The Impact Of Environmental Regulation On The Investment And Financing Behavior Of Enterprises

It has become an important challenge for the international community to balance environment and economic high-quality development,and reducing greenhouse gas and pollution emissions has become a common goal.Enterprises in all regions are bound by the increasingly stringent environmental regulations of the government.Environmental policy not only affects corporate environmental governance,but also influences their business and financing-investment decisions.In order to avoid environmental penalties and improve the quality of environmental information disclosure,enterprises increase investment in environmental protection and reduce pollution or greenhouse gas emissions to alleviate their financing constraints and provide financial security for their transformation and upgrading.In this context,this paper focuses on the financing-investment decisions of enterprises such as credit financing,preference of asset allocation and mismatch of investment term when facing environmental pressure.The study provides implications for promoting the coordinated development between finance and environmental policies.Based on credit discrimination theory,investment substitution theory and environmental default risk theory,this paper first examines the impact of environmental regulation on enterprise financing.Because the government has strict control over equity financing,it is difficult for enterprises to directly or effectively obtain benefits from the capital market.This paper holds that the debt financing of financial institutions is the main channel of external financing of enterprises.Therefore,in Chapter 4,it discusses the impact of environmental regulation on corporate debt financing.Then,through the transmission mechanism of "financing-investment",and the pressure of environmental governance,environmental regulation may change the investment direction of enterprises.In the study of enterprise investment direction,the motivation of enterprise capital promotes profit to make financial investment,and enterprise financialization has become a common phenomenon.Therefore,under the increasingly strict environmental regulations,whether the direction of enterprise financial investment can be changed.This article discusses this topic in chapter 5.Finally,based on the influence of environmental regulation on the financing structure and investment preference of enterprises,this paper further studies from the perspective of investment and financing asset allocation.Environmental regulation affects the adjustment of financing structure of long-term loans and short-term loans,and also affects the change of long-term investment,short-term investment and environmental protection investment.Therefore,it is necessary for us to pay more attention to the capital term allocation of investment and financing(i.e.,the short-term loan for the long-term investment).Short-term loan for the long-term investment can easily lead to corporate debt risk,making enterprises fall into financial and operational difficulties.Following the above research logic,this paper uses data of A-share listed enterprises and air pollutant concentration data of prefecture-level cities in China.It empirically examines the impact path and mechanism of environmental regulation on the capital maturity mismatch and investment preference,and puts forward policy recommendations.The paper is divided into seven chapters,the first three chapters are introduction,literature review,institutional background and theoretical basis;chapters 4 to 6 are the empirical chapters of the thesis,discussing three sub-problems respectively;chapter 7 is a brief summary.The main findings and viewpoints of this paper are as follows:It provides a systematic analysis of environmental regulation and corporate debt financing in Chapter 4.Under the dual objectives of ecological civilization construction and high-quality economic development,environmental regulation not only affects the environmental governance,but also becomes a key factor affecting the external financing channels.Since the government has strict control over equity financing,it is difficult for enterprises to obtain benefits directly or effectively from the capital market.Therefore,this paper believes that the external financing channels of enterprises mainly come from the debt financing of financial institutions.This chapter empirically tests the impact of environmental regulation on corporate debt financing from three dimensions,which is debt financing structure,financing cost and financing constraints,and the results show that environmental regulation inhibits corporate debt financing.Environmental pressure leads financial institutions to pay more attention to the environmental problems of enterprises,financial institutions scale down long-term borrowing and debt financing of enterprises to avoid the risk of environmental default,and the effect is especially significant for enterprises with high financing constraints,high marketability,and non-green credit.It provides a theoretical basis for studying the synergistic management of corporate debt financing and environmental pollution,and effectively promoting corporate green development,transformation and upgrading of enterprises.On the basis of studying the financing structure of environmental regulation on enterprises,this paper further explore the influence of environmental pressure on enterprise investment.Especially the enterprise face environmental default penalty,on the one hand,they need to increase environmental governance investment,on the other hand,they are subject to the environmental financing constraints of financial institutions.Environmental pressure leads enterprises to face huge capital pressure,and financial investment brings large profits.Whether enterprises increase financial investment driven by capital profit is the focus of this paper.Therefore,Chapter 5 examines the impact of environmental regulation on the financialization of corporate investment.Environmental regulation is an important means to constrain the pollution emissions and an important factor to affect corporate investment decisions and asset allocation.This chapter empirically examines the impact of environmental regulations on corporate financialization with the help of the "Blue Sky Protection Campaign"(BSCP)in 2018 and Difference in Difference(DID)model.The results show that environmental regulation has a crowding-out effect on corporate financialization.Enterprises with high financing constraints face higher financing constraints and their financialization levels are more crowded out by environmental regulations.The implementation of environmental policies increases corporate environmental costs,providing a new perspective for the “Porter Hypothesis”,which suggests that with limited financial resources and higher environmental costs,enterprises reduce the risk of environmental violations by consuming financial assets to carry out innovation and environmental investments.Environmental regulation by the government is an effective strategy to guide the development of corporate finance,combat environmental pollution,and promote corporate innovation.Environmental regulation changes the financing structure and investment direction of enterprises,so whether it has an impact on the capital allocation of enterprises.In chapter 6,this paper further discusses the impact on the term allocation of funds,especially the financing constraints brought by the environment,the reduction of long-term borrowing,and the prosperity of long-term investment demand,whether the short-term loans for long-term investment behavior.It examines the impact of environmental regulation on enterprises’ short-loan for the long-investment behavior in chapter 6.To improve environmental quality and reduce pollutant emissions,China enacted the Environmental Protection Tax Law(EPTL)in 2018,leading to an increase in environmental pressure.In this chapter,using the Difference in Difference(DID)method,the empirical results show that environmental pressure intensifies the short loan for the long investment behavior of energy-intensive enterprises and aggravates the degree of maturity mismatch of their funds.Specifically,environmental pressures lead enterprises to increase long-term investment activities,such as fixed assets,environmental protection,and innovation.However,long-term loans are reduced,which forces them to use short-term loans for long-term investments.Due to credit discrimination,the environmental policy effect of enterprises with low financing constraints is significant than that with high financing constraints,explaining the high leverage of Chinese enterprises.As a result of rising environmental pressure,firms with low financing constraints prefer to use short-term loans rather than long-term loans to support long-term investment activities,while firms with high financing constraints are unable to obtain short-term loans,which does not have a significant effect on their funding mismatch.Based on the above theoretical and empirical findings,this paper holds that it is necessary to reduce the debt risk of enterprises,cooperate with the internal pollution control of enterprises,and effectively promote the green development and transformation and upgrading of enterprises under the dual goals of ecological civilization construction and high-quality economic development.We comprehensively analyzes the impact of environmental regulation on corporate investment and financing,answers the question of "how to balance ecological construction and economic development",and reveals the internal transmission mechanism of environmental policies to corporate investment and financing behavior.Enterprises should take environmental issues into consideration when formulating development strategies,improve the quality of their environmental information disclosure to alleviate the problem of the difficulty and high cost of financing,achieve green development of enterprises.This study provides important insights into environment and corporate financial risks,further optimizes China’s environmental governance system,and promotes high-quality economic development.