Local Green Governance Spillovers: Perspective of Trade Credit Financing

ABSTRACT Corporate sustainable growth is intrinsically linked to governmental support. From a green development perspective, we investigate how local government environmental governance influences trade credit financing among heavily polluting firms. Our findings reveal a significant positive relationship, which is primarily related to improvements in environmental information disclosure and increased investment in green transition. Cross‐sectional analyses further show that this positive relationship is more pronounced among firms with lower information transparency and restricted financing access. Moreover, we find that greater trade credit financing is associated with lower managerial myopia and higher firm market value. These insights carry important implications for optimising financing structures in heavily polluting sectors and advancing the modernization of local environmental governance systems.