Evolutionary game analysis on firms and banks' behavioral strategies: Impact of environmental governance on interest rate setting

The pollution emission of manufacturing firms is threatening the sustainability of economy and society across the globe. AI techniques have widely applied in firm's environmental governance and have improved the environmental pollution situation. However, such application requires support and inclination of bank credit capital allocation. Based on the evolutionary game theory, the interaction and influencing factors among interest rate setting of banks and environmental governance of firms are analyzed. Taking 89 heavy-polluting listed companies of China for example, the empirical analysis is carried out to investigate the findings of game theory analysis based on data from 2012 to 2018. Research results mainly show that: environmental governance by AI of firms has a negative effect on the interest rate setting of banks. Meanwhile, the interest rate setting of banks is also constrained by the environmental information disclosure and environmental regulation. Both improving the service-oriented and constrain-oriented environmental regulations can effectively stimulate environmental governance of firms. More importantly, service-oriented environmental regulations significantly promote the interest rate setting of banks, and the environmental governance plays a suppressing role between the service-oriented environmental regulation and the interest rate setting of banks. Our results also find that improving constrain-oriented regulations is conducive to decreasing interest rate setting. The environmental governance plays an intermediary role between the constrain-oriented regulations and the interest rate setting.