Green factory certification and its role in reducing financial asset holdings: evidence from a quasi-natural experiment

Employing a quasi-natural experiment design, this paper evaluates the causal effect of China’s Green Factory Certification program on publicly listed manufacturing firms’ financial asset holding. Our analysis, based on a Difference-in-Differences (DiD) approach, demonstrates that certification significantly curbs corporate holding of financial assets. The underlying channels for this reduction include mitigating financing constraints, increasing external monitoring, and reducing managerial short-termism. These effects are more substantial for enterprises operating in high-pollution sectors, those exhibiting weaker ESG performance, and firms located in regions with more robust legal institutions. To ensure the robustness of our findings, we conduct a series of supplementary tests, such as stacked DiD, instrumental variable estimation, entropy balancing, and propensity score matching. The results underscore the pivotal function of green certification in steering the manufacturing sector towards long-term sustainable development while countering the trend of financial asset holdings.