Do environmental regulations reduce the financing constraints of heavy polluting enterprises? Based on the empirical data of 704 A-share listed companies in China

Using a quasi-natural experiment of China’s new Environmental Protection Law, this study investigates the impact of environmental regulations on the financing constraints of heavily polluting firms and explores the underlying mechanisms.This study employs a difference-in-differences (DID) model based on a panel dataset of 704 listed firms from 2012 to 2021. The results indicate that the implementation of the new Environmental Protection Law significantly alleviates the financing constraints of heavily polluting enterprises. This finding remains robust after a series of verification tests. The conclusions above are heterogeneous for different enterprise sizes and polluted areas. The mechanism analysis shows that the new Environmental Protection Law can alleviate the financing constraints of heavily polluting enterprises by reducing agency costs, improving information disclosure, and strengthening responsibility fulfillment. Based on this, the conclusion of this paper provides empirical support for further improving the Environmental Protection Law and provides a decision-making basis for comprehensively constructing an environmental economic policy framework system.