Does green factory certification mitigate corporate downside risk? Evidence from China listed companies

Global green transition has emerged as a central challenge for sustainable development, and the associated economic risks in this process require close attention. Using data from China’s A-share listed companies from 2010 to 2023, this study employs a staggered Difference-in-Differences (DID) approach to examine the impact of Green Factory certification on corporate downside risk. The results indicate that: first, Green Factory certification significantly mitigates firms’ downside risk. This finding remains robust after a series of tests including parallel trend tests, placebo tests, and controls for heterogeneous treatment effects and sample selection issues. Second, mechanism analyses reveal that the certification reduces downside risk primarily by lowering debt financing costs, enhancing ESG performance, and promoting green technology innovation. Third, heterogeneity analysis shows that the risk-mitigating effect is more pronounced in non-state-owned enterprises, firms facing fewer financing constraints, and those operating in highly competitive markets. This study offers empirical evidence from China on preventing and mitigating micro-level economic risks during the green transition.