies between 2003 and 2020 as a sample to investigate the impact of local government's environmental attention on firms' green investment. The findings demonstrate that local government's environmental attention positively influences companies' green investment. Mechanism analyses reveal that local government's environmental attention primarily stimulates enterprise green investment by expanding the scale of green credit supply and reinforcing local environmental regulations. The effect of local government's environmental attention is more pronounced for state-owned enterprises, heavily polluting firms, large-scale firms, and firms with higher cash reserves and low financing constraint. Moreover, the influence is particularly significant in eastern China as well as regions characterized by lower ecological levels and stronger enforcement of environmental regulations.