Green Credit Policy and Corporate Productivity: Evidence from a Quasi-natural Experiment in China

Abstract

• We examine the impact of green credit policy on corporate total factor productivity. • Green credit policy improves total factor productivity of heavily polluting firms. • Technology innovation and resource allocation efficiency are the channels. • Firm characteristics, external monitoring, and regional differences shape the link. Taking the implementation of the “Green Credit Guidelines” in China in 2012 as an exogenous shock, we adopt the difference-in-differences (DIDs) method to explore the influence of the green credit policy on total factor productivity (TFP). We show evidence of a significant and positive correlation between green credit and corporate total factor productivity, and this result is robust to a series of robustness tests. In addition, the improvement is particularly evident for non-SOEs, small-scale firms, firms with weak external supervision, and firms in developed areas of eastern China. Moreover, the green credit policy mainly affects corporate total factor productivity through promoting technological innovation and enhancing resource allocation efficiency. Overall, green credit promotes the win-win development of the environment and the economy.