Environmental performance and firm financing during COVID-19 outbreaks: Evidence from SMEs

Abstract

The COVID-19 pandemic has resulted in substantial constraints for small and medium enterprises (SMEs) worldwide. The techniques in which SMEs handle recent crises and the degree to which environmental performance is advantageous when the marketplace experiences an adverse shock is fairly untouched in the literature. To assess this probability, we examine, using data from 6,597 SMEs in 13 developing countries, the effect of firm environmental efficiency on firm financing during the COVID-19 outbreak. We consider three aspects of external financing -- bank, non-bank and trade credit -- and suggest that it pays for firms to show devotion to environmental obligations in a global pandemic. Our research implies that the trust between a firm and its stakeholders, if it is based on environmental performance, pays off when the trust freefall during periods of shock and adversity.