Improving Chinese Transnational Enterprises' Environmental Performance: Does Government's Green Finance Support Matter?

With the goal of promoting Chinese enterprises' green development in overseas markets, China issued the Guidance on Promoting Green Belt and Road in 2017. The Guidance is the world's first government document specifically designed to provide green finance support for domestic enterprises in overseas markets. Based on data on heavily polluting enterprises listed on the Shanghai and Shenzhen A-share markets from 2008 to 2021, this paper applies a Difference-in-Differences (DID) approach to explore the impact of this document on Chinese transnational enterprises' environmental performance. Our empirical results reveal that government's green finance support significantly improves Chinese transnational enterprises' environmental performance by financing their overseas projects. Such effects are heterogeneous in enterprises with different natures, management levels, and profitability. From mechanism checks, we discovered that the Guidance impacts Chinese transnational enterprises' green behaviors through both financial and institutional channels. Our study proposes corresponding policy suggestions and offers government policymakers insights into designing effective financial support for its enterprises' green development in the global market.