How do financing constraints enhance pollutant emissions intensity at enterprises? Evidence from microscopic data at the enterprise level in China

Abstract

This paper introduces financing constraints into a partial equilibrium analysis framework for heterogeneous enterprises and theoretically reveals the mechanism in how financing constraints affect enterprise pollutant emissions. The results show that financing constraints can significantly increase the emissions intensity of enterprises. This conclusion remains robust to multiple scenarios, such as considering the endogeneity problem, excluding interference from external financing environment and environmental regulations. Our heterogeneity analyses show that financing constraints have a relatively small impact on export enterprises, large-scale enterprises, and enterprises located in clean industries, low-carbon cities and innovative cities. Further inspection of the transmission mechanism confirms that financing constraints affect the increase in enterprise pollutant emissions intensity in mainly two ways: hindering enterprises' technological progress and inhibiting improvement in total factor productivity. In addition, the extensibility analyses show that urban financial development can weaken the impact of financing constraints on pollutant emissions intensity. Financing constraints also significantly increase enterprises' energy intensity.