How does ecology of finance affect financial constraints? Empirical evidence from Chinese listed energy- and pollution-intensive companies

Investment and financing are crucial for the healthy development of modern enterprises. A series of recent studies have examined various influential factors of financial constraints of enterprises, but few researchers have incorporated the influential factors simultaneously. This study introduces the term ecology of finance as a synthesized indicator to measure the influences of a series of variables that may affect financial constraints simultaneously. Using the data of Chinese A-share listed energy- and pollution-intensive firms from 2007 to 2017, how and to what extent the ecology of finance affects financial constraints is quantitatively investigated. The main finding of this research is threefold. First, good internal ecology of finance can relieve the financial constraints of high-polluted and high energy consumption firms, and improved external ecology of finance intensifies the financial constraints. Second, firms with high-level internal ecology of finance are more sensitive to the change in external ecology of finance. Third, firms with a lower level of external ecology of finance are affected more by the change in internal ecology of finance. This study provides insights on how to formulate appropriate policies and regulations for energy- and pollution-intensive companies to relieve their financial constraints and improve their environmental performance.