Sustainable finance analysis of commercial banks in China

The literature generally finds a mixed relationship between corporates' social activities and performance in emerging economies. One possible explanation is that such social activities lack sufficient recognition from financial institutions, leading to inefficient allocation of resources in terms of sustainable development. Therefore, the practice of sustainable finance by commercial banks in emerging economies is crucial to future sustainable development. Our empirical results show that providing loans to corporates engaged in sustainability activities positively contributes to performance in China's banking industry, whereas loans to small- and micro-size firms have an insignificant impact. Hence, the government should actively encourage commercial banks to continuously expand green credits that will not only upgrade sustainable finance, but also enhance future sustainable development.