Green finance reform and stock price crash risk: Evidence from Chinese heavily polluting companies

In 2017, China established green finance reform (GFR) pilot areas to promote green finance. Using Chinese listed heavily polluting companies for the period 2007-2020, this paper finds that the GFR reduces the stock price crash risk based on difference-in-differences (DID) methods. This study proposes two potential mechanisms: easing financial constraints and curbing man-agement's tendency to hoard bad news. Furthermore, the reduction effect is more significant for firms with high environmental expenditure, non-state-owned firms, large firms, and firms with high media attention. These results provide evidence for the positive consequences of the green finance reform on the stock market.