Financing constraints change of China's green industries

Adequate funding is a crucial factor for the sustainable development of green industries. However, most green firms have suffered from financing constraints due to the negative externalities and information asymmetry of green finance. This study analyzes the driving factors of financing constraints index (FCI) of green industries from 2010 to 2019 using shift-share analysis. At the regional level, this study decomposes the change in FCI into three factors: national FCI change effect (NC), regional FCI change effect (RC), and regional FCI structure effect (RS). At the industry level, the study decomposes the change in FCI of green sub-industries into three factors: total industries FCI change effect (TIC), green industries FCI structure effect (GIS), and green sub-industries FCI structure effect (GSIS). The results show that the financing constraints on Chinese listed companies are getting stronger with each passing year. In particular, the financing constraints on green industries start to become larger than those of non-green industries after 2015. The decomposition results show that NC for each province is positive and relatively similar from 2010 to 2019. Nearly half of the provinces have positive RC values and there are more provinces with positive RS effects than those with negative RS effects. Most provinces are dominated by NC and RS effects. From the three green sub-industries, we observe that the TIC of all three sub-industries is positive, and GIS is positive in most years, while GSIS presents different characteristics. This study provides policy implications for alleviating financing constraints in green industries.