Abstract
Environmental regulation restricts corporate pollution emissions and affects corporate investment decisions and asset allocation. Based on the data of A-share listed enterprises in China from 2013 to 2021 and the difference in differences (DID) model, this paper identifies the impact of environmental regulation on corporate financialization with the help of the "Blue Sky Protection Campaign (2018-2020)" (BSPC) of China. The results indicate that environmental regulation has a crowding-out effect on corporate financialization. Enterprises with stricter financing constraints receive more significant crowding-out effects. This paper provides a new perspective on the "Porter hypothesis." Under the constraint of financial resources and high environmental protection costs, enterprises carry out innovative activities and environmental protection investments by consuming financial assets to reduce the risk of environmental violations. The government's environmental regulation is an effective way to guide the financial development of enterprises, control environmental pollution, and promote enterprise innovation.