The Impact of Environmental Constraints on Firms'Debt Financing
The Amendment to the Environmental Protection Law implemented in 2015 is an important law to strengthen the construction of ecological civilization in the new era.Using this implementation as a natural experiment,this paper examines the impact of strengthening environmental constraints on the debt financing of heavily polluting firms(HPFs).The findings reveal that among A-share listed companies,compared to non-HPFs,the leverage ratio of HPFs has decreased by an average of 2.2 percentage points more following the implementation,indicating that strengthening environmental constraints has a significant deleveraging effect on HPFs.Heterogeneity analyses show that this effect is more pronounced for non-state-owned enterprises(non-SOEs),over-indebted firms,firms with weaker governmental relations,and firms in provinces with higher GDP per capita or higher marketization rate.Mechanism analyses show that the strengthening of environmental constraints affects the debt financing of HPFs mainly through the following three mechanisms:reducing target capital structure,reducing debt financing capacity and decreasing debt fund supply.This paper verifies the spillover effect of environmental protection policy from the perspective of debt financing.