The impact of green credit policy on heavily polluting enterprises' financial risk: evidence from China

It is imperative to enhance the incentive mechanism and institutional framework of green credit policy in order to advance the green transformation of the economy and accomplish the objectives of carbon neutrality and carbon peaking. Based on the China's 2012 Green Credit Guidelines, this study constructs quasi-natural experiments over two distinct time periods, using as samples a group of A-share listed heavily polluting enterprises relative to non-heavily polluting enterprises. The study arrives at the subsequent conclusions. To begin with, green credit policy substantially mitigates the financial risk that heavily polluting enterprises face, specifically pertaining to funding, operational and revenue risks. As the green credit policy progresses, the impact of the policy intensifies. Second, the effect of green credit policy's reduction in financial risk would be weakened by the increase in financing costs. Furthermore, the central and western regions, as well as non-state-owned enterprises, are disproportionately affected by green credit policy. The findings offer valuable perspectives on how to advance green credit policy and ultimately drive enterprise transformation; thus, they serve as a point of reference for the government in its efforts to implement green credit policy effectively. It is recommended that policymakers regarding green credits integrate incentives and constraints in order to simultaneously promote environmental management and enterprise development.