Does green financial policy affect debt-financing cost of heavy-polluting enterprises? An empirical evidence based on Chinese pilot zones for green finance reform and innovations

In order to accelerate the green economic transformation, promote the development of green finance and explore reproducible and propagable experiences in terms of institutions and mechanisms, the Chinese government has set up eight pilot zones in five provinces for green finance reform and innovations (GFRIs) in 2017. In this paper, we construct a quasi-natural experiment and explore the impact of this pilot policy on the debt-financing cost of heavy-polluting enterprises with DID method to evaluate the implementation effect of this policy. Furthermore, mechanism analyses are conducted to identify the guidance effect and deep mechanism of the policy. The results demonstrate that the debt-financing cost of heavy-polluting enterprises in the pilot zones decreases substantially after implementing the pilot policy for GFRIs, indicating that the policy has a significant incentive effect. Further mechanism analyses show that the GFRIs pilot policy is conducive to stimulating reputation insurance effect through signal transmission, rather than innovation compensation effect proposed by Porter Hypothesis. The conclusions of this paper play an essential guiding role in the improvement of relevant policies and the expansion and promotion of the pilot zones. Moreover, this paper also provides new ideas for heavy-polluting enterprises to respond to the policy shock and formulate future development strategies.