Greening the Chain: Supplier Emission Reductions From Focal Firm Green Bonds

ABSTRACT Green bonds have emerged as a significant financial instrument for sustainable development. Grounded in stakeholder theory, institutional theory, and signaling theory, this study contributes to the sustainable development literature by exploring how focal firms' green bond issuance influences green supply chain sustainable governance. Using 2132 firm‐year observations of Chinese A‐share listed firms during 2016–2023, the study employs a fixed‐effects model to examine the relationship between focal firms' green bond issuance and supplier carbon emissions. The empirical results indicate that focal firms' green bond issuance reduces supplier carbon emissions, with supplier green innovation and analyst attention serving as two key mediating mechanisms. Furthermore, heterogeneity analysis reveals that this emission reduction effect is more pronounced for suppliers that are state‐owned, smaller, or operating in more competitive industries. This study reveals the broader environmental governance effects of green bonds from the perspective of suppliers, providing practical implications for government green finance policy formulation and corporate supply chain decarbonization strategies.