Does environmental regulatory pressure affect corporate debt financing?

This study explores whether and how environmental regulatory pressure affects enterprise debt financing. We find that environmental regulatory pressure significantly reduces the debt financing scale of enterprises in Guangdong Province, China, listed from 2010 to 2018. Our heterogeneous analysis of enterprise size, ownership type, and industry attributes shows that the negative relationship between environmental regulatory pressure and debt financing is strong in small-scale, privately owned, and high pollution-intensity enterprises. We also explore the mechanism from the perspective of the environmental awareness of enterprises and debt funders and observe that both are improved following strong environmental regulatory pressure. We confirm that environmental regulatory pressure has a negative effect on the debt financing of listed enterprises. Our study provides implications on how to promote the rationalization and perfection of environmental policies effectively.