Work

The capital market effects of local government green special Bonds: An examination from the perspective of corporate stock liquidity

Year: 2025

Type: article

Abstract: From a green governance perspective, this paper examines the impact of local government green special bonds on corporate stock liquidity. Using data of listed firms in China from 2015-2022, we use a multi-time point difference-in-differences model to empirically verify that local governments issuing green special bonds can help promote local firms’ stock liquidity from both “capital flow” and “signal flow”. Regarding the influence mechanism, we find that green special bonds issuance enhance firms’ stock liquidity by existence of green investors, ESG investment funds’ shareholding, and firms’ financing constraints. Further analysis indicates that the impact of green special bonds on stock liquidity vary across regions, industries, and firm-level characteristics. This paper contributes to understanding the interaction mechanism between local governments and the capital market in China in the area of green development, significantly whether the investment behavior in capital market can contribute to environmental governance.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.104268

Authors: Li Chen, Sijia Dai, Zhixuan Wang

Institutions: Xiamen National Accounting Institute, Trinity College Dublin

Language: English

Topic: Sustainable Finance and Green Bonds

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $1,930

Funder: Fujian Provincial Federation of Social Sciences