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<p>This study takes advantage of the difference-in-differences method to assess the impact of China’s Green Credit Policy (GCP) on the tail risk of its most polluting firms (HPFs). Our study reveals that the GCP implemented in 2012 increases tail risk (a measure of individual firms’ risk of large negative drop in stock price) by encouraging greater earnings management, and elevating default risk at HPFs. However, the adverse impact is less evident for firms with more digital transformation, greater tax avoidance, and better environmental disclosure. Our paper provides important policy insights for both high-polluting firms (HPFs) and policymakers responsible for designing and implementing GCPs.</p>

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Challenges of a green credit policy for highly polluting firms in China: evidence from a quasi-natural experiment

  • 期刊论文

  • 发表日期：

    2025年3月13日

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  • Hongmin Jin,
  • Lu Wang,
  • Hung-Gay Fung

摘要

This study takes advantage of the difference-in-differences method to assess the impact of China’s Green Credit Policy (GCP) on the tail risk of its most polluting firms (HPFs). Our study reveals that the GCP implemented in 2012 increases tail risk (a measure of individual firms’ risk of large negative drop in stock price) by encouraging greater earnings management, and elevating default risk at HPFs. However, the adverse impact is less evident for firms with more digital transformation, greater tax avoidance, and better environmental disclosure. Our paper provides important policy insights for both high-polluting firms (HPFs) and policymakers responsible for designing and implementing GCPs.