Whether green credit is effecitve: a study based on stock market

Abstract

Many environmental policies have achieved good pollution control results by using a financial market approach, but whether or not an effective green credit policy can play an effective role in the financial market has not been proved. Due to the information asymmetry problem which exists between investors and enterprises in the financial market, and the “Green Credit Guidelines” outlined in 2012, this article builds a signal game model. It uses the short-term event study method to examine whether green credit affects abnormal stock returns, and discusses the enterprises' and investors' selection mechanism strategy and influencing factors. The results show that green credit policy will cause green enterprise stock prices and yields to rise, while polluting enterprises stock and yields will fall while investors’ behaviour moderates the relationship between them. Thus, environmental information disclosure, financing constraints, and environmental expenditure forms the primary mechanism, as enterprise ownership and environmental law enforcement have differential effects. The research results help expand the relevant research on the impact of environmental information asymmetry on market efficiency. The results also provide targeted policy suggestions, giving full play to the role of green credit policies in financial markets and promoting the implementation of a green credit policy.