Green bonds and environmental violations in financially constrained environments

This study examines the impact of green bonds on environmental violations and investigates how corporate financial constraints and environmental sensitivity moderate this relationship. Utilizing data from publicly traded firms in China from 2009 to 2023, this study employed logistic regression as the baseline regression and finds that green bonds negatively affect environmental violations, thereby introducing opportunities for value creation within firms. Further investigations reveal that the negative impact of green bonds on environmental violations is more pronounced in non-financially constrained and environmentally sensitive firms. To validate the robustness of this research, we employ different approaches including fixed effect, one year lag, two-stage Heckman test and the Generalized Method of Moments (GMM) to ascertain the uniformity of the results. The results have significant policy implications by emphasizing the importance of proactive environmental management in ensuring firms' access to green financing in emerging markets such as China.