Abstract: In this study, I analyze why firms go green. I develop a novel green commitment score to measure firms' green levels. The score is based on textual analysis of standardized green commitment information from Chinese-listed firms' annual reports. By exploring the control right transfer of air quality monitoring stations from local governments to the central government, I find that high government policy enforcement intensity and firms' low production shift abilities will increase firms' green commitment score. With the two-stage-least-square methodology, I further prove that firms with low green commitment scores and high production shift abilities will shift production under high government policy enforcement intensity. I also explore the benefits of going green early. I find that firms with high green commitment scores have the flexibilities to replace their existing debts with low-cost debts and thus decrease financial expenses.
Abstract: Passive funds, which are index funds and Exchange-traded funds, are prevalent nowadays. Previous literature has shown that passive funds are active voters but have contradictory impacts on firms' governance. To understand the passive funds voting impacts, we need to research their voting incentive. 86.44% of passive funds' voting assets are voted in the situation that the same fund family's active funds are present in the voting meeting. This paper proposes that the same fund family's active funds' voting alignment incentive is one crucial channel for passive funds' voting. Based on incentive theory, this paper finds that active funds' voting alignment incentive comes from the target of maximizing their asset value instead of beating the market. By employing individual clients' desired passive fund flow as an exogenous shock, this paper establishes the causality relationship between active funds voting alignment incentive and the passive funds voting behavior. Growing passive ownership increases the same fund family's active funds governance ability at a lower cost.
Abstract: The literature suggests that stock prices seem to react positively to the issuance of green bonds and that bond investors would be ready to buy green bonds at a premium. Our objective is to understand what may drive these results. The fact that CBI develops a three-tier system to certify the green bond issuance gives us a novel angle to dig into, as the firm green status is released to the market before the first green bond issuance. We find that the market reacts to the green bond certification and the first green bond announcement for the efforts that the firms made to issue green bonds. The positive impact is larger than we thought before. Further, by employing a two-step matching process to control for both firm and bond characteristics, we found that the CBI-certified green bonds are traded at a large greenium, while other green bonds are not.