Impact of Environmental Violations on Firm's Access to Finance in China: Evidence from IPE Database

By innovatively utilizing environmental violation data from the IPE database and constructing a stacked cohort regression, we investigate the reactions of government and market participants to corporate environmental violations from the perspective of firms’ access to finance. We find that firms violating environmental regulations experience a significant decrease in government-guided bank loan financing but an increase in market-oriented equity financing. The results are robust through the parallel trend assumption test and the propensity score matching (PSM). Through empirical and systematic analytical methods, this study investigates how environmental violations impact firms’ access to finance, revealing the difference between government and market participant goals in environmental issues.